Master of Business Administration- MBA Semester 4 MB0053 International Business Management -4 Credits (Book ID:B1315) Assignment (60 marks)

1Q )Write a short note on GATT and WTO, highlighting the difference between the two? Ans: G e n e r a l Ag r e e m e n t o n T a r i f f a n d T r a d e ( GATT) :The GATT, was established on a provisional basis after the Second World War in thew a k e o f o t h e r n e w m u l t i l a t e r a l i n s t i t u t i o n s d e d i c a t e d t o i n t e r n a t i o n a l e c o n o m i c cooperation notably the "Britton Woods" institutions now known as the World Bankand the International Monetary Fund.The original 23 GATT countries were among over 50 which agreed a draft Charter for an International Trade Organization (ITO) a new specialized agency of the UnitedNations. The Charter was intended to provide not only world trade disciplines but alsocontained rules relating to employment, commodity agreements, restrictive businesspractices, international investment and services.In an effort to give an early boost to trade liberalization after the Second World War and to begin to correct the large overhang of protectionist measures which remained inplace from the early 1930s-tariff negotiations were opened among the 23 foundingGATT "contracting parties" in 1946. This first round of negotiations resulted in 45,000tariff concessions affecting $10 billion or about one-fifth of world trade. It was alsoagreed that the value of these concessions should be protected by early and largely"provisional" acceptance of some of the trade rules in the draft ITO Charter. The tariff concessions and rules together became known as the General Agreement on Tariffsand Trade and entered into force in January 1948.A l t h o u g h t h e I T O C h a r t e r w a s f i n a l l y a g r e e d a t a U N C o n f e r e n c e o n T r a d e a n d Employment in Havana in March 1948, r a t i f i c a t i o n i n n a t i o n a l l e g i s l a t u r e s p r o v e d impossible in some cases. When the United States government announced, in 1950,that it would not seek Congressional ratification of the Havana Charter, the ITO waseffectively dead. Despite its provisional nature, the GATT remained the only multilateralinstrument governing international trade from 1948 until the establishment of the WTO.

WTO World Trade Organization came into existence in 1995 after the desolation of GeneralAgreement on Tariff and Trade (GATT).T h e W T O s o v e r r i d i n g o b j e c t i v e i s t o h e l p t r a d e f l o w s m o o t h l y , f r e e l y , f a i r l y a n d predictably. It does this by: Administering trade agreements Acting as a forum for trade negotiations Settling trade disputes Reviewing national trade policies Assisting developing countries in trade policy issues, t h r o u g h t e c h n i c a l assistance and training programs Cooperating with other international organizationsThe WTO has nearly 150 members, accounting for over 97% of world trade. Around 30others are negotiating membership. Decisions are made by the entire membership. Thisis typically by consensus. A majority vote is also possible but it has never been used inthe WTO, and was extremely rare under the WTOs predecessor, GATT. The WTOsagreements have been ratified in all members parliaments.The WTOs top level decision-making body is the Ministerial Conference which meetsat least once every two years. Below this is the General Council which meets severaltimes a year in the Geneva headquarters. The General Council also meets as the TradePolicy Review Body and the Dispute Settlement Body. At the next level, the GoodsCouncil, Services Council and Intellectual Property (TRIPS) Council report to theGeneral Council.Numerous specialized committees, working groups and working parties deal withthe individual agreements and other areas such as the environment, development,membership applications and regional trade agreements. 2Q ) Describe various entry strategies available to a firm when it wants to enter a foreign market? Ans: The various strategies available to a firm when it enters a f o r e i g n m a r k e t a r e a s follows:1. Supplying Products to Foreign Buyers : F o r e i g n p r o d u c t i o n i s n o t a l w a ys a n answer. Foreign markets can be better served by exporting, rather than by creatinga f o r e i g n s u b s i d i a r y i f t h e r e a r e e c o n o m i e s o f s c a l e . I f l a r g e s c a l e p r o d u c t i o n reduces unit cost, it is better to concentrate production in one place.

