IB06

International Business
Assignment No.I

Assignment Code: 2011IB06A1 Last Date of Submission: 31st March 2011

Maximum Marks:100

Attempt all the questions. All the questions are compulsory and carry equal marks.

Section-A
Ques.1 Write short note on :-
a.General Agreement on Trade in Services
b.Agreement on Rules of Origin
c.Agreement on Trade related investment measures

Ques.2 a.Distinguish between the approaches of Foreign Exchange Management Act 1999
vis-à-vis the FERA, 1973.
b. Write a comprehensive note on Exchange Risk Management
Ques.3 Choice of a strategy for a multinational firm depends on a comparison of benefits and
costs of implementation. On this basis, it may be logical for a firm to pursue a multi-
domestic strategy, for others a global strategy or an international strategy, and still for
others, a transnational strategy? Explain.
Ques.4 If current trends continue, China may be the world’s largest economy by 2030.
Discuss the possible implications of such development for :

a.World trading system

b.World monetary system

Section-B

Case Study
Dixon Ticonderoga – Victim of Globalization?
Dixon Ticonderoga is one of the oldest public companies in the United States. The company’s flagship product is
the ubiquitous No. 2 yellow pencil, introduced in 1913, which is known to almost anyone who went to school or
took standardized tests in the United States. With annual revenues of a little more than $100 million, Dixon is the
second largest pencil manufacturer in the country. For most of its history, Dixon has been a prosperous company,
but the 1990s proved to be a very difficult decade. It’s not that people are no longer buying pencils – in fact,
demand for pencils in the United States has soared. Americans bought an estimated 4.2 billion pencils in 1999, a
53 percent jump from 1991. But an increasing proportion of these pencils have been from China.

The problem began in the early 1990s when Chinese manufacturers entered the market with low-priced pencils.
The pencil industry fought back, arguing that the Chinese were dumping pencils on the U.S. market at below cost
and lobbying Washington for protection. In 1994, when foreign pencil importers accounted for 16 percent of the
market, the United States enacted heavy antidumping duties on Chinese pencils,. Effectively raising their price.
Imports fell dramatically, but the Chinese kept making better, cheaper pencils, and after a couple of years imports

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returned to the levels attained before the imposition of duties. Nor did it stop here. In 1999, U.S. manufacturers
shipped some 2.2 billion pencils domestically, down from 2.4 billion I 1991. During that time, imports jumped from
16 percent to more than 50 percent of the market, with China leading the importers. The pencil industry continued
to lobby for protection, and in mid 2000, the United States renewed duties on pencil imports form China, imposing
import tariffs as high as 53 percent on some brands.

In the meantime, Dixon was not standing still. To try to meet the foreign competition on price, Dixon experimented
with cheaper ways to make pencils. The company tried to make pencils out of recycled paper cases, but quickly
backed away after the product jammed pencil sharpeners. Then the company looked at the wood used to make
pencils –traditionally California incense cedar – and decided it was too expensive for all but the company’s
premium brand. Now the company uses lower priced Indonesian jelutong wood. As an additional cost reduction
measure instituted in the late 1990s, Dixon started to buy the erasers for its pencils from a Korean supplier, rather
than its traditional U.S. supplier.

Despite these steps, the company continued to lose share to imports, and by 1999 it was beginning to lose
money, too. Realizing that it could bring in finished pencils cheaper than it could manufacture them in the United
States , Dixon established a manufacturing operation in Mexico. The original idea behind the Mexican operation
was to supplement its U.S. manufacturing, but in late 2000 the company realized it needed to be more aggressive
and switched many of its processes from the United States to Mexico, cutting some 40 jobs at its U.S. facility. In
another strategic move, in 2000 Dixon created a wholly owned subsidiary in China. This subsidiary manufactures
wooden slats for pencil manufacturing. The slats are then sent to Mexico, where they are turned into pencils. The
lead for the pencils (carbon) is still made in the United States by Dixon, while the erasers are shipped from Korea.
The Chinese subsidiary is also responsible for the production and distribution of certain products that are sold
internationally. As a result of these moves, by 2002 Dixon’s performance was improving, but the company still
needed to cut its cost structure. Accordingly, it decided to shut down its U.S. manufacturing operation at
Sandusky, Ohio, in 2003 and move production to either Mexico or china.

