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Rajalakshmi Engineering College Thandalam, Chennai 602015 Dept. of Management Studies International Business Management - III Semester Dear Students, Herewith we are giving the Hints and Key. Elaborate these given Concepts against the questions either in Part A or B. You are requested to develop further by adding subject matters in this and answer the question, with global case study references. Best Wishes. Prof.Dr.CB.Ragothaman Mr. G. Sankararaman, Asst. Prof.
1. What are the principal economic bases for International Trade? The Principal economic basis for international trade is price of product in various countries and difference in prices. 2. How does exchange rate determination prevail in international business? The demand for exchange is derived from the demand for foreign goods and services as they are composite demand and supply in nature. 3. What are the constraints in globalization of business? Globalization has to be done by solving the constraints like cultural and economic differences, marketing infrastructure, financial expect-exchange rate, and inflation rate and govt. policies. 4. Why does the regional block emerge in business? Regional trade blocks means that fewer but larger economic entities are gradually replacing the multitude of national markets. There will be pressure to trade from within a regional market than to export. 5. Why does MNEs differ in their strategic planning? MNEs differ in the strategic planning due to dominate orientation, sacrificing return on investment upon return on market share, competitive position, timely formulation and implementation. 6. What are the standard approaches to global competition? The standard approaches of global competition are low costs, differentiated products and seeking protected markets. 7. What are the administrative mechanisms for strategic control of MNEs? The administrative mechanism are information systems, measurement systems, choice of key managers, career paths rewards and punishment system, decision responsibility assignments, integrated business teams etc., 8. Mention any two special measurement techniques used by MNEs. The specialized techniques such as distribution cost analysis and the marketing audit. 9. Mention any three conflict resolution mechanisms followed in International business. Business teams,, issue resolution process, decision responsibility assignments integrates, task force, coordination committees are some of the conflict resolution assignments. 10. How does WTO settle disputes in International business? WTO dispute settlement active panels list the complaint and the subject of complaint for further resolution in dispute.

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11. Explain the approaches in International Trade theories. How do product life Cycle approach and balance payments vary in International Trade? International trade theories emphasis much on buyer behaviour and motivation knowledge of basic causes in international business-economic forces in working conditions of the firm-economic environment-why nations trade-national political-economic environment-self sufficiency status-buying cheaper goods-goods-comparative advantages-absolute advantage-product life cycle-balance of paymentfinancial considerations-purchase power-parity-Product life cycle is referred to consumption pattern for a product production and trade cycle-four phase export/foreign production, competitive foreign market, import corp.-balance of payments-all economic transactions current account and Capital Account. 12. Discuss about strategies for coping with foreign-exchange risks. Describe the impact of exchange-rate fluctuations. Strategies for coping with foreign Exchange risk: 1. Transaction risk: Transaction risk-foreign currency-value of foreign currency and changes. 2. Competitive risk: Pattern of manufacturing and sales configuration depreciating exchange Rates /appreciating exchange risk. 3. Market portfolio risk: Firms export markets. Global competitors diversified company. Impact of exchange rate fluctuation: Price setting efforts-European Union Currency Receipts and Payment in sensitive currency balancing with other currency-commodity hedging-Hedge long term exposure-reasons sources deciding-increase marketing in stronger currency. 13. Draw a frame work of global trade. Examine various dimensions and institutions in the world of Economy. Framework of global trade: Global volume-united states-Latin-American-Japan-Germany-Asia-foreign trade of individual nations-foreign trade of individual firms-composition of world trade-pattern of world trade. Other dimensions and Institutions: GATT-WTO growth and development in terms of establishment and issues UNCTAD- the new Eastern Europe and its union World group on transparency in government procurement committee on trade growth-councils for trade in goods-textile monitoring body- council for trade in financial services. 14. How does the big emerging market shape global economy? Explain the implications of regionalism for India. The big emerging Markets: Argentina-ASEAN-BRIC-Taiwan-India-Mexico-Poland-South Africa South Korea-Turkey-Regional Economic Integration-Free-trade Area-Customs Union-Common market-Other groupings-Regionalism and Multinational Company-SAARC, South East Asian Nations. 15. Briefly explain the corporate goals and global strategy of MNCs. Corporate goals and Global strategy of MNCs: the dominant orientation-profit and return on investment sacrifices-global and or national competitive positions-strategic binding to the timely formulations. Modes of Competitions: Low-cost producer-competing with differential products-competing by seeking protected markets-global competition-govt. action on strategy.

