Business and Economics

WEEK 12 – EXAM REVISION

EXAM - 50%100 MARKS

SEMESTER ONE 2014 – MGF 2351

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Section A: Short Answer Questions

ANSWER ONLY 6 – worth 10 (18 min) marks each (60 total – 1hr 48min)

– Question 1: The International Business Environment (Weeks 1 & 2)

– Question 2: Culture in International Business (Week 3)

– Question 3: Theories of International Trade and Investment (Week 4)

– Question 4: The Regulatory Framework (Week 5)

– Question 5: Foreign Direct Investment and the Multinational Enterprise

(Week 6)

– Question 6: Cooperation among Nations (Week 7)

– Question 7: Entry Strategies for Internationalising (Week 10)

– Question 8: Globalisation and International Business (Week 11)

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Section B: Essay Questions  ANSWER ONLY 2:

1 from each section!

Worth 20 (36 min) marks each (40 total - 1hr 12min)

– Question 1: Foreign Exchange and the International Monetary System (Week 8)

– Question 3: The Structure and Strategy of International Business (Week 9)

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Common Pitfalls Not answering question

Not providing examples

In section 2 ,answering questions from the same topic

Not answering the required number of questions

Avoid these!

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PRACTICE EXAM

The practice exam is a carbon copy of the structure of the final exam.

Familiarise yourself!

Actually do it, under timed conditions!!

Think of other questions that may be asked in the actual exam..

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Read the question carefully

Look for key words

Address all components of the question

- They will all be assigned marks

Provide examples

No need for an essay structure – JUST MAKE IT CLEAR, Bullet points are also fine

WE don’t need you to reproduce the exact textbook definition!

Answering Short Answer Questions

ANSWERING ESSAY QUESTIONS

Must use a more formal essay style of writing.

Do not try to spill out everything you know!! Remember to look back at the question and ensure you stay on track.

Remember to clearly number your questions.

Which section? Which question number?

Mark question number on exam cover

Begin a new question on a new page.

Make sure your writing is readable!!8

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Use reading time well– Understand what the question is asking– Choose which questions you will answer– Think of examples

If you don’t know, guess!– You cant lose marks, only gain them!

Relax!!!

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Plenty of case studies in the text book

Also throughout they mention many others!!

When you are writing your revision notes, include examples and how they can be used to support each topic.

EVERY Exam question requires examples.

Don’t make up examples!

WHERE TO FIND EXAMPLES??

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What is a political economy?– Political, economic, and legal systems of a country are interdependent

Political systems– Collectivism (socialism, communism) vs. individualism– Democracy vs. totalitarianism (communist, theocratic, right-wing, and tribal)

Economic systems– Command– Market– Mixed

INTERNATIONAL BUSINESS ENVIRONMENT

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Legal systems– Common, civil, and theocratic law

Important issues for international business– Contract law– Property Rights and Corruption– Protection of Intellectual Property– Product Safety and Liability

Economic development– GNI, PPP, HDI

Transition economies– Attractiveness, costs, risks

INTERNATIONAL BUSINESS ENVIRONMENT

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A system of values and norms that are shared among a group of people and that when taken together constitute a design for living.

Elements of Culture

– Religion– Political Philosophy– Economic Philosophy– Education – Language– Social Structure

Hofstede’s Cultural DimensionsChanging Cultures

– Cultural Convergence– Cultural Divergence

Society and Nation State

CULTURE

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THEORIES OF INTERNATIONAL TRADE What is free trade?

Classical country-based trade theories – Mercantilism – Absolute Advantage – Comparative Advantage

Modern firm-based trade theories – Product Life Cycle Theory – New Trade Theory – Porter’s National Competitive Advantage

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Why Governments Intervene in Trade:

Political

– Protecting jobs and industries– National security– Retaliation– Protecting consumers– Furthering foreign policy objectives– Protecting human rights

Economic

– Infant industry– Strategic trade policy

THE REGULATORY FRAMEWORK

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THE REGULATORY FRAMEWORK How Governments Intervene in Trade:

– Tariffs– Subsidies– Import Quotas– Voluntary Export Restraints– Local Content Requirement– Administrative Policies– Anti-dumping policies

The World Trade Organisation– Purpose– Benefits– What do the critics say?

