Master of Business Management (Semester IV)MB0053 - International Business ManagementAssignment Set- 1 Q 1 - What is globalization and what are its

benefits? Ans Globalization is a process where businesses are dealt in markets around the world, apartfrom the local and national markets. According to business terminologies, globalization is defined as the worldwide trend of businesses expanding beyond their domestic boundaries. It is advantageous for the economy of countries because it promotes prosperity in the countries thatembrace globalization. In this section, we will understand globalization, its benefits andchallenges. Benefits of globalization The merits and demerits of globalization are highly debatable. While globalization createsemployment opportunities in the host countries, it also exploits labor at a very low cost comparedto the home country. Let us consider the benefits and ill-effects of globalization. Benefits of globalization are as follows:

1. Promotes foreign trade and liberalization of economies. Increases the living standards of people in several developing countries through capitalinvestments in developing countries by developed countries. Benefits customers as companies outsource to low wage countries. Outsourcing helps the companies to be competitive by keeping the cost low, withincreased 2. Productivity. Promotes better education and jobs. Leads to free flow of information and wide acceptance of foreign products, ideas, ethics,and best practices and culture.Provides better quality of products, customer services, and standardized delivery modelsacross countries. Gives better access to finance for corporate and sovereign borrowers. Increases business travel, which in turn leads to a flourishing travel and hospitalityindustry across the world. Increases sales as the availability of cutting edge technologies and productiontechniques decrease the cost of production. Provides several platforms for international dispute resolutions in business, whichfacilitates international trade.

Q2 - Discuss in brief the Absolute and comparative cost advantage theories. Ans Absolute Advantage: Adam Smith (a social philosopher and a pioneer of political economics) argued that nations differin their ability to manufacture goods efficiently and he saw that a country gains by trading. If thetwo countries exchanged two goods at ratio of 1:1, country I gets one unit of goods B bysacrificing only 10 units of labor, whereas it has to give up 20 units of labor if it produced thegoods itself. In the same manner country II gives up only 10 units of labour to get one units of

goods A, whereas it has to give 20 units of labour if it was made by itself. Hence it wasunderstood that both countries had large amount of both goods by trading. Comparative Advantage: Ricardo (English political economist) questioned Smiths theory stating if one country is m oreproductive than the other in all lines of production and if country I can produce all goods with lesslabour costs, will there be a need for the countries to trade. The reply was affirmative.He used England and Portugal as

examples in his demonstration the two goods they producedbeing wine and cloth. This case is explained using following table:Labour cost of production (in hours)1 unit of wine 1 unit of clothPortugal 70 80England 110 90According to him Portugal has an advantage in both areas of manufacture. To demonstrate thattrade between both countries will lead to gains, the concept of opportunity cost (OC) isintroduced. Qus3 How is culture an integral part of international business. What are its elements? Ans- Culture is defined as the art and other signs or demonstrations of human customs,civilization, and the way of life of a specific society or group. Culture determines every aspect thatis from birth to death and everything in between it. It is the duty of people to respect other cultures, other than their culture. Research shows that national cultures generally characterize the dominant groups values and practices in society, and not of the marginalized groups, eventhough the marginalized groups represent a majority or a minority in the society.

Culture is veryimportant to understand international business. Culture is the part of environment, which humanhas created, it is the total sum of knowledge, arts, beliefs, laws, morals, customs, and otherabilities and habits gained by people as part of society.Culture is an important factor for practicing international business. Culture affects all the businessfunctions ranging from accounting to finance and from production to service. This shows a closerelation between culture and international business. Cultural elements that relate business The most important cultural components of a country which relate business transactions are: Language. Religion. Conflicting attitudes.Cross cultural management is defined as the development and application of knowledge aboutcultures in the practice of international management, when people involved have diverse culturalidentities.International managers in senior positions do not have direct interaction that is face-to-face withother culture workforce, but several

home based managers handle immigrant groups adjustedinto a workforce that offers domestic markets.

The factors to be considered in cross cultural management are: Cross cultural management skills The ability to demonstrate a series of behavior is called skill. It is functionally linked to achieving aperformance goal.The most important aspect to qualify as a manager for positions of international responsibility iscommunication skills. The managers must adapt to other culture and have the ability to lead itsmembers.The managers cannot expect to force members of other culture to fit into their cultural customs,which is the main assumption of cross cultural skills learning. Any organization that tries toenforce its behavioral customs on unwilling workers from another culture faces conflict. Themanager has to possess the skills linked with the following: Providing inspiration and appraisal systems. Establishing and applying formal structures. Identifying the importance of informal structures. Formulating and applying plans for modification. Identifying and solving disagreements.

