JAN 2014

Part A (b)
4 reasons for Tesco penetrating into the India's
market.
The first reason for Tesco penetrating into the Indias
market is because Tesco plans to become the first
global chain to enter India since the government of
India allowed foreign companies to invest in multi brand
retail more than a year ago.
The second reason for Tesco penetrating into the
Indias market is because gives it an edge over
Walmart Stores Inc, which recently ended a six year
old partnership with Bharti Retail, stalling the worlds
biggest retailers efforts to expand in the country.
Tescos move is likely to provide an impetus for other
international retailers to enter a market thats projected
to be worth $865 billion by 2023.

 The third reason is, the government has

eased some rules governing merchandise
buying, infrastructure investment and
store locations, to lure global chains to open
stores in Asia's third biggest economy.
The last reason is, Tesco's application will
be for the almost minimum amount
required under India's policy governing
foreign investment in supermarkets. Those
rules require foreign entities to invest a
minimum of $100 million, half of which has to
be for facilities such as warehouses,
distribution networks and refrigerated storage
centers.

PART A (C)
Advantages & Disadvantages
of Tesco entry strategy into the Indias market.

ADVANTAGES

Ease the process of

entering a new
market by
collaborating with an
established local
partner.

DISADVANTAGES

Joint venture contracts

limit the outside
activities of participant
companies.
Each company involved in a
joint required to sign
exclusively agreement.

Process of entering into Example :

Indias market by Tesco
Signing in the agreement
would be easier since
reduce the potential for
conflicts of interest between
Tesco decided to joint
Tesco and outside business
venture with Tata for
and keep the focus on the
India supermarket
success of the new joint
business.

ADVANTAGES

Could

share

costs

DISADVANTAGES

and Participating companies in a

joint venture share control over

risks.

the

New business can minimize

the business risks in the
new market.

activities

ventures

give

Tesco

opportunity :
I.
II.

To increase sales
Enhance technological
through research and

and

but

work

use

of

resources not always divided

equally.
One

According to this case, joint

project

participant

business

required to :
I.

Contribute technology

II. Access to a distribution

channel
III. production facilities
While another partner company

PART B
QUESTION 1 (A)

Question 1(b)

The government intervention and protectionism

The first reason why government

intervenes in international business
is to protect the economic
condition of its country.
Second, the government intervenes
in order to protect infant
industries.

Cont
Third, the government wants to
protect the countrys national
security.
Last, the reason why government
intervenes in international business
is to preserve its national
culture.

Q2(a)
Describe The Three Types
Of Economic Systems

Q2(b)
Three Types Of Legal Systems.

Q 3(A)
Five (5) dimensions of culture by
Geert Hofdtede.

Individualism VS Collectivism
The relationship between individuals
and others in their society.
Individualism
United States
An individual who performs
well in his or her job will be
rewarded individually

Collectivism
Japan
Reward and incentive
scheme will not work among
Japanese workers
Their society values group
efforts and group rewards
highly

Power Distance
Quantifies how well individuals
accept the different levels of power
that might be evident among them.
Higher Rank
Malaysia
Malaysians tend to wait for
instructions from their
superior instead of taking
their own action
They respect hierarchy
system.

Lower Rank
Sweden and Norway
The managers to delegate
their decisions making
authority to their
subordinates.

Uncertainty avoidance
How well individuals accept
ambiguous situation and risk.
Highest Rank
Japan
Follow specific rules from
bowing to show respect to
others to how they should sit
down and eat.

Lowest Rank
India
Less structured in their
activities and less bound by
written rules.
Taking a risk is seen as the
norm.

Masculinity VS femininity
MASCULINIT
Y:
assertiveness
, status,
financial
rewards
Masculine
Italy
Fewer women in qualified
jobs

FEMININE :
Quality of life

Femininity
Sweden
Take care of and show
concern for their employees
needs.
Giving rewards

Long term Orientation (LTO) VS

Short-term orientation (STO)
Helps to distinguish the differences in
thinking between Eastern and
Western societies.
Long term Orientation (LTO)

Short-term orientation (STO)

Japan
Toyota are likely willing to
defer returns on investment
from the overseas market for
a longer period.

United States
Result must be achieved
within a short time span
Eg : General Motors

QUESTION 4 (a)
Describe with examples the following terms
i.
Foreign direct investment (FDI)
.FDI is a situation when a firm invests directly in
facilities to produce and to market
products/services in a foreign country.
.Once a firm undertakes foreign direct investment
(FDI), it is known as a multinational enterprise.
.For example, Toyota had to choose between
exporting & FDI in North American production
facilities. Toyota chose FDI because Toyota would
like to overcome trade barriers imposed by the
U.S.

ii. Greenfield investment

Refers to the construction of new
production facilities by an investor.
FDI occurs when firms invest to build
new manufacturing & administrative
facilities.
A firm will buy an empty plot of land
& build its own production plant.
For example, Panasonic built its
electrical appliances manufacturing
factory in Malaysia.

iii. Acquisition
A takeover or a buy out, is the buying of
one company by another.
Also be known as a direct investment by
a company.
For example, Lenovo (A Chinese
personal computer manufacturer)
Lenovo was internationalized in 2004 by
acquiring IBM. The deal amounted the
company nearly $1.25 billion or two-thirds of
Lenovos revenue in 2005.

Q4(b)
Advantages and Disadvantages of Foreign Direct
Investments

Advantages
Employment Effects
FDI brings jobs to a host country that otherwise would not be created.
There are two effects, direct and indirect effect of FDI. Direct effect
takes place when a foreign firm employs a number of host country
citizens. In contrary, that indirect effects occur when the FDI resulted
in jobs being created among local suppliers.
Balance-of-Payment Effects
The effect occurs when the firm establishes a foreign subsidiary and
the capital account of the host country benefits from the initial
capital inflow. Other than that, if the FDI is a substitute for imports of
goods and services, it can improve the current account of the host
country's balance-of-payments.

Disadvantages
Unemployment in the Host Country
FDI literary did not improve the country's unemployment problem
because most foreign investors that are prefer to hire guest laborers
and only a handful of local workers. Thus, foreign direct investment is
only stabilizing the status quo without much in the way of
significantly having an impact on the problem of unemployment.
Adverse Effects on the Balance-of-Payments
For balance of payments, there are two major concerns over the
possible negative effects of FDI. Set against the initial capital inflow
of FDI must be subsequent out flow of earnings from the foreign
subsidiary of its parent company. Other than that, when a foreign
subsidiary imports a substantial number of its inputs from abroad,
which results in a debit on the current account of the host country's
balance-of-payments.