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Strategies: 1. Pressure in multiple markets 2. Global brand presence and strong distribution. 3. Deployment of product lines and product founders. 4. Transferring marketing know-how 5. Integration efforts across countries. 16. Compare and contrast strategic issues of global firms in automobile and PC Industry? Strategic Issues in Automobile Industry: 1. Developing the right car for a market in timely fashion 2. Cutting costs by designing cars that need fewer parts 3. Attaining reference and national market balance 4. Achieving financial strength and improving cash flow 5.mDiversifying 6. Overcoming Govt. and related business. Issue on PC markets: 1. Building brand image, emotion based and campaign 2. Multiple retail distribution points. 3. Developing support and service networks 4. PC design 5. Overseas manufacturing capacity 6. Stage by stage, penetrations from Asian markets. 7. Latest software Solutions required running day to day as well future business with protection. 17. Enumarate the integrated procedure to control multinational marketing efforts and explain the steps involved in it. Integrated Control mechanisms: 1. Standard planning systems 2. International Product Management 3. Marketing Committees 4. International Marketing Meet. 5. Task force 6. Marketing support issues 7. International marketing publications-journals-magazines. 8. Rotational marketing personnel. Steps instructions: 1. Establish standards 2. Measuring performance against standards. 3. Coming devotees from standards and plan. 18. Illustrate the positive and negative control mechanisms in International Joint Venture IJV. Positive Control Mechanism: 1. Ability to make specific decisions 2. Ability to design 3. Planning Process appropriate requirement 4.Policies and procedures 5. Ability to set objectives for general Management 6. Ability to drive for future promotions 7. JVGM participating in parents world wide marketing 8. Contracts-Management-Technology transfer marketing-supplies 9. Participating in planning or budgeting process. 10. Reporting structure staffing. Negative Control Mechanism: 1. Board 2. Executive Committee 3. Approval required for specific plan a budget approval requirements nomination screening/no objects. 19. Examine the actions in conflict resolutions internationally. List the factors causing conflict in global business. Actions in Conflict resolution process: 1. International legal environment 2. International Law is applicable to settle international marketing commercial disputes 3. Prior agreements/no prior agreements, jurisdiction/court decides 4. Contract performance 5. Country specific settlements to individual firm in different country. Factors affecting international business/causing conflict: 1. Measures affecting photographic film and paper Import prohibition 2. Customs classification of equipments 3. Anti dumping importation automobile industry specification subsidies provided to providers and exporters 4. Patent protection and taxation. 5. Quantitative restriction 6. Measures affecting agricultures and poultry products. 20. Describe the role of dispute settlement process by International agencies. FCN and Tax treaties (Treaties of Friendship, commerce and navigators) IMF and WTO UNCITRAL

