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IBM 1143 INTERNATIONAL BUSINESS

FINAL EXAMINATION

Section A (50 marks)

This section contains TWENTY (20) questions. You are required to answer ALL
questions in the answer sheets given.
Objective
1. There are 3 basic decisions that a firm contemplating foreign expansion must make :
A. Cost, Accessibility and Timing
B. Entrance, Timing and Scale
C. Liability, Partnering and Competition
D. Location, Licensing and Distribution
2. Which of the following is NOT one of the advantages of a joint venture?
A. Firms can benefit from a local partners knowledge of the host country
B. In some countries, political considerations may make this the only feasible entry
mode.
C. It is one of the least risky forms of entry
D. High development costs can be shared with a partner

3. Whole own subsidiaries in foreign countries usually take one or two forms- an
acquisition or ____
A. Selective franchising
B. Greenfield Investment
C. Equity partnership
D. Exclusive licensing agreements.
4. An acquisition has 3 main points in its favour: its quick to execute, to may pre-empt
competitors, and _______________.
A. It has a solid record of successes
B. It is less capital intensive than other modes.
C. It is relatively easy to end if profits do not meet expectations
D. It may be less risky than a greenfield venture
5. If a firm is considering to enter a country where there are no current competitors or
where the competitive advantage of the firm is based on the transfer of
organizationally embedded competencies, skills, routines and cultures, it is probably
preferable to use _____ entry mode.
A. Franchising
B. Greenfield investment
C. Exporting
D. Acquisition.

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FINAL EXAMINATION

_____ refers to the systematic reduction in production costs over the life of a product
based on the learning effects and economies of scale.
A. Location economy
B. Sustainable Competitive Advantage
C. Experience Curve
D. Total Quality Control

7. Products that serve_____ when tastes and preferences of consumers in different

nations are similar if not identical
A. Core needs
B. Transnational needs
C. Universal Needs
D. Local responsive
8. A localization strategy seeks to increase profitability by :
A. Customizing the firms products to match local tastes
B. Marketing local goods instead of imported ones
C. Brokering through strategic alliances with local partners
D. Offering Discounts and promotions to match local needs.
9. The firm must ________ to maximize the learning benefits of an alliance.
A. Shield inside knowledge as proprietary unless necessary
B. Make use of new knowledge within its own organization
C. Apply knowledge transferences carefully
D. Seek 3rd party protections against industrial espionage.
10. When the growth in the countrys money supply is faster than the growth in its output
(GDP), _____ is fuelled.
A. Trade creation
B. Money supply
C. De-flation
D. Inflation
11. Research suggests that when FDI takes the form in acquisition, employment in the
host country would
A. Fall first then tends to grow faster than domestic rivals
B. Falls off rapidly and rarely recovers
C. Increase
D. Unaffected
12. Government will ________when foreign imports flood a domestic market to attract
customers or threated local firms.
A. Declare war
B. Begin boosting exports
C. Impose countervailing duties
D. Seize foreign goods

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FINAL EXAMINATION

13. The extra profit that producers/ manufactures make when supply is artificially limited
by an import quota is referred to as _____.
A. A windfall profit
B. An import surcharge
C. A subsidy
D. A quota rent.
14. IMF rescued efforts for trouble economies may involve enabling week governments a
way out of their management financial messes created by reckless behaviour. This is
known to the economists as :
A. Loan Hazard
B. Monetary Hazard
C. Moral Hazard
D. Debt Hazard
15. Which of the following is not a business strategy for dealing with risks in exchange
rate movements?
A. Contracting out manufacturing
B. Insisting payments to be made in gold certificates
C. Insurance coverage
D. Dispersing productions to around the world
16. An extensive 20 year old study of the relationship between economic growth and
economic growth demonstrated _____.
A. No significant relationship between the two
B. Despite more economic freedom, economic growth in fact slows down.
C. More economic freedom, more economic growth
D. Less economic freedom, more economic growth
17. Which of the following is NOT one of the steps in a shift toward a market-based
economic system?
A. Privatization
B. Deregulation
C. A stable price of petroleum and other natural resources
D. The creation of a legal system to safeguard property rights.
18. _______ risk is defined as the likelihood that political forces will cause drastic
changes in a countrys business environment that adversely affect the profit and goals
of a business enterprise.
A. Legal
B. De-regulation
C. Regulation
D. Political
19. The role of the government in a market economy is to ____.
A. Allocate resources for the good of society
B. Re-distribute income to create equitable access to the market
C. Plan the production of goods and services in that country
D. Encourage vigorous free and fair competition between private producers
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20. The objective of a command economy is to ____.

A. Mobilize resources for the public good
B. Take over troubled industries
C. Open up markets both at home and abroad
D. Ensure free supply of products.

