International Business Environment

PART A (Descriptive Type) = 16

PART B (Case Study) = 3
PART C (Multiple Choice) = 85
Instant Downloadable Solution from AiDLo.com

PART A
Descriptive Type Question

Question 1: What factors should Indian Exporters consider in assessing demand for
a product in foreign markets? How are they different from assessing domestic
demand?
Question 2: The world's poorest countries are at a competitive disadvantage in
every sector of their economies. They have little to export. They have no capital;
their land is of poor quality; they often have too many people given available work
opportunities; and they are poorly educated. Free trade is not in interest of these
countries. Discuss.
Question 3a: What are the specific advantages that a firm can derive by going
"international"?
Question 3b: Why is the task of the international marketer more difficult that of the
domestic marketer?
Question 4: Describe the impact of foreign trade on the economic development of a
country. Illustrate your answer with examples from India.
Question 5: How would you proceed to shortlist possible markets for your products?
Explain in detail. Also explain the various methods through which you can export
your products.
Question 6: What are the sources of commercial intelligence available to exporters
in India? How far can a firm arrange for its own sources of commercial intelligence?
Question 7: Critically examine the Japanese style of management and distinguish it
from Indian style of Management. Also explain how their importance in
International Negotiations by giving relevant examples.
Question 8: Is international marketing research generally more complex task than
Domestic marketing research? Discuss with reference to problems regarding
collection, analysis and interpretation of data from foreign markets.
Question 9: By giving the appropriate examples explain how Chinese, American and
Turkish Markets are different from each other.
Question 10: How do you think the successful conclusion of the multilateral
agreement to liberalize regulations governing FDI will benefit the world economy.
Question 11: Discuss the National Competitive Advantage Theory of International
Trade. How this theory is different from other theories.
Question 12: On what basis countries as classified as low income, middle income
and high income countries? Do you think economic status of a country will influence
its global business.
Question 13: Explain different types of Economic System. What are the major
challenges faced by the command economies while transiting to a market
economy?
Question 14: Explain the following terms i) Tariff ii) Subsidies and Countervailing
Duties iii) Quotas iv) Voluntary Export Restraint v) Local Content Requirement. Why
do advanced countries insist on elimination of subsidies.
Question 15: Explain the achievement of EU in integrating its member countries.
How formation of EU is beneficial for India.
Question 16: How is WTO different from GATT?. What are the main issued in the
Doha Development Agenda and what are the implications for the developing
countries?