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( The United Nations established a commission on International Trade Law) ISO Patent protection system Trade mark Convention Regional Grouping and International Law WIPO (World Intellectual Property Organization) UNCTAD, OECD, WHO and others. 21. Define MNE/MNCs. Multinational enterprises is an organization which innovates, invests, produces based on demand, market and operates globally with talented multicultural human resources. MNE has worldwide operations and involvement with global perspective. 22. Define the traits MNE/MNCs. It uses the opportunity to penetrate in the global market availing FDI limits, JV, Merger and Acquisitions, technological transfers, by way of royalty, turnkey plant operations and supplies, consultation facilities with manpower and managerial decisions for private as well to Govt. sectors. 23. Discuss the Eiffel Tower culture of MNE/MNCs. A culture which is characterized by emphasis on hierarchy and orientation to the task. Well structured with centralized power control, with precise decision making control to the global operations. 24. Discuss Incubator culture in MNEs. A culture which has a trait by a strong emphasis on equality and orientation to the individual. With informal structure and they are designed for entrepreneurial creative skills. E.g. Silicon Valley. 25. Define Guide Missile Culture in MNE/MNCs. A culture which has a trait by a strong emphasis on equality and orientation to the individual in the workplace and orientation to the task, .Individual skill is given importance, but everyone in the group is given equal importance because of their respective contribution towards the organization goal. 26. Discuss the different approaches to control MNE/MNCs. 1. Working within controlled parameters 2. Focus on Qualitative Objective aspects of a foreign subsidiary. 3. Control requires large control staffs and centralized information processing capability 4. Decentralized operating decisions required 5. Required precise plans, budgets, required standards 6. Monitor unit wise. 27. Discuss the factors that affect controlling of MNE/MNCs. 1. Now and then Data problem arises because of lack of rapid changes and delayed exact information. 2. There are dissimilar outside stake/stock holders which are uncontrollable with Govt. influences. 3. Country differences make it hard to compare operations. 4. Time, distance and expenses make a vital role in communications. 28. What do you mean by Transnational Company? These companies view global market as global village, due to global network; it tends towards geocentric operation, interdependent business with specialized activities, a team work. 29. What do you mean by Global Company? A company in-between global company and global strategy. Focuses on home country manufacturing and centered with domestic market.. But using TRIPS it may concentrate on global sale also. E.g ,Bata India Ltd 30. Discuss host country operations? Any foreign country in which an international company operates and the foreign country is involved in any functions or operations that will affect the international company is called host country operations. 31. Discuss Creativity and Innovation help in global competitiveness. According to Micheal Porter, a key to successful multinational efforts in global competitiveness battle is the ability to continually innovate. Innovative is stimulated by vision, bench making, product proliferation, while creativity constitutes personal flexibility and willingness to take risk. These factors help MNEs in global competitiveness through differentiation, niche markets etc.,

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32. What is technology diffusion? Technology diffusion is the spreading of technology to underdeveloped countries. The developed countries spread to technical know-how to the under develop countries in order to facilitate the industry.

33. WHAT IS TQM? Ans: TQM is a process that stresses three principles: customer satisfaction, employee involvement and continuous improvements in quality. The goal of TQM is to eliminate all defects. TQM often focus on benchmarking world class standards, products and service design, process design and purchasing.
34. DEFINE QUALITY CIRCLES?

Ans: A quality control circle is a group of workers who meet on a regular basis to discuss ways of improving the quality of works. 35. WHAT IS KAIZEN & TAGUCHI? Ans: The continuous improvement process is also known as kaizen, which means identifying problems and enlisting employees at all levels of the organization to help eliminate the problem. Taguchi method is a Japanese method to identify the cause of defects. 36. WHY SHOULD HOST COUNTRY CONTROL MNES? Ans: The home country government has a number of problems when attempting to prevent firms shifting operations to other countries. The control & restrictions on MNCs foreign operations include: prohibitions on the transfer of technology to certain nations - Preventing firms from using money raised in the home country for foreign investment - Creation of tax regimes not conducive to FDI. 37. WHAT IS EMBARGO? Ans: Embargo may prohibit the shipment of all goods to a particular country or to a group of countries. A specific type of quota that prohibits all trade. Under this method countries or group of countries prohibit import or exports on whole categories of products regardless of destination on specific products to specific countries, or on all products to give countries. Government generally imposes embargoes so that their economic effects will serve political purposes. For e.g. The UN voted an embargo on Haiti in 1933 because of political animosity towards the military dictatorship in power. 38. WHAT IS VOLUNTARY EXPORT RESTRAINTS? Ans: A voluntary export restraint is a quota on exports of the domestic firm imposed by the exporting country. Exporting country imposes such restrictions, mostly at the request of the importing country. For e.g. Japanese automobile exporters had such restraint in 1981 due to the request of the US government foreign exporters mostly accept for the voluntary export restraint as its violation quotas etc. it helps the domestic firms by providing protection from the foreign competitors and this enhances the price of import goods and make the domestic goods cheap. 39. WHAT IS MERCANTILISM? Ans: Mercantilism, the trade theory that formed the foundation of economic thought from about 1500 to 1800. Mercantilism held that a countrys wealth was measured by its holdings of treasure, which usually meant it gold. Mercantilism theory was intended to benefit the colonial powers. According to the theory, countries should export more than they import if successful, receive gold from countries that run deficit.