Handling cultural diversity Cultural diversity in a work group offers opportunities and difficulties. Economy is benefited whenthe work groups are managed successfully. The organizations capability to draw, save, andinspire people from diverse cultures can give the organization spirited advantages in structures ofcost, creativity, problem solving, and adjusting to change Cultural diversity offers key chances for joint work and co-operative action. Group work is a joint venture where, the production of two ormore individuals or groups working in cooperation is larger than the combined production of theirindividual work. Qus 4. Describe the tools and methods of country risk analysis. Ans Country risk analysis is the evaluation of possible risks and rewards from businessexperiences in a country. It is used to survey countries where the firm is engaged in internationalbusiness, and avoids countries with excessive risk. With globalization, country risk analysis hasbecome essential for the international creditors and investors. Country Risk Analysis

(CRA)identifies imbalances that increase the risks in a cross-border investment. CRA represents thepotentially adverse impact of a count rys environment on the multinational corporations cash flows and is the probability of loss due to exposure to the political, economic, and socialupheavals in a foreign country. All business dealings involve risks. An increasing number ofcompanies involving in external trade indicate huge business opportunities and promisingmarkets. Methods of Country risk Analysis:Fully qualitative method The fully qualitative method involves a detailed analysis of a country.It includes general discussion of a co untrys economic, political, and social conditions and prediction. Fully qualitative method can be adapted to the unique strengths and problems of thecountry undergoing evaluation. Structured qualitative method

The structured method uses a uniform format withpredetermined scope. In structured qualitative method, it is easier to make comparisons between

countries as it follows a specific format across countries. This technique was the most popularamong the banks during the late seventies. Checklist method The checklist method involves scoring the country based on specificvariables that can be either quantitative, in which the scoring does not need personal judgment ofthe country being scored or qualitative, in which the scoring needs subjective determinations. Delphi technique The technique involves a set of independent opinions without groupdiscussion. As applied to country risk analysis, the MNC can assess definite employees whohave the capability to evaluate the risk characteristics of a particular country. Inspection visits

Involves travelling to a country and conducting meeting with governmentofficials, business executives, and consumers. These meetings clarify any vague opinions thefirm has about the country. Other quantitative methods The quantitative models used in statistical studies of country riskanalysis can be classified as discriminate analysis, principal component analysis, and logicanalysis and classification and regression tree method. Tools of country risk analysis: The risk management demands a regular follow up regarding governmental policies, external andinternal environment, outlook provided by rating agencies, and so on. Following are the toolsrecommended: Chain of value Includes the main countries that sustain trade relationships with the nation,broken by sectors and products. Strength and weakness chart Focus the key aspects that warn the country. Table of financial markets performance

 Follow up the behavior of bonds and stocks alreadyissued and to be issued. Table of macroeconomic variables Provides alert signals when the behavior of any ratiopresents a relevant change. Qus 5. Write short notes on:a. Spot and forward contracts A spot contract is a binding obligation to buy or sell a certain amount of foreign currency at thecurrent market rate, for settlement in two business days' time. To enter into a spot deal youadvise us of the amount, the two currencies involved and which currency you would like to buy orsell. For a company to use only the spot market for its foreign currency requirements may be ahigh risk strategy because exchange rates could move significantly in a short period of time. Forward contracts A forward exchange contract (or forward contract) is a binding obligation to buy or sell a certainamount of foreign currency at a pre-agreed rate of exchange, on a certain future date. To takeout a forward contract you

need to advise us of the amount, the two currencies involved, theexpiry date and whether you would like to buy or sell the currency. It can be possible to build insome flexibility to allow the purchase or sale of the currency between two pre-defined datesrather than a single maturity date. b. Foreign currency derivatives

Currency derivative is defined as s financial as a financial contract in order to swap twocurrencies at a predestined rate. It can also be termed as the agreement where the value can bedetermined from the rate of exchange of two currencies at the spot. The currency derivativetrades in markets correspond to the spot (cash) market. Hence, the spot market exposures canbe enclosed with the currency derivatives. The main advantage from derivative hedging is thebasket of currency available.Some of the risks associated with currency derivatives are: Credit risk takes place, arising from the parties involved in a contract. Market risk occurs due to adverse moves in the overall market.