Questions
1. Do you think that lobbying the U.S. Government to impose antidumping duties on imports
of pencils from China is a good way to protect U.S. jobs? Who benefits most from such
duties? Who loses? What alternative policy stance might the government take?

2. Why has Dixon become a multinational company? What are the economic benefits to
Dixon of becoming an international business?

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 IB06
International Business
Assignment No.II

Assignment Code: 2011IB06A2 Last Date of Submission: 15th May 2011

Maximum Marks:100

Attempt all the questions. All the questions are compulsory and carry equal marks.

Section-A
Ques.1 What are the economic and political arguments for regional economic integration?
Given these arguments, why there is not much integration in the world economy.
Ques.2 Research suggests that many expatriate employees encounter problems that limit
both their effectiveness in foreign posting and their contribution to the parent company
when they return home. What are the main causes and consequences of these
problems? How can a firm reduce the occurrence of such problems?
Ques.3 What are the pros and cons of (i) manufacturing a component in-house, and (ii)
outsourcing manufacturing to an independent supplier? Which of these options will
you recommend and why?
Ques.4 Price discrimination is indistinguishable from dumping. Discuss this statement.

Section-B

Case Study

Degrussa: Strategy and Human Resources in China

Germany’s Degrussa AG is one of the largest chemical companies in the world with 2002 sales of euro 11.5
billion(approximately $ 11 billion). During the early 2000s Degrussa underwent a major strategic transformation
from a producer of low-margin commodity chemicals to high margin specialty chemicals. Many of its products are
customized to the unique needs of its customers and require significant investment in R & D and close
collaboration with key customers.
A major component of Degrussa’s strategic shift, which involved numerous divestments and acquisitions, has
been the establishment of significant operation in China. Degrussa sees China as the linchpin of its global
strategy. By 2008, Degrussa anticipates that the Chinese specialty chemicals sector will leapfrog to number two
positions, behind the European Union. Degrussa aims to be one of the major producers in specialty chemicals in
China by that time period. In 2002, Degrussa generated euro 240 million form its Chinese operations, up from
euro 210 million the previous year. The company has established 15 operating companies in China and an R&D
center in Shanghai.
As part of its China strategy, Degrussa has established a goal of becoming one of China’s most attractive
employers. Degrussa believes that such a strategy is key if the company is going to achieve high productivity and
profitability in China. One of the company’s goals is to recruit as many exceptionally qualified young Chinese
recruit as many exceptionally qualified young Chinese people as possible, many of whom will be slated to take on
key management roles in China. To this end , Degrussa has established a “China Top Program.: Emerging
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management personnel in the China region who display exceptional potential and outstanding performance are
nominated for participation in this program by their business units. The nominees are then screened in a
demanding assessment center set up by Degrussa for participation in the program. The first group to go through
the program completed it in December 2002. This group will be assuming important management positions in
Degrussa’s Chinese companies in the near future. They will also have the opportunity to aspire to leadership
positions internationally within Degrussa’s global network of operating companies. Already, the graduates of this
program are working cooperatively across organizational boundaries, helping to establish the company’s short
and medterm strategy for China.
More generally, Degrussa aspires to become the preferred employer in its industry in China. Among other things,
this means a commitment to treating its Chinese emplouees on par with those in other locations around the world.
As a practical matter, that means salary and benefit packages that are attractive relative to the local market.
Degrussa’s human resource policy is an extension of the company’s corporate vision and its pledge t ensure the
“fair treatment of our employees as well as deep respect for the diversity of different nationalities, cultures and
opinions.” Also part of Degrussa’s corporate vision is a commitment to include all members of Degrussa’s staff in
the process of defining the basic tenets and continually developing corporate culture. Emphasis is placed upon
values that promote openness and fairness and upon flat hierarchies and team or project-oriented work practices.
The company also strives to foster innovation, encouraging every staff member, irrespective of nationality, to think
like an entrepreneur.

Questions
1. How would you characterize Degrussa’s staffing practices?
2. From a management development perspective, what is Degrussa trying to achieve through its China Top
Program?

3. How does Degrussa’s human resource strategy in China fit with the company’s goals of attaining high
productivity and profitability in China? How does it fit with the goals of fostering innovation and
entrepreneurship?

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