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FDI and the MNE What is FDI / What is an MNE?

Forms of FDI– Greenfield Investment– Mergers and Acquisitions

Why Choose FDI over other modes of entry?

Benefits/Costs of FDI to home and host nations

Political Ideology – Radical view– Free Market View– National Pragmatism

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COOPERATION BETWEEN NATIONS What is economic integration?

Different types of economic integration

– Bi-lateral, multi-lateral, regional, international

Why pursue economic integration?

– Nation-state perspective– Business perspective

Trade related concepts

– Trade creation, diversion, and deflection

Different levels of economic integration

– Free trade area, customs union, common market, economic union, and political union.

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What is the Foreign Exchange Market?– Currency conversion– Insure again foreign exchange risk

Types of Foreign Exchange Systems– Floating – Pegged– Dirty float– Fixed

Role of the IMF

Monetary union

Influences on exchange rate

FOREIGN EXCHANGE AND THE INTERNATIONAL MONETARY SYSTEM

How Internationalisation Improves Profitability

– Market Expansion– Location Economies– Experience Effects– Subsidiary Competencies

Pressures of the Global Market

– Local Responsiveness– Cost Reductions

Strategies for International Business

– International– Localisation– Global Standardisation– Transnational

Structures for International Business

– VERTICAL VS HORIZONTAL– International Divisional– Functional – Product– Worldwide Area– Matrix

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STRATEGY AND STRUCTURE

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Which market?

When to enter?

On what scale?

How to enter?

– Exporting, turnkey projects, licencing, franchising, joint ventures, FDI

– Consider core competencies– Pressures for cost reduction vs. local

responsiveness Countertrade

ENTRY STRATEGIES

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GLOBALISATION What is globalisation? Production and Market, Interconnected and

Interdependent economy.

Drivers of Globalisation– Declining trade barriers– Technology– Environmental standards– Civil society– Culture

Global governance and institutions– WTO, IMF, UN, World Bank

Debate on Globalisation (Preble article)– Jobs– Inequality and poverty– National sovereignty and cultural diversity– The natural environment

LETS PRACTICE

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SHORT ESSAY:Question: Identify the three types of economic systems. Explain the differences and similarities between them. Use valid examples in your answer. The three economic systems are: Command Economy, Market EconomyMixed Economy. They are different from each other with respect to “ownership”, “role of government” and “type of government system”.

Free Market Command Mixed

Resources are owned privately. The consumers and firms decide the allocation of resources. Government has no control over the economy. E.g. USA

Resources are owned by the government. The government decides the allocation of resources; that is what to produce, how to produce and for whom to produce. Firms are not very efficient as they do not earn profits. E.g. Soviet Union, Cuba

Resources are owned both privately and by the government. Important sectors like health,medical,education are under the government and less important ones are under private ownership. Eg.India

Part B: Long EssayQuestion: When expanding globally firms are subjected to two main types of competitive pressures. What are these? How do these competitive pressures influence the type of business strategy used by firms? Discuss using real life examples.

Answering Strategy:

1. UNPACKING

1. Two pressures: Cost and localisation and examples2. Influence on Business strategy: 4 strategies3. Examples

2. STRUCTURING

3. WRITING UP

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INTRODUCTION: Firms undertake internationalization and enter global markets in order to increase their profitability and profit growth firms. In the global environment they are faced with two main competitive forces: (1) pressure for cost reduction and (2) pressure for local responsiveness. Both these competitive pressures impact business strategy.

BODY: Define the two terms.

Business strategy depends upon the relative strength of these competitive pressures.

International (LL), Localisation (LH), Global standardization (HL), and Transnational (HH)

E.G. :Xerox, Cars, Intel, Caterpillar CONCLUSION: Businesses should therefore carefully consider the

competitive forces operating I the global market and then devise and implement a suitable strategy. They should also be cognizant of the dynamic nature of these competitive pressures and make necessary adjustments in business strategy.

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THE END

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