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40. WHAT IS COMPARATIVE ADVANTAGE? Ans: The theory that there any still be global efficiency gains from trade if a country specializes in those products that it can produce more efficiently than other products. 41. WHAT IS TRADING BLOCK/ REGIONAL ECONOMIC INTEGRATION? Ans: regional economic integration is the political and economic agreements among countries that give preference to member countries to the agreement. Regional economic groups might reduce tariffs for member countries while keeping tariffs for non member countries. 42. WHAT IS FDI? Ans: The investment made by a company in new manufacturing and/ or marketing facilities in a foreign country is referred to as foreign direct investment. Investment made by Eron in power plant in India is an example of FDI. It can be vertical and horizontal FDI. 43. WHAT ARE THE BENEFITS FROM FDI TO THE COMPANIES? Ans: Companies benefit from direct investment by Control Access to foreign markets Access to foreign resources Higher foreign sales than exporting Partial ownership (something) 44. WHAT IS GATS? Ans: General agreement on trade and services provides a multilateral framework on principles on services. Trade in services like, insurance, travel, tourism, hotel banking, maritime, transportation, mobility of human resources etc. has been brought within the purview of GATS. The GATS covers 4 models of international delivery of services; Cross border supply(trans border data flows, transportation services) Commercial presence(provision of services abroad through FDI or representative services) Consumption abroad(tourism) Movement of personnel(entry & temporary stay of foreign consultants)

45. WHAT IS THE PURPOSE OF AGREEMENT ON AGRICULTURE? Ans: The agreement on agriculture establishes guidelines for initiating a process of reform of trade in agriculture. The important aspects of UR agreement on agriculture includes: -tariffication -tariff binding -tariff cuts -reduction in subsidiaries & domestic support. 46. WHAT IS COUNTER TRADE? Ans: Counter trade is an arrangement to pay for import of goods and services with something other than cash. Thus, counter trade is goods-for-goods deal. The different types of counter trade include: barter, counter purchase, compensation trade, switch trading, offsets & clearing agreement. 47. WHAT ARE THE DIFFERENT KINDS OF ECONOMIC INTEGRATION? Ans: There are 4 types of regional economic integration:

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-Free trade area: no internal tariff -customs union: common external tariff -common market: factor mobility -economic integration: coordinate fiscal & monetary policy. 48. WHAT IS CARTEL? Ans: It is an agreement to restrict competition between productions of the same commodity in 1 country or between many countries. 49. WHAT ARE THE INDICATORS FOR GLOBAL BUSINESS ENV? Ans: The indicators for global business env are; micro & macro factors. Micro factors are customer, supplier, stakeholders, employees etc & macro factors are divided into internal & external factors: Internal factors are government rules & regulations, consumers taste & behavior etc & External factors are political, economic, natural, technology, legal, cultural & social factors. 50. WHAT ARE TRIMS? Ans: Trade related investment measure refers to certain conditions or restrictions imposed by a government in respect of foreign investment in the country. TRIMS were widely employed by developing countries. The agreement on TRIMS provides that no contracting party shall apply any trim which is inconsistent with the WTO articles. 51. DEFINR GLOBALIZATION? Ans: IMF defines globalization as the growing economic interdependence on countries worldwide through increasing volume and variety of cross border transaction in goods & services & of international capital flows & also through the more rapid and wide spread diffusion of technology. 52. WHAT DO YOU MEAN BY FREE TRADE AREA? Ans: FTA is association between 2 or more countries to abolish all tariffs between member countries. FTA usually begins modestly by eliminating tariffs on goods that already have low tariff, & there is usually an implementation period over which all tariff are eliminated on all products. The member countries might explore other forms cooperation, such as reduction of non tariff barriers or trade in services & investment, but focus is clearly on tariffs. 53. HOW IS ECONOMIC UNION FORMED? Ans: Economic union is formed when the member countries create greater economic harmonization through the adoption of common economic policies. E.g., the European Union has established a common currency complete with a common central bank. 54. WHAT IS CORPORATE PHILOSOPHY OF A GLOBAL FIRM? Ans: The corporate philosophy of a global firm is that it is committed to cleaner environment throughout the world, and is diligently working to ensure better environment everywhere. E.g. General Motors. 55. WHAT DO YOU MEAN BY ECONOMIC INTELLIGENCE UNIT? Ans: Economic intelligence unit is used to measure the market intensity of the major regions based on the market. 56. MENTION THE AVENUES FOR INTERNATIONAL MANAGEMENT? Ans: The various avenues for international trade management are Export-import Joint venture FDI Wholly owned subsidiary Green field project