MES is them i n i m u m r a t e o f o u t p u t a t w h i c h A v e r a g e C o s t ( A C ) i s m i n i m i z e d . I f m i n i m u m efficient scale (MES) is not achieved, then export. In other words, if there is excess capacity, why not utilize that and export outputs toother countries? There is no point in creating another plant overseas when domesticcapacity is not fully utilized. If the foreign demand exceeds the minimum efficient 2. International Joint Ventures: JV is a business organization established by two or more companies that combines their skills and assets. A JV is formed by two businesses that conduct business in a third country. (USfirm + British firm jointly operate in the Middle East) Joint venture with a local firm (GM + Shanghai Automobile Company) Joint venture may include local government (Bechtel C o m p a n y - U S ; Messerschmitt Boelkow Blom, Germany; Iran Oil Investment Company;National Iranian Oil Company)International JV has certain benefits. These are Large capital costs costs are too large for a single company Protection LDC governments close their borders to foreign companies Bypass protectionism. e.g.: US workers assemble Japanese parts. The finishedgoods are sold to the US consumers. The new venture increases production, lowers price to consumers. The new business is able to enter the market that neither parent could haveentered singly. Cost reductions (otherwise, no joint ventures will be formed). 3Q )Write a note on Globalization? Ans: The term "globalization" has acquired considerable emotive force. Some view it as aprocess that is beneficial a key to future world economic development and alsoinevitable and irreversible. Others regard it with hostility, even fear, believing that iti n c r e a s e s i n e q u a l i t y w i t h i n a n d b e t w e e n n a t i o n s , t h r e a t e n s e m p l o y m e n t a n d l i v i n g standards and thwarts social progress. This brief offers an overview of some aspects of g l o b a l i z a t i o n a n d a i m s t o i d e n t i f y w a y s i n w h i c h c o u n t r i e s c a n t a p t h e g a i n s o f t h i s process, while remaining

realistic about its potential and its risks.Globalization offers extensive opportunities for truly worldwide development but it is notprogressing evenly. Some countries are becoming integrated into the global economymore quickly than others. Countries that have been able to integrate are seeing faster growth and reduced poverty. Economic "globalization" is a historical process, the result of human innovation andtechnological progress. It refers to the increasing integration of economies around theworld, particularly through trade and financial flows. The term sometimes also refers tot h e m o v e m e n t o f p e o p l e ( l a b o r ) a n d k n o w l e d g e ( t e c h n o l o g y) a c r o s s i n t e r n a t i o n a l borders. There are also broader cultural, political and environmental dimensions of globalization that are not covered here.At its most basic, there is nothing mysterious about globalization. The term has comeinto common usage since the 1980s, reflecting technological advances that have madeit easier and quicker to complete international transactions both trade and financial flow. 4Q )What does FDI stand for? Why do MNCs opt for FDI to enter international market? Ans: FDI stands for Foreign Direct Investment. New MNCs do not pop up randomly in foreignnations. It is the result of conscious planning by corporate managers. Investment flowsf r o m r e g i o n s o f low anticipated profits to those of high r e t u r n s . W h e n M N C incorporated in one country, invests in another country, it is said that the FDI has flowedinto the other country from some foreign origin.The main reasons for MNCs to opt for FDI to enter international market is stated asfollows: 1. Growth motive : A company may have reached a plateau satisfying domesticdemand, which is not growing. Looking for new markets. 2. Protection in the importing countries : F o r e i g n d i r e c t i n v e s t m e n t i s o n e w a y t o expand. FDI is a means to bypassing protective instruments in the importing country.E u r o p e a n C o m m u n i t y i m p o s e d c o m m o n e x t e r n a l t a r i f f a g a inst outsiders. UScompanies circumvented these barriers by setting up subsidiaries. Japanes e corporations located auto assembly plants in the US, to bypass VERs. 3. High Transportation Costs : Transportation costs are like tariffs in that they areb a r r i e r s w h i c h r a i s e c o n s u m e r p r i c e s . W h e n t r a n s p o r t a t