Liquidity risks occur due to the requirement of available counterparties to take the otherside of the trade. Settlement risks similar to the credit risks occur when the parties involved in the contractfail to provide the currency at the agreed time. Qus 6. Discuss the importance of transfer pricing for MNCs. Ans Transfer pricing is the process of setting a price that will be charged by a subsidiary (unit)of a multiunit firm to another unit for goods and services, which are sold between such relatedunits.Transfer pricing is a critical issue for a firm operating internationally. Transfer pricing isdetermined in three ways: market based pricing, transfer at cost and costplus pricing. The Arms Length pricing rule is used to establish the price to be charged to the subsidiary.Transfer pricing can also be defined as the rates or prices that are utilized when selling goods orservices between a parent company divisions and departments that may be across manycountries. The price that is set for the exchange in the process of transfer pricing may be a ratethat is

reduced due to internal depreciation or the original purchase price of the goods inquestion. When properly used, transfer pricing helps to efficiently manage the ratio of profit andloss within the company. Transfer pricing is a relatively simple method of moving goods andservices among the overall corporate family.Many managers consider transfer pricing as non-market based. The reason for transfer pricingmay be internal or external. Internal transfer pricing include motivating managers and monitoringperformance. External factors include taxes, tariffs, and other charges.Transfer Pricing Manipulation (TPM) is used to overcome these reasons. Governments usuallydiscourage TPM since it is against transfer pricing, where transfer pricing is the act of pricingcommodity or services. However, in common terminology, transfer pricing generally refers TPM. TPM assists in saving the organizations tax by shifting accounting profits from high tax to low tax jurisdictions. It also enables to fix transfer price on a non-market basis and thus enables to savetax. This method facilitates in moving the tax revenues of one country to another. A similar trendcan be observed in domestic markets where different states try to attract investment by reducingthe Sales tax rate, and this leads

in an outflow from one state to another. Therefore, theGovernment is trying to implement a taxing system in order to curb tax evasion.

MB0052 Strategic Management and Business Policy Assignment 1.What is meant by Strategy? Differentiate between goals and objectives. Answer Strategy is the method by which an organisation systematically achieves its future objectives. A business cannot progressfor a long term without a reliable strategy. In this unit, you will learn meaning of business strategies, its conceptual evolution,scope and its importance, distinction between goals and objectives, analysing strategic intent through vision and missionstatements and

finding out the significance of core competencies of business and critical success factors. Difference between Goals and Objectives of Business Goals 1 Are long term 2 Cannot be validated 3 Are abstarct 4 Are intangible can be qualitative as well as quantitative Objectives 1 Are usually meant for short term 2 Can be validated 3 Are concrete 4 Are intangible are usually quantitative and measurable

2. Define the term Strategic Management. What are the types of strategies? Ans Strategic management is a systematic approach of analysing, planning and implementing the strategy in an organisation toensure a continued success. Strategic management is a long term

procedure which helps the organisation in achieving along term goal and its overall responsibility lies with the general management team. It focuses on building a solid foundationthat will be subsequently achieved by the combined efforts of each and every employee of the organisation. Types of Strategies Corporate Level

The board of directors and chief executive officers are involved in developing strategies at corporate level. Corporate levelstrategies are innovative, pervasive and futuristic in nature

Business level

Business level strategy relates to a unit within an organisation. Mainly strategic business unit (SBU) managers are involvedin this level. It is the process of formulating the objectives of the organisation and allocating the resources among variousfunctional areas. Business level strategy is more specific and action oriented. It mainly relates to how a strategy functionsrather than what a strategy is in corporate level. Tactical of functional level The functional strategy mainly includes the strategies related to specific functional area in the organisation such asproduction, marketing, finance and personnel (employees). Decisions at functional level are often described as tacticaldecisions. Operational level Operational level is concerned with successful implementation of strategic decisions made at corporate and business level.The basic function of this level is translating the strategic decisions into strategic actions.

3. Describe Porters five forces Model. Answer: Porters Five Force model Michael E. Porter developed the Five Force Model in his book, Competitive Strategy. Porter has identified five competitiveforces that influence every industry and market. The level of these forces determines the intensity of competition in anindustry. The objective of corporate strategy should be to revise these competitive forces in a way that improves the positionof the organisation. Figure 3.4 describes forces driving industry competitions.