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Functional alliances 57. WHAT ARE THE NON TARIFF BARRIERS ADOPTED BY ANY GOVERNMENT? Ans: The non tariff barriers are: Subsidies, customs valuation, quotas, government legislation, arbitrary standards, licensing agreements, administrative delays, reciprocal requirements, service restrictions. 58. WHAT IS ZERO DEFECTS? Ans: The elimination of defects, which results in the reduction of manufacturing costs & on increase in consumer satisfaction. 59. DEFINE DUMPING? Ans: Dumping means selling the products less than the ongoing price in the market or less than the cost of production. Dumping is used to sell excess production or to earn foreign exchange. Germans & Japanese used dumping during World War II. Presently china is dumping its products in Indian markets. 60. WHAT IS INTELLECTUAL PROPERTY RIGHTS? Ans: IPR has been characterized as a composite of ideas, invention & creative expression, plus the public willingness to bestow the status of property on them & give their owners the right to exclude others from access to or use protected subject matter. Acc to WTO, IPR are the rights given to persons over the creation of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time. 61. WHAT IS TRIPS? Ans: Trade related aspects of intellectual property rights are a provision from the Uruguay round of trade negotiations requiring countries to agree to enforce procedures under their national laws to protect intellectual rights. 62. MENTION THE ORGANIZATION STRUCTURE OF MNES? Ans: The organization structure of MNEs is: International division structure Global structure arrangement- global product division Global product division Global functional division Mixed organization structure Transnational network structure 63. WHAT IS ETHNO CENTRIC APPROACH OF INTERNATIONAL BUSINESS? Ans: A nationalistic philosophy of management whereby the values and interests of the parent company guide the strategic decision. 64. WHAT IS POLYCENTRIC APPROACH OF INTERNATIONAL BUSINESS? Ans: A philosophy of management whereby strategic decision are tailored suit the cultures of the countries where the MNC operates. 65. WHAT IS REGIOCENTRIC APPROACH OF INTERNATIONAL BUSINESS? Ans: A philosophy of management whereby the firm tries to blend its own interests with those of its subsidiaries on a regional basis. 66. WHAT IS GEOCENTRIC APPROACH OF INTERNATIONAL BUSINESS? Ans: A philosophy of management whereby the company tries to integrate a global systems approach to decision making. 67. WHAT IS JIT? Ans: A system that decreases inventory costs by having components and parts delivered as they are needed in production. It focus on reducing inefficiency & unproductive time in the production process improve continuously the process & the quality of the product or service. 68. WHAT IS OFFSHORE MANUFACTURING?

