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IB 06/eIB 06
INTERNATIONAL BUSINESS
Time: Three Hours
Maximum Marks: 100
Note:
1.
2.
3.
4.
Business
due
the
2.
3.
4.
5.
Explain the term cross cultural differences. How can one prepare
against making wrong assessments of culture?
6.
What is the role of India in WTO? Why WTO agreement in Bali has
helped developing countries?
7.
Describe the choices in the marketing mix in relationship to the
global-local dilemma.
8.
June 2014/IB 06
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9.
Write
a)
b)
c)
10.
11.
12.
Describe the foreign exchange market. Discuss why it exists and why it
is necessary for international trade and commerce.
Section-C (15 Marks)
Case Study (Compulsory)
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call an 800 number and may never realize that they are talking with
someone halfway around the world. AOL reports much lower operating costs
and lower turnover in its India call center than it experience in the United
States. Costs are lower, even though training costs are higher and the
company must provide employees with transportation to and from work.
Like AOL, other well-known American companies have beaten a path to India
to outsource their back-office services. Recently, Microsoft announced that it
was moving some of its customer service jobs to India. Microsoft joins a long
list of American companies already operating back office operations in India,
such as Oracle, IBM, Intel and HP Lloyds TSB, one of the UKs largest banks,
has announced the closing of call center in England and movement to India.
Lloyds TSB call center workers in the UK earn on average ten times the
wages to be paid to their Indian substitutes. Even the World Bank has
moved its accounting function from Washington to India.
American
businesses are realizing that almost any back-office or service job can be
moved overseas.
While the call center and other lower-level service jobs which have moved to
India are becoming commonplace, India is also embarking on a much more
ambitious approach to job creation. India has attracted work from the United
States and Europe in software development, chip design, IT consulting,
financial services, and drug research. An estimated 20,000 US tax returns
were prepared in India last year and the number is expected to skyrocket to
200,000 this year. The returns are prepared by Indian accountants familiar
with the US tax code and are signed by CPA in the United States. Indians
now process mortgage applications, do legal and medical transportation, and
book travel reservations. The management consulting firm McKinsey now
outsources to India the design of its Power Point presentations that it shows
its clients.
The skill level of jobs being outsourced is increasing. GE has established the
jack Welch Technology Center in India and employs 1,800 engineers, many
with doctoral degrees, top conduct basic research. The game here really
isnt about saving costs but to speed innovation and generate growth for the
company. Nevertheless, a top-of-the-line electrical engineer in India earns
only about US$ 10,000 a year, a fraction of the salary of an American or
European with the same qualifications.
India has the advantage of having, an educated workforce that can speak
English and is willing to work for a fraction of the wage level of developed
country workers. It does, however, have a number of disadvantages to
consider when companies decide to outsource work. India has experienced
very impressive economic growth in the years since economic liberalization,
however, it is still very much a less developed country. An estimated onethird of the population is illiterate, and only the higher classes speak English
June 2014/IB 06
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well. The official language of India is not English but Hindi. And India still
possesses a very poor infrastructure with unreliable power sourcing and
frequent flooding Government bureaucracy is still very much a factor in
business activity and presently Indias fiscal deficit is running at over 10
percent of GDP. While India has made great strides in eliminating excessive
government, much improvement needs to be made. In addition to concerns
over budget deficits, political tensions are also troublesome. India has an
uneasy relationship with its neighbor Pakistan and the tension between
Muslims and Hindus produces violent conflict at times.
At the present time, India is the lead country in attracting service
outsourcing, but other countries are now beginning to compete. Like India,
the Philippines is an English-speaking country with a low wage level. Unlike,
India the Philippines, a former colony of the United States, is closer to the US
in language and culture. While the number of jobs outsourced to the
Philippines is currently much lower, estimated to be around 30,000, the
number is expected to grow rapidly.
An additional factor which may slow the growth of outsourcing to India is the
political backlash caused by job losses in the United States and Great Britain.
In the United States, the state of Indiana cancelled a $15 million contract
with the software arm of large Indian company, Tata Group, over fears of
unemployment in the United States. Protection of domestic jobs is a very
strong political motive and one that will likely be raised as more and more
jobs are outsourced to India. Many will argue the costs and benefits of
overseas outsourcing. A study by the McKinsey Global Institute found that for
every dollar invested in overseas outsourcing $1.25 returned to the United
States. Supporters of foreign outsourcing argue the benefits of free trade
and comparative advantage, while critics argue that foreign workers are
taking jobs and potentially destroying the countrys technical competitive
advantage.
13.
Case Questions:
(a)
From
the
companies, analyze the
work to India.
perspective
of
American
and European
advantages disadvantages of outsourcing
(10)
(b)
What would you recommend to Indian Government officials to
ensure continued
job creation?
(5)
June 2014/IB 06
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