Forces driving industry competitions are: Threat of new entrants New entrants to an industry generally bring new capacity; desire to gain market share and substantialresources. Therefore, they are threats to an established organisation. The threat of an entry depends on the presence of entry barriers and the reactions can be expected from existing competitors. An entry barrier is a hindrance that makes itdifficult for a company to enter an industry. Suppliers Suppliers affect the industry by raising prices or reducing the quality of purchased goods and services. Rivalry among existing firms In most industries, organisations are mutually dependent. A competitive move by oneorganisation may result in a noticeable effect on its competitors and thus cause retaliation or counter efforts. Buyers Buyers affect an industry through their ability to reduce prices, bargain for higher quality or more services. Threat of substitute products and services

Substitute products appear different but satisfy the same needs as the originalproduct. Substitute products curb the potential returns of an industry by placing a ceiling on the prices firms can profitablycharge. Other stakeholders - A sixth force should be included to Porters list to include a variety of stakeholder groups. Some of these groups include governments, local communities, trade association unions, and shareholders. The importance of stakeholders varies according to the industry. 4. What is strategic formulation and what are its processes? Answer: Strategy Formulation Strategy formulation is the development of long term plans. It is used for the effective management of environmentalopportunities and for the threats which weaken corporate management. Its objective is to express strategical information toachieve a definite goal. The main processes involved in strategy formulation are as follows:

Stimulate the identification - Identifying useful information like planning for strategic management, objectives to achieve thegoals of the employees and the stakeholders. Utilisation and transfer of useful information as per the business strategies - A number of questions arising during utilisationand transfer of information have to be solved The questions that arise during utilisation and transfer of information are thefollowing:Who has the requested information?What is the relationship between the partners who holds the requested information?What is the nature of the requested information?How can we transfer the information? 5. Explain strategic evaluation and its significance. Answer: Strategy Evaluation The core aim of strategic management succeeds only if it generates a positive outcome. Strategic evaluation and controlconsists of data and reports about the performance of the organisation. Improper analysis, planning or implementation of thestrategies will result in negative performance of the organisation. The top management needs to be

updated about theperformance to take corrective actions for controlling the undesired performance. Effective control Policies provide logical basis for assessing performance. They ensure that the activities are synchronisedwith the objectives of the organisation. It prevents divergence from the planned course of action. The management tends todeviate from the objective if policies are not defined precisely. This affects the overall efficiency of the organisation. Policiesare derived objectives and provide the outline for procedures. Decentralisation Well defined policies help in decentralisation as the executive roles and responsibility are clearly identified.Authority is delegated to the executives who refer the policies to work efficiently. The required managerial procedures canbe derived from the given policies. Policies provide guidelines to the executives to help them in determining the suitableactions which are within the limits of the stated policies. Policies contribute in building coordination in larger organisations.

Q1.Why are ERP systems said to be flexible? Explain with an example. Apr 012012 Answer: To work successfully, the ERP solutions need to address a lot of factors. There should be good people who know the business. The vendor should be good, and his package should be one of the best suited for the, companys needs. The ERP consultants should be good. The system developers should plan well and execute perfectly the implementation. The enduser training should be done so that the user must be aware of the system, and the effect of their efforts on the overall success of the program. In case of any of the above mentioned factors are not addressed properly by the companys top management, the possibility of system failure is evident during the implementation process of the ERP system. A change in the job descriptions and functions of many employees is imminent when ERP system is

introduced in a company. Employees who were earlier doing the work of recording information are transformed into decision-makers. For example, in the past an order entry clerks job was to enter the orders that came to him. With the implementation of a good ERP system, the order entry clerk becomes an action initiator. As soon as he enters the order into the system, the information is passed on to the sales, distribution, and finance modules. The distribution module checks whether the item is in stock, and if available, the item is dispatched and the information is sent to the finance module. If the items are not in stock, then the manufacturing module is given the information, so that the production can start. The customer is informed about the status of his order. If the items are shipped, the finance module prepares the invoice and sends it to the customer. All these actions take place automatically as soon as the order entry clerk enters the information regarding the order into the system. Thus the order entry clerk is transformed from a data entry operator to a decisionmaker whose actions can trigger a chain of actions.