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Ans: Cost-minimization strategies and the drive for global efficiencies force MNEs to establish economies of scale in manufacturing, often by producing in areas with low-cost labor. This is one of the major reasons why many MNEs establish manufacturing facilities in Asia, Mexico & Eastern Europe. This type of foreign direct investment is known as offshore manufacturing. 69. WHAT ARE THE REASONS FOR MNEs SUCCESS GLOBAL SOURCING STRATEGIES? Ans: The success of global sourcing strategies depends on four key factors: -compatibility -configuration -coordination -control. 70. WHAT IS THE ROLE OF WTO IN SETTLING DISPUTES? Ans: The WTO understands on rules & procedures governing the settlement of disputes establish a unified system for setting disputes that arise under the WTO agreement. It solves the disputes between states and private persons, between private persons. The General council convenes as the dispute settlement body under its own chairman is responsible for establishing panels. It also adopts panel & Appellate body reports, monitors the implementation of rulings & recommendations & other member state privileges if that should be required. 71. WHAT ARE THE INTERNATINAL AGENCIES RESPONSIBLE FOR RESOLVING THE CONFLICT? Ans: The international agencies responsible for resolving the conflicts are -international court of justice -WTO dispute settlement body -International center for the settlement of investment disputes -The American arbitration association -International chamber of commerce -Spanish court of arbitration -United nations committee on International trade law. 72. WHAT ARE THE METHODS FOR RESOLVING CONFLICTS UNDER THIRD PARTY INTERVENTION? Ans: The methods for resolving conflicts under third party intervention are: -mediation -arbitration -conciliation -inquisition 73. WHAT ARE THE 2 BASIC BARGAINING ORIENTATION OR SITUATIONS AVAILABLE FOR THE MNEs? Ans: They are: 1, Distributive bargaining: negotiations that seek to divide up a fixed amount of resources; this is also called win-lose situation. 2, Integrative bargaining: negotiation that seeks 1 or settlements that can create a win-win situation. 74. WHAT ARE THE 2 PRIMARY CONSIDERATIONS IN CHOOSING A LOCATION? Ans: In choosing a location, MNC has 2 primary considerations: 1, The country,- MNCs often invest in advanced industrialized countries because they offer the largest markets for goods & services, and 2, The specific locate- the factors include access to market, proximity to competitors, availability of transportation & electric power,& desirability of the location for employees coming from the outside. 75. WHAT ID KEY FACTOR FOR SUCCESS? Ans: It is a factor that is necessary for a firm to compete effectively in a market niche. For e.g., a KFS for an airline is safety, price & service. The elements for KFS are people and resources that help to develop & sustain the necessary KFS. 76. WHO ARE THE INTERNATIONAL AGENCIES TO RESOLVE CONFLICT? Ans: The inter American Commercial Arbitration commission The Canadian-American Commercial Arbitration Commission for dispute between Canadian & US businesses

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The London Court of Arbitration The American Arbitration Association The International Chamber of Commerce The Commercial Dispute Resolution Center. 77. WHAT IS BENCH MARKING? Ans: Benchmarking is part of the process of continuous improvement. It is defined as measuring that of the strongest competition in order to establish best practice. Benchmarking can be carried out in the larger organization by ways of comparisons between operations units. Thus the super market chain might benchmark operations across stores, a financial institution across branches, different hospitals under the same health authority, different college under the same education authority. Clearly of paramount importance is how performance is measured, & this has a clear link to the strategy of the organization. 78. WHAT IS LEARNING ORGANIZATION? Ans: organization that are able to transform themselves by anticipating change & discovering new ways of creating products & services; it has learned how to learn. Eg. Kodak, is now focusing on digital technology which it anticipates will be the wave of the future. 79. WHAT IS CHARACTERISTICS OF LEARNING ORGANIZATION? Ans: Three characteristics of learning organization are Openness: encourage & anticipate change, they learn how to accommodate, create & profit from it. Creativity: requisite skills & abilities for learning, willingness to take risk Self-efficacy: belief or confidence in his or her abilities to marshal the motivation, resources & courses of action needed to successfully accomplish a specific task. 80. DEFINE WORLD CLASS ORGANIZATION? Ans: WCO are enterprises that are able to compete with anybody, anywhere, anytime.. WCOs has operations throughout globe but some MNCs focus heavily on only 1 geographic locale & have only limited worldwide operations. However, WCOs are able to compete effectively against all comers, foreign or domestic. 81. WHAT IS TECHNOLOGY PARADOX? Ans: The situation where high-tech business can thrive at the very moment that their prices are failing the fastest. 82. WHAT IS VIRTUAL ORGANIZATION? Ans: An organization that is able to conduct business as if it were a very large enterprise when, in fact it is much smaller made up of core business competencies & the rest outsourced or partnered. 83. WHAT IS GLOBAL SOURCING? Ans: The use of worldwide suppliers, regardless of where they are located geographically, who are best able to provide the needed output. 84. WHO IS HOST-COUNTRY NATIONALS? Ans: Expatriate managers who are citizens of the country where the multinationals corporation is head quartered. 85. WHO ARE EXPATRIATED? Ans: Those who live and work away from their home country. They are citizens of the country where the multinational corporation is head quartered. 86. WHO ARE THIRD-COUNTRY NATIONALS? Ans: Managers who are citizens of countries other than the one which the MNC is hear quartered or the one in which the managers are assigned to work by the MNC. 87. WHAT IS OFF-SET TRADE? Ans: It is where an exporter sells products for cash and then undertakes to promote exports from the importing country in order to help it earns foreign exchange. 88. WHAT DO YOU MEAN BY BUY-BACKS? Ans: Buy-backs are products the exporter receives as payment that are related to or originate from the original export. E.g. Pepsi co. provided Pepsi syrup to state-owned bottling plants in Russia & received Stolichnaya vodka, which it marketed in the west.

