JUNE 2012 EXAMINATION

IB06 International Business Time: Three Hours

Note: 1. 2. 3. 4.

Maximum Marks:100

The paper is divided into three sections: Section A, Section B and Section C. There are seven questions in Section A of 10 marks each. Attempt any four. Section B has 5 questions of 15 marks each. Attempt any three. All the questions of Section C (Case Study) are compulsory. This section is of 15 marks

Section A 1. Describe the structure of WTO in detail mentioning the functions of all the levels. 2. (i) What are the essential difference between FEMA and FERA? (ii) What penalties can be imposed on the persons contravening provision of FEMA? 3. Write short notes on following modes of International Market Entry strategies (i) Licensing Strategies (ii) Franchising Strategies 4. Discuss key factors to be kept in mind by International Supply Chain Managers while shipping in following types of cargoes to far-off destinations. (a) Perishable Foods (b) Diamond Jewellery (c) Cement 5. Discuss the various types of staffing policies adopted by companies engaged in International Business. 6. How does foreign exchange fluctuations impact exporters of goods and service? 7. Differentiate between the following: (i) Antidumping duty & special safeguard provision. (ii) Tariff Barriers and Non Tariff Barriers. Section-B 1. Give a detailed account of Horizontal Foreign Direct Investment 2. What are the different types of risks in International business? What is meant by hedging in foreign exchange market? Enumerate the hedging tools IB06/June12/Page 1 of 3

3. What is the difference between a transnational corporation, Multinational Corporation, and global corporation? Explain with example 4. Discuss key issues in deciding compensation for expatriate managers 5. FDI is risky yet firm prefer to go all out to acquire enterprises abroad to establish subsidiaries in alien countries. What are the factors that explain such preference? Section-C Chinese state firm to buy 153-million stake in African Minerals AIM-listed miner African Minerals Limited (AML), which holds a significant interest in iron ore and base metals in West African nation Sierra Leone, West Africa, has entered into a deal to divest a 12.5-per cent stake in itself to China Railway Materials Commercial Corporation (CRM) for about 152.6 million to raise funds for its flagship Tonkolili iron-ore project in Sierra Leone. Hamilton, Bermuda-based AML, which had held been scouting for funds in recent months mainly from Asian investors to develop the Tonkolili iron-ore project, has now entered into a conditional long-term agreement with CRM for a minimum of 20 years, with an option to extend it for a further five years.
In September 2009 AML had said that it was in ''advanced'' discussions with the Londonlisted Eurasian Natural Resources Corporation, as well as with the Central African Mining & Exploration Company for financing the project. The Tonkolili iron-ore deposits holds an estimated 5.1 billion tonnes of high grade iron ore. Under the off-take agreements, CRM will purchase between five and eight million tonnes per annum of hematite iron ore from AML's first stage of production at Tonkolili for a minimum of 20 years, expected to commence by 2011. The Chinese State-owned company will also purchase a minimum of 10 million tonnes per annum of magnetite iron ore production from AML's second stage of production at Tonkolili for a minimum of 20 years, expected to commence by 2013. CRM will take up approximately 30.5 million new common shares of AML at 5.00 per share for approximately 152.6 million representing 12.5 per cent of the enlarged issued share capital. The funds will provide the majority of the funding for AML's first phase of iron ore production. "African Minerals welcomes the signing of this Conditional Agreement with CRM, one of China's large-scale state owned enterprises and one of China's largest steel trading companies,'' said Alan Watling, CEO of African Minerals. ''We expect that this strong and strategic relationship with CRM will help underwrite Tonkolili's start-up hematite production of up to 8 million tonnes per annum by 2011,'' he added. ML is a mineral exploration company with significant interests in Sierra Leone, West Afric(i) It is in the business of exploration for various minerals in Sierra Leone. It

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explores for diamonds, kimberlite, nickel/cobalt, base metals, uranium, gold, and iron ore. The explorer operates in five geographical regions, Sierra Leone, Canada, Bermuda, the UK and Guernsey. QUESTION: (i) What strategic benefits would accrue to both the paries in the deal? (ii) What mode of Finance will AML use to fund its Tonkolili iron ore project? (7.5+7.5)

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