Assignment

Subject Code: MB0053

Roll no- 1302006411
1. Environment scanning is an important part of international business. Explain
your views on this statement and discuss what factors need to be scanned.
A.
Environment Scanning is one essential component of the global environmental
analysis. Environmental monitoring, environmental forecasting and environmental
assessment complete the global environmental analysis. The global environment refers to
the macro environment which comprises industries, markets, companies, clients and
competitors. Consequently, there exist corresponding analyses on the micro-level. Suppliers,
customers and competitors representing the micro environment of a company are analyzed
within
the
industry
analysis.
It can be defined as the study and interpretation of the political, economic, social and
technological events and trends which influence a business, an industry or even a total
market. The factors which need to be considered for environmental scanning are events,
trends, issues and expectations of the different interest groups. Issues are often forerunners
of trend breaks. A trend break could be a value shift in society, a technological innovation
that might be permanent or a paradigm change Factors:
a) Economic Factors: It refers to the economic conditions under which a business operates
and takes into account all factors that have affected it. It includes prime interest rate,
legislation concerning employment of foreigners, return of profits, safety of country, political
stability and so on.
b) Political Factors: It influences the economic and legal environment in which the
business operates to a larger extent, especially in contract law and rules on advertising and
consumer protection. It also affects the business practices, restrictions on market entry,
tariffs charged and ability to repatriate profits.
c) Legal Factors: International businesses confront different sets of laws in various
countries of operation. IB must not only abide by the domestic laws of each nation but also
by the supranational laws which impose obligations beyond those of national legal systems.
d) Demographic Factors: It helps firm understand the various demographic factors such
as gender; age; religious background and ethnicity. Firms use demographic environments to
identify target markets for specific products it wishes to cater.
e) Socio-Cultural Factors: The cultural and social norms of people differ worldwide in all
key markets. The customers/consumers of a particular country/region become conditioned
to accept certain things as per conditioned behavior. The increasingly competitive
international business environment necessitate the exporters/companies doing business
overseas to customize their organizational policies keeping in mind the local cultural norms.
Q2. What is FDI? Why is it considered as the best option for a developing
country like India?
A.
Foreign investment, in its classic definition, is defined as a company from one
country making a physical investment into building a factory in another country. In an era

of global economic liberalisation, privatisation and globalisation, the definition of foreign

investment has been broadened to include the acquisition of a lasting management
interest in a company or enterprise outside the investing firms home country.
With waves of globalisation taking place in global economy with the formation of
World Trade Organisation (WTO), developed and developing nations are competing for
foreign investment in their respective economies. Foreign investment is said to have played
an important factor for spurring the development of a nation. This is particularly more
important in the context of a developing country like India which has abundance of other
two factors of production i.e. land and labour. However it lacks the capital to tap the innate
potential of its physical resources. Following are some of the advantages due to which
nations give emphasis to their economic development.
a) Easier integration into global economy: A developing country like India is keenly
interested to have foreign investment in their economy as it can gain greater access and
foothold in other economies of the world. Foreign investor may manufacture the products
that may be meant for global markets resulting in greater exports of the country and
improving the employment scenario in the country.
b) Up gradation in technology and advancement in technical knowhow: Foreign
investment facilitates the transfer of advanced level of technology mainly from developed
countries to developing countries. Thus, less developed countries and developing countries
can have world-level technology and technical know-how to process their physical and nonphysical resources. Foreign expertise mainly coming from developed countries can be of
immense use in upgrading the existing technical processes in the least developed or
developing countries. For example India has got access to nuclear technology by signing the
deal with Nuclear Supplier Group; thus having an access to advanced nuclear technology
form countries like France, USA, Russia, Britain, Germany and Japan. India has also been
benefited with advanced technology in areas of ports, ship building, power sector, energy
sector and telecommunication in the recent year.
c) Increased competition improved productivity: Foreign investment from the foreign
players brings in advances in technology, technical knowhow and processes. This helps in
increasing competition and resultant productivity in the domestic economy of the developing
country. As a catalysing effect, its competitors in the domestic markets also start improving
their technology or start tying up with foreign players in search of technology. It acts as a
spillover effect in improving the productivity in a particular sector or sub sectors of the
industry. Each company tries to stay competitive so as to retain the market share and sales
turnover.
d) Improvement in human development skills: There comes a significant improvement
in human resources skills of the country that attracts foreign investment as its employees
get exposure to globally valued skills. Foreign investors come with improved skill set to
perform in a particular industry. Thus the host country is benefitted from the training and
skills up gradation of the foreign investor. For example in the automobile sector in India,
Japan has contributed various aspects on quality improvement of the employee.
Some of the other advantages of foreign investment are access to a larger market for
foreign investor in the host country. Foreign investor also has other advantages of tapping
the potential of a cheap and skilled labour, making effective use of raw material and other
physical resources in the host country. Foreign investor also has the benefit of expansion in
capacity thus generating economies of scale and optimisation in costs along with gaining
diversification in different product categories.
Q3. Regional integration is helping the countries in growing their trade. Discuss
this statement. Describe in brief the various types of regional integrations.