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89. WHAT DO YOU MEAN BY STRATEGIC-ALLIANCE? Ans: An agreement between companies that is of strategic importance to one or both companies competitive viability. 90. WHAT IS SUBSIDAIRY OPERATION? Ans: A foreign operation that is legally separate from the parent company, even if wholly owned by it. 91. WHAT DO YOU MEAN BY SUBSIDIES? Ans: It is the direct or indirect financial assistance from governments to companies, making them more competitive. 92. WHAT DOES THE PORTERS DIAMOND THEORY OF INTERNATIONAL BUSINESS STATE? Ans: The theory states that the 4 conditions- demand, factor, endowments, related & supporting industries, & firm strategy, structure, & rivalry- that usually must all be favorable for an industry in a county to develop & sustain a global competitive advantage. 93. WHAT DO YOU MEAN BY MOST-FAVOURED- NATION? Ans: A GATT requirement that a trade concession that is given to one country must be given to all. 94. DEFINE MANAGEMENT CONTRACT? Ans: An agreement whereby one company provide management personnel to perform general or specialized management functions to another company for a fee. 95. DEFINE INTERNALIZATION? Ans: It is the control through self-handling of foreign operations, primarily because it isles expensive to deal with in the same corporate family than to contract with an external organization. 96. DEFINE HOST COUNTRY? Ans: Any foreign country in which an international company operates. 97. WHAT DO YOU MEAN BY GSP? Ans: It is the preferential import restrictions extended by industrial countries to developing countries. 98. WHAT DO YOU MEAN BY GLOBAL COMPANY? Ans: It integrates it operations that are located in different countries. It may be also called as globally integrated company. E.g. It might design a product or service with a global market segment in mind. 99. WHAT IS A MULTI-DOMESTIC COMPANY? Ans: It allows each of its foreign country operations to act fairly independently, such as by designing & producing a product or service in France for French market & in Japan for Japanese market. They are sometimes called as locally responsive company. 100. WHAT IS A WHOLLY OWNED SUBSIDAIRY? Ans: It is an overseas operation that is totally owned & controlled by an MNC. In recent years a growing number of multinationals have acquired their subsidiaries through alliances or mergers. E.g. British Petroleum Companys purchase of Amoco for $48.2 bn. 101. WHAT ARE THE ORGANIZATIONAL CHARACTERISTICS OF MNCs? Ans: They are; Formalization: use of defined structures & systems in decision making, communicating, & controlling. Specialization: assigns individuals to specific, well-defined tasks. Centralization & decentralization: decision are made at the top or down the line & getting the lower-level personnel involved. 102. WHAT ARE THE FACTORS THAT AFFECT THE TRADING PARTENERS IN THE INTERNATIONAL BUSINESS? Ans: They are Distance Competitive capabilities Cultural similarity Relations between countries. 103. MENTION THE FIVE ASPECTS OF THE INTERNATIONAL CONTROL PROCESS? Ans: They are:

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Planning Organizational structure Location of decision making Control mechanisms Special situations(acquisition, shared ownership) 104. DIFFERNTIATE BETWEEN FOREIGN BRANCH & SUBSIDAIRY? Ans: A foreign branch is foreign operations not legally separate from the parent company. Branch operations are possible only if the parent holds 100% ownership. A subsidiary, however, is an FDI that is legally a separate company, even if the parent owns all of the voting stock, the parent controls a subsidiary through the control mechanism.