i o n c o s t s a r e h i g h , multinational firms want to build production plants close to the market in order tosave transportation costs. Multinational firms that invested and built production Orleans port to ship and distribute products through New Orleans, provided that theybuilt plants in a safe area. 4. Exchange Rate Fluctuations: Japanese firms invest here to produce heavyconstruction machines to avoid excessive exchange rate fluctuations. A l s o , Japanese automobile firms have plants to produce automobile parts. For instance,Toyota imports engines and transmissions from Japanese plants, and produce therest in the U.S. 5. Market competition: T h e m o s t c e r t a i n m e t h o d o f p r e v e n t i n g a c t u a l o r p o t e n t i a l competit ion is to acquire foreign businesses. GM purchased Monarch (GM Canada)and Opel (GM Germany). It did not buy Toyota, Datsun (Nissan) and Volkswagen.They later became competitors. 6. Cost reduction: United Fruit has established banana-producing facilities in Honduras.Cheap foreign labour. Labour costs tend to differ among nations. MNCs can holddown costs by locating part of all their productive facilities abroad. 5Q ) What is the need to understand to understand cultural differences? Explain Hofstedes cultural dimensions? Ans: The number of Hispanic employees working in agricultural and horticultural businesses in the northeast has increased dramatically in recent years. This increase in people from Latin American cultures has introduced change into our workplaces and in some cases our communities. Decades ago the United States was referred to as a melting pot. As groups of people of different nationalities, ethnicities, races, and religions came to this country they came together and blended to eventually resemble one another. Today, the term salad bowl is often used to reflect the mixture of people in American society. We are all one population but with individual identities. Immigrants today often have the expectation of maintaining their cultural identity while participating in the American way of life.As agricultural and horticultural employers become familiar with the Hispanic workforce, cross-cultural understanding is essential to building healthy interpersonal relationships and strong communities. It is also essential in the workplace where supervisors find it important to take cultural values and beliefs into consideration as they manage their employees. Culture is defined as the set of values, attitudes, and beliefs that members come to share. Culture guides how a group of people perceives the world and how life is organized and experienced. Each person within a culture possesses learned ways of finding

meaning in their actions and experiences. Culture is not genetic; it is learned from ones social environment. Hofstedes four dimensions of culture. In 1980, Geert Hofstede, a scholar and researcher from the Netherlands introduced a model proposing four dimensions of culture. He defined a dimension as an aspect of culture that can be measured relative to other cultures. He suggested that people carry mental programs which develop in the family and in early childhood and are reinforced in a persons organizations and community. Hofstede further suggested that these mental programs include a component of national culture and are expressed in the values that people of different countries posses. Hofstedes dimensions of culture werebased on a worldwide survey of over 116,000 employees in a large United States multinational company. He named the four dimensions: Power Distance Collectivism vs. Individualism Femininity vs. Masculinity Uncertainty Avoidance Hofstedes dimensions of culture are often used to explain different ways of structuring organizations, different motivations of people within organizations, and different issues people and organizations face within society. By developing an understanding of the dimensions of culture, small business managers can improve their ability to relate to and supervise their Hispanic employees. 6Q )Write short notes on: a) Ethnocentric approach b) Polycentric approach Ethnocentric approach Human resource management (HRM) refers to the activities an organization carries out to utilize its human resources effectively, including determining the firm's human resource strategy, staffing, performance evaluation, management development, compensation, labor relations. The staffing activity is concerned with the selection of employees who have the suitable skills required to perform a particular job. To perform staffing function effectively, there are three main approaches within international business identified: the ethnocentric approach, the polycentric approach, the geocentric approach (Dowling PJ, Festing M and Engle AD, 2008). In the article, the ethnocentric approach will be comprehensively and deeply analyzed, and then the advantages and disadvantages of ethnocentric approach will be figured out. Combined with analyzing the case of Hilton Group, we will see that the reason why the ethnocentric approach to HRM for multinational company (MNC) is out, that how an international human resource management (IHRM) effectively plays its part under the global context.

Polycentric approach The broad recruitment strategy determines the nature of the international manager development program and the type of IMD, suggested by Perlutter (1969) and later on by D'Annunzio-Green (1997). Besides the ethnocentric approach which tends to use expatriates in key positions abroad, there are other two different approaches available for managing and staffing companies' subsidiaries, the polycentric approach and geocentric approach. The polycentric approach tends to use local nationals wherever possible and the polycentric approach tends to use a mixture of nationals, expatriates and third country nationals (Treven S., 2001; Datamonitor, 2004). For the ethnocentric approach, the cultural values and business practices of the home country put a predominant influence on the subsidiaries. The corporation headquarter determines all the standards of evaluation and controls the branch's management practice in the form of orders and commands (Miles, 1965; Malkani, 2004). For the polycentric approach, it is just direct opposite to the ethnocentric approach. The corporation headquarter allows its subsidiaries to develop locally but the corporation headquarter will supervise the local managers. However, this results in little communication between the corporation headquarter and its subsidiaries. For the geocentric approach, it combines the advantages of ethnocentric approach and polycentric approach. The selection of manager is based on competency rather than nationality and organizations try to combine the best from both the corporation headquarter and its subsidiaries. With regard to Hilton Hotel Group, it tries to integrate different parts of the group through the cooperation between headquarter and subsidiaries, and then implement combined standard of both universal side and local side for evaluation and management (Johnson, 2003). And at the same time, Hilton has attempted to recruit and develop a group of international managers from diverse countries for many years. These international managers constitute a mobile base for a variety of management facilities as the need arises.