A.
Regional integration is the process by which two or more nation-states agree to cooperate and work closely together to achieve peace, stability and wealth. It results in the
creation and diversion of trade. It supports overall growth of the region, coupled with
efficient trading practices. Trade creation increases production and income and also leads to
new entrants in the market and, therefore, results in tougher competition. The transfer of
technology is also faster.
It includes reduction on traffic and prohibitions. It spread goodwill among member countries
and also helps in reducing the chances of conflict.
Types of Regional Integration:
a) Preferential trading agreement: It gives preferential access to certain products from
the participating countries. This can be called as a limited or sector based free trade area.
b) Free trade area: It includes the reciprocal removal of tariffs on member countries
goods. In an FTA, each member is free within the limits specified by the GATT/WTO system
on deciding the level of external tariffs that will be applied to nonmembers. As there is
flexibility
on
the
interactions
with
the
third
countries,
the
members in an FTA are free to establish or join other FTAs.
c) Custom union: It is a type of agreement that include determination of the common
external tariff (CET), in addition to the elimination of the internal tariff rates. Generally,
determination of the CET is done through taking an average of all partners before union
tariff levels.
d) Common market: It is where there is free factor mobility capital, investment and labor
in addition to the customs union requirements that determine free flows of goods and
services. This integration requires governments to employ coordinated actions in order to
ensure the equal treatment for all factors in the member countries of the CM.
e) Economic union: It results from the enlargement of a common market with the
additional requirement of the harmonization of economic policies, both monetary and fiscal.
It further involves the creation of an independent regional central bank that has control over
exchange rate policy and inflation rates.
f) Political union: It is a type of agreement which includes the harmonization of economic
and political policies, and so as to become a single state. This kind of integration
necessitates
the
loss
of
sovereignty
and
the
creation
of domestic institutions on the international level.

Q4. Write short note on:

a) Licensing
b) Joint venture
A.

Q5. Explain the Top-down and Bottom-up approach of planning.

A.
Top-down Planning:

Top-down planning is a common strategy that is used for project planning. It helps
maintain the decision making process at the senior level. Goals and allowances are
established at the highest level. Senior-level managers have to be very specific when laying
out expectations because the people following the plan are not involved in the planning
process. It is very important to keep the morale of the employees high and motivate them to
perform the job. Since employees are not included in any of the decision making processes,
they are motivated only through fear or incentives.
A top-down approach is essentially the breaking down of a system to gain insight into
its compositional sub-systems. In a top-down approach an overview of the system is
formulated, specifying but not detailing any first-level subsystems. Each subsystem is then
refined in yet greater detail, sometimes in many additional subsystem levels, until the entire
specification is reduced to base elements. A top-down model is often specified with the
assistance of black boxes, these make it easier to manipulate. However, black boxes may
fail to elucidate elementary mechanisms or be detailed enough to realistically validate the
model. Top down approach starts with the big picture. It breaks down from there into smaller
segments.
Bottom-up Planning:
A bottom-up approach is commonly referred to as tactics. It is the piecing together of
systems to give rise to more complex systems, thus making the original systems subsystems of the emergent system. Bottom-up processing is a type of information processing
based on incoming data from the environment to form a perception. Information enters the
eyes in one direction (input), and is then turned into an image by the brain that can be
interpreted and recognized as a perception (output). In a bottom-up approach the individual
base elements of the system are first specified in great detail. These elements are then
linked together to form larger subsystems, which then in turn are linked, sometimes in many
levels, until a complete top-level system is formed. This strategy often resembles a seed
model, whereby the beginnings are small but eventually grow in complexity and
completeness. However, organic strategies may result in a tangle of elements and
subsystems, developed in isolation and subject to local optimization as opposed to meeting
a global purpose.
Q6. Discuss the importance of ethics in international business.
A.
The importance of international business ethics has been rising steadily along with
the growth of international business. Technologies like the Internet have made international
business all the more viable, and many companies can only find the desirable growth and
profit they seek by expanding into new markets. This means that just as business ethics
domestically have grown in importance along with the power and significance of major
businesses, so must international business ethics take center stage as a major concern of
the modern era.
a) Public Image: In order to gain public confidence and respect, organizations must
ascertain that they are honest in their transactions. The services or products of a business
affect the lives of thousands of people. It is important for the top management to impart
high ethical standards to their employees, who develop these services or products.
A company that is ethically and socially responsible has a better public image.
People tend to favor the products and services of such organizations. This in turn will help
gain investors trust-a company that practices good ethical creates a positive impression
among its stakeholders.
b) Managements Credibility with Employees: Common goals and values are developed
when employees feel that the management is ethical and genuine. Managements credibility
with employees and public are interrelated. Employees feel proud to be a part of an
organization that is respected by the public. Generous compensations and effective business

strategies do not always guarantee employ loyalty, organizational ethics is equally

significant. Thus, companies benefit from being ethical because they attract and retain good
and loyal employees.
c) Better Decision-making: Decision made by an ethical management is in the best
interest of the organization, its employees, and the public. Ethical decisions take into
account various social, economic and ethical factors.
d) Profit Maximization: Companies that emphasis on ethical conduct which is successful
in the long run, even though they lose money in the short run. Hence, a business that is
inspired by ethics is a profitable business. Costs of audits and investigation are lower in an
ethical company.
e) Protection of Society: In the absence of proper enforcement, organizations are
responsible to practice ethics and ensure mechanisms to prevent unlawful events. Thus, by
propagating ethical values, a business organization can save the resources of the
government and protect the society from exploitation.