105. MENTION SOME KEY STRATEGIES THROUGH WHICH MNCs REMAIN COMPATIBLE & COMPETITIVE? Ans: The key company strategies are: Efficiencies in cost-reduction of manufacturing costs Dependability-degree of trust in a companys product & its delivery & price promises Quality-performance reliability, service quality, speed in delivery Flexibility-ability of the production process to make different kinds of product & to adjust the volume of output Innovation-ability to develop new products & ideas. 106. WHY SHOULD A COMPANY PURSUE GLOBAL SOURCING STRATEGIES? Ans: Companies pursue global sourcing strategies for a number of reasons: 1, to reduce cost-due to less expensive labour, less restrictive work rules, & lower land & facilities cost 2, to improve quality 3, to increase exposure to worldwide technology 4, to improve delivery of supplies 5, to strengthen the reliability of supply by supplementing domestic with foreign suppliers. 6, to gain access to materials available only abroad, possibly because of technical specifications or product capabilities. 7, to establish a presence in a foreign market 8, to satisfy offset requirements 9, to react to competitors offshore sourcing practices. 107. WHAT ARE THE 3 MAIN CONFIGURATION OF OUTSOURCING? Ans: They are: Vertical integration Arms-length purchases from outside suppliers Japanese keiretsu relationships with suppliers 108. WHAT DO YOU MEAN BY PIGGYBACK EXPORTS? Ans: Piggyback exports are products exported by a company through another other manufacturers channels of distribution (an exporter use another exporter as an intermediary). For e.g., a company may agree to supply products to a foreign distributor even though it does not produce the entire range of products. Then it might look for other manufacturers to fill the gaps in the product line. In this way, the second manufacturer becomes an exporter indirectly by using the first exporters distribution channels. 109. WHAT DO YOU MEAN BY ACHIEVEMENT CULTURE? Ans: A culture in which people are accorded status based on how well they perform their functions. 110. WHAT IS ADAPTIVE ORGANIZATION? Ans: Organization that are characterized by reaction to required changes but failure to anticipate them & stay on or ahead of the cutting edge.

Concept by Profs . Dr. CB. Ragothaman & G Shankarraman REC DOMS

(For Private Circulation to MBA Students of Rajalakshmi Engineering College, Chennai )

111. DEFINE ARBITRATOR? Ans: An individual who provides a solution to a grievance that both sides have been unable to resolve themselves & that both sides agree to accept. 112. DEFINE ASCRIPTION CULTURE? Ans: A culture in which status is attributed based on who or what as person is. 113. WHAT DO U MEAN BY BICULTURE GROUP? Ans: A group in which 2 or more members represent each of 2 distinct cultures, such as 4 Mexicans & 4 Taiwanese who have formed a team to investigate the possibility of investing in a venture. 114. WHAT IS CONGLOMERATE INVESTMENT? Ans: A type of high-risk investment in which goods or services produced are not similar to those produced at home. 115. WHAT IS DIFFUSED CULTURE? Ans: A culture in which both public & private spaces are similar in size & individuals guard their public space carefully, because entry into public space also affords entry into private space as well. 116. WHAT IS GLOBAL SOURCING? Ans: The use of world wide suppliers, regardless of where they are located geographically who are best to provide the needed output. 117. DEFINE INPATRIATE? rd Ans: An individual from a host country or a 3 country national who is assigned to work in the home country. 118. WHAT DO YOU MEAN BY LEARNING ORGANIZATION? Ans: Organization that are able to transfer themselves by anticipating change & discovering new ways of creating products & services they have learned how to learn. 119. DIFFERENTIATE UNIVERSALISM & PARTICULARISM? Ans: the belief that ideas & practices can be applied everywhere in the world without modification is called as universalism. The belief that circumstances dictate how ideas & practices should be applied & something cannot be done the same everywhere is called particularism. 120. WHAT IS ANDEAN GROUP? Ans: A South American form of economic integration involving Bolivia, Columbia, Ecuador, Peru & Venezuela. 121. WHAT DO YOU MEAN BY APPROPRIABILITY THEORY? Ans: The theory that companies will favor FDI over chug non-equity operating forms as licensing arrangements so that potential competitors will be less likely to gain access to proprietary information. 122. WHAT IS BILL OF EXCHANGE? Ans: A instrument of payment in international business that Instructs the importer to forward payment to the exporter.

Concept by Profs . Dr. CB. Ragothaman & G Shankarraman REC DOMS