Many employees find this transformation difficult to accept. If the employees are not given proper training, well in advance, then the systems fails. Another factor is the fear of unemployment. When procedures become automated, the people who were doing those jobs become redundant. So it is quite natural to have resistance from the employees. But the same employees can be trained in the new system, and can work in more challenging and stimulating environments. For this also, the employees have to be told, in advance, as to what would be the result, and should be given ample time and training to make the transformation. Without support from the employees, even the best system is liable to fail. So it is very important that the management should take the necessary steps, well in advance, to ease the fears of, and provide necessary training to their employees. The ERP packages can be used from, simple and small applications of small businesses houses to the large organisations, with a highly flexible decentralised database, and a network linking a number of information system

Q2. Explain with an example the concept of supply chain management? Q2. Explain with an example the concept of supply chain management? Answer: A supply chain can be defined as a network of facilities and distribution options that performs the function of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Both in service and manufacturing organisations supply chains system exist. However, the complexity of the chain may vary greatly from industry to industry and firm to firm. Traditionally, distribution, purchasing independently the departments like the marketing, planning, manufacturing, and of an organisation operated along the supply chain. This kind of

traditional organisations each departments had their own objectives, which often conflict with other departments objectives. For example, Marketing's objective of high customer service and maximum sales revenue conflicts with manufacturing and distribution goals. Many manufacturing operations are designed to maximise throughput and lower costs, but very little concern was given for the impact of this on inventory levels and distribution capabilities. With the very little information and based on the historical buying patterns purchasing contracts were often negotiated. This resulted in chaos and there was not a single, integrated plan for the organisation there were plans as many as services the company offered. This clearly demanded a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such integration can be achieved. If the SCM has to be successful their must be a change from managing individual functions to integrating activities into key supply chain processes.

For example, the purchasing department places orders as requirements become known. In case of marketing department, it has to respond to customer demand, communicate with several distributors and retailers as it attempts to determine ways to satisfy this demand. Information shared between supply chains partners can only be fully leveraged through process integration. The integration process of Supply chain business process involves collaborative work between buyers and suppliers, joint product development, common systems, and shared information. But one has to understand that continues information flow is required to operate an integrated supply chain. Top management of many companies have reached the conclusion that optimising the product flows cannot be accomplished without implementing a process approach to the business. An organisations supply chain or logistics network is affected because of supply chain sustainability. This is a major business issue and is frequently quantified by comparison with SECH ratings like

social, ethical, cultural and health records. Today consumers have become aware of the environmental impact of their purchases and companys SECH ratings. Along with this nongovernmental organisations ([NGO]s), are setting the agendas for focusing on transitions to organically-grown foods, anti-sweatshop labor codes, and locally-produced goods that will support independent and small business groups. Because supply chains frequently account for over 75% of a companys carbon footprint many organisations are exploring how they can reduce this and thus improve their SECH rating. Companies can improve their overall competencies with the help of supply chain specialisation, in the same way that outsourced manufacturing and distribution has done. It allows them to focus on their core competencies and assemble networks of specific, best-in-class partners to contribute to the overall value chain itself, thereby increasing overall performance and efficiency. The leading reason why supply chain specialisation is gaining popularity is just because of the companys ability to quickly obtain and deploy this domain-specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house.

Oracle Supply Chain Management Applications simplify supply-chain processes by providing a single, integrated environment for managing the extended enterprise. Oracle enables effective trading partner collaboration and supply-chain optimisation capabilities that are essential to gain and sustain competitive advantage. Oracle Supply Chain Management Applications help in increasing market share while improving customer service. It also helps the company in minimising the costs across the networked supply chain system. Qus3 Differentiate between Open Source and Commercial ERP. Ans These are major differences Results Success rate of open source ERP are considerably more compare to proprietary ERP softwares. Read open source ERP success stories for more details. Training Lots of training is required for using commercial ERP. It calls for lots of investments in terms of time and money. If they don't give the necessary impetus

the results will be poor. Similarly validity of training sessions designed and handled exclusively by the ERP vendor is also debatable. On the other hand Open Source ERP does not require much training. The results are also bound to be effective because the user gets to learn through the process of self training. The company need not spend much on training and makes a minimal utilization of the resources. This is another way of reducing the level of dependence on the ERP vendor. You can get free online ERP training with SOSE!. Security On comparing commercial and open source ERP applications, Commercial ERP systems are less secure. They are by and large prone to the traps and pitfalls of hackers. Even though open source ERP makes everything transparent and available in the public domain it bring into the notice of user whenever something goes wrong. visibility Few end users change the underlying code of an open source application. But when the need arises,

open source provides access to the code to make changes to suit each distributors unique business needs. Open source customers enjoy a refreshing level of transparency from their vendors around activities such as bug reporting and fixing and road map planning. Ease of integration with current systems ERP solutions touch every aspect of a company, from warehousing to accounting. As such, a companys ERP solution should easily integrate with existing IT infrastructure components, such as application servers, directory services and storage arrays. Open source solutions are compatible via standards-based interfaces with multiple technologies, including support for lowest-cost commodity operating systems, databases, utilities and hardware