Section B (20 marks)

This section contains FIVE (5) questions. You are required to answer ALL questions in
the answer sheets given.
One of the strategic objective shared by production and logistics is to increase product quality
by eliminating defective products from both the supply chain and the manufacturing process.
In this context, quality means reliability, implying that the products has no defects and
performs well.
Please fill in the figure below that shows the relationship between quality and costs. Write
your answers in the answer sheet. (not in this paper)

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FINAL EXAMINATION

a)
d)
Improve
Performance
Reliability

Increases
Profits

b)

e)

c)

Part C : Case Study (30 marks)

This section contains FIVE (5) questions. You are required to answer ALL questions in
the answer sheets given.
General Electrics Joint VentureGeneral Electric formerly entered a foreign market by either
acquiring an established firm or establishing a greenfield subsidiary. Joint ventures with a
local company were almost never considered. The prevailing philosophy was that without full
control, the company didnt do the deal. However, times have changed. Since the early 2000s
joint ventures have become one of the most powerful strategic tools in GEs arsenal.To enter
the South Korean market, for example, GE Money, the retail lending arm of GEs financial
services business, formed joint ventures with Hyundai to offer auto loans, mortgages,and
credit cards.
GE has a 43 percent stake in these ventures. Similarly, in Spain it has formed several joint
ventures with local banks to provide consumer loans and credit cards to Spanish residents,
and in Central America it has a joint venture with BAC-Credomatic, the largest bank in the
5

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region.There are several reasons for the switch in strategy. For one thing, GE used to be able
to buy its way into majority ownership in almost any business, but prices for acquisitions
have been bid so high that GE is reluctant to acquire for fear of overpaying. Better to form a
joint venture, so the thinking goes, than risk paying too much for a company that turns out to
have problems that are discovered only after the acquisition.Just as importantly, GE now sees
joint ventures as a great way to dip its toe into foreign markets where it lacks local
knowledge. Moreover, in certain nations, China being a case in point, economic, political,
legal, and cultural considerations make joint ventures an easier option than either
acquisitionsor greenfield ventures. GE believes it can often benefit from the political
contacts, local expertise, and business relationships that the local partner brings to the
table,plus in certain sectors of the Chinese economy and some others,local laws prohibit other
entry modes. GE also sees joint ventures as a good way to share the risk of building a
business in a nation where it lacks local knowledge.
Finally, under the leadership of CEO Jeffrey Immelt, GE has adopted aggressive growth
goals, and it believes that entering via joint ventures into nations where it lacks a presence is
the only way of attaining these goals. Fueled by its large number of joint ventures, GE has
rapidly expanded its international presence over the past decade. For the first time, in 2007
the company derived the majority of its revenue from foreign operations. Of course, General
Electric has done joint ventures in the past. For example, it has a long standing 50/50 joint
venture with the French company Snecma to make engines for commercial jet aircraft,
another with Fanuc of Japan to make controls for electrical equipment, and a third with Sea
Containers of the United Kingdom, which has become one of the worlds largest companies
leasing shipping containers.But all of these ventures came about only after GE had explored
other ways to gain access to particular markets or technology. Once the last option for GE,
establishing joint ventures is now often the preferred entry strategy.GE managers also note
there is no shortage of partners willing to enter into a joint venture with the company. The
company has a well-earned reputation for being a good partner. GE also is well known for its
innovative management techniques and excellent management development programs. Many
partners are happy to team up with GE to get access to this know-how. The knowledge flow
goes both ways, with GE acquiring access to knowledge about local markets, and partners
earning cutting-edge management techniques from GE that can be used to boost their own
productivity.
Nevertheless, joint ventures are no panacea. GEs agreements normally give even the
minority partner in a joint venture veto power over major strategic decisions, and control
issues can scuttle some ventures. In January 2007, for example,GE announced it would enter
into a venture with Britains Smiths Group to make aerospace equipment. However, in
September of the same year, GE ended talks aimed at establishing the venture, stating it could
not reach an agreement over the vision for the joint venture. GE has also found that as
much as it would like majority ownership, or even a 50/50 split, sometimes it has to settle for
a minority stake to gain access to a foreign market. In 2003, when GE entered into a joint
venture with Hyundai Motor to offer auto loans, it did soas a minority partner even though it
would have preferred a majority position. Hyundai had refused to cede control to GE.
Sources: C. H. Deutsch, The Venturesome Giant, The New York
Times , October 5, 2007, pp. C1, C8; Odd Couple: Jet Engines, The
Economist , May 5, 2007, p. 72; and GE, BAC Joint Venture to Buy
Banco Mercantil, Financial Wire , January 11, 2007, p. 1.

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IBM 1143 INTERNATIONAL BUSINESS

FINAL EXAMINATION

Questions
1. GE used to prefer acquistions or greenfield ventures as an entry mode, rather than
joint ventures. Why do you think this was the case?
(6 marks)
2. Why do you think GE has come to favour joint ventures in recent years? (6 marks)
3. What are the risks that GE must assume when it enters into a joint venture? Is ther any
way for GE to reduce these risks
( 6 marks)
4. The case mentions about GE has a well-earned reputation for being a good partner.
What are the likely benefits for this reputation to GE? If GE were to tarnish its
reputation by, for example, opportunistically taking advantage of a partner, how might
this impact the company going forward?
( 6marks)
5. In addition to its reputation for being a good partner, what other assets do you think
GE brings to the table that make it an attractive joint-venture partner
( 6 marks)