PART B
Case Study 1
CARREFOUR
The hypermarket concept is usually defined as an outlet retailing both food and non-
food products from a sales area of at least 2,500 sq. Meters with extensive car parking.
It was Maicel Fournier and Louis Deffrorey who opened the first European hypermarket
just outside Paris. It was an instant success and largely as a result Carrefour has grown
into one of the largest grocery retailers in Europe with sales exceeding from 117 billion
in 1992.
The basic strategy of Carrefour, which has remained largely unaltered over the past 30
years, was summed up in the Annual Report: "Carrefour, a single objective; offer quality
products and services to consumers at lowest prices and convenience of choice in large
well stocked, well managed stores." There are three elements to this objective.
1. Discounting Carrefour has been nominated as the leading discounter, not only in
France, but also in Brazil.
2. Multi specialization. Carrefour is a specialist in every product line whether it is in
butchery, bakery or delicatessen.
3. Empowerment of staff. It is at the store level at which decisions are made.
Not only has the hypermarket concept-changed little over the past 30 years, the basic
approach has been adapted very little for the international market. Each hypermarket
operates as a profit centre with the Store Manger responsible for performance.
International Expansion
Almost from the outset Carrefour adopted a strategy which took account of
internationalization. After the first hypermarket was opened in France, the group
ventured into Belgium in a joint venture, followed by a similar arrangement with another
company in Switzerland. As far as the UK was concerned, Carrefour took a minority
shareholding in the hypermarket holdings with Wheat sheaf distribution which itself
became part of the Dee Corporation. Carrefour went on to expand with joint venture
operations in Italy, Spain, Brazil, Austria and Germany. Following this strategy of market
spreading, the group rationalized its overseas operations to focus on a limited number
of markets. The number of joint ventures operation to focus on a limited number of
markets. The numbers of joint ventures have been discontinued. Attempts were made
to build up the Italian subsidiary but with little success and divestment followed in the
early 80s. More recently, two stores in Switzerland were sold.
While divestment was occurring in some areas, in other Carrefour invested heavily.
Spain, Brazil, Argentina, the USA and Taiwan saw heavy investment. Stores continued
to be opened via a number of separate operating subsidiaries, but since the mid 1980s
a policy of organizational consolidation ensures. In Latin, America, investment has
continued despite the difficulties of operating in markets experiencing hyper Inflation in
Brazil, annual inflation rates soared to levels of 200% in the mid 1980s and 1700% in
1989, while in Argentina a figure of 5,000% is recorded in the annual report for 1989
and 800% in 1990. Such figures have rendered a marketing strategy based in low
prices almost impossible to promote as prices are virtually obsolete from the moment
they are set. The hypermarket has been an innovation in these markets, reinforced by
the development of focused shopping centre to support the stores. In south America
much of the development is self-financing.
The American experiment was a different story. The Carrefour store opened in February
1988 in Philadelphia but failed to live up to expectations. Carrefour responded to this by
increasing the range of food which did result in some improvement in performance but
many still felt that the hypermarket was not suited to the American market. In early 1993
the American operation was to be discontinued.
Carrefour's expansion into Taiwan has met with the much greater degree of success. By
1993 there were five stores trading successfully, although certain adaptations have
been made to the retail format to include an outdoor market and only 200 parking
spaces. Carrefour intends to continue its expansion plans into Malaysia.
Carrefour was at the forefront of innovation with the development of hypermarkets. In
the last three decades they have attempted to maintain this leadership in retail
innovation. They have done this by the introduction of retailer brands, the launching of
financial services and investment in innovative retail concepts. This innovative approach
has been demonstrated by involvement in DIY stores, shareholdings in CostCo, the
large American club stores, and involvement in restaurants and freezer centres.
Most of the development has taken place under the same families of original founders,
Marcel Fournier and Louis Defforey. Since 1984 however Michael Bond has occupied a
post of either Deputy or Chief Executives whilst in 1990 he became Chairman of the
group, the first non-family member to hold this post. Bond was replaced under dramatic
circumstances by Danniel Bernard to sort out a short term balance sheet problem. The
group announced that it would sell non-essential investments, an unusual approach for
a company which has in the past been noted for showing patience and taking a long
term view of investments.
Question: Consider Carrefour's competitive strategy in relation to alternatives, some of
which may be adopted by rival companies. While their strategy would appear to have
been successful for thirty years, is it likely to continue to be for the next 30 years?


Case Study 2
"Export Promotion"
India's tea exports rose to 46.74 million kg. during the first quarter of the current
financial year from 35.47 million kg. in the previous comparable period. Export earnings
from this item aggregated Rs. 81.61 crore during April - June, 1981 against Rs. 68.03
crore in the corresponding period last year. Thus, although in terms of quantity our tea
exports have looked up this year, the unit value realization dropped from Rs. 19.8 per
kg. to Rs. 17.46 per kg.
The drop in unit value realization is attributed to the slackness in the international tea
market due to the global over-supply in the commodity. Since 1975, world tea
production has gone up by 41 percent whereas increase in consumption by the tea-
improving countries has been only of the order of 9 percent. Naturally, the prospects of
a revival in international tea prices are dim, at least in the immediate future. The
recommendations made by the recent national tea meet to 'revitalise' the tea industry in
the country have to be viewed in this context.
The national meet on tea, organized by the Union Commerce Ministry, was held in the
first week of August to take a close look at the various problems confronting the tea
industry. The meeting which was attended by the representatives of Central
Government, tea producing States, Planters' associations and small growers, has
recommended a package of fiscal reliefs---both at the Central and State levels.
The package includes, among other things, a substantial reduction in excise duty on
tea, refund of indirect taxes paid on tea exports, simplification of drawback procedures,
substantial reduction or removal of the excise duty on packet tea until further review,
suspension of sales tax on auction tens concessional scredit and a significant cut in the
agricultural income-tax and other local taxes by the respective State Governments. It
was also recommended that the State Government should consider grant of exemption
from rural employment cess to all export sales of tea and teas used for packeting by the
producers themselves. According to the available information these recommendations
are being considered by the Centre and States concerned for implementation.
The basic problem that confronts the tea industry in the international sphere is one of
depressed prices. More and more black tea is coming into the international markets
from several new producing-exporting countries leading to over-supply and lower price
realisation. And the tea producing nations are realizing that without demand and supply,
the cannot get a better price for their produce.
Viewed against this background, it is doubtful that the massive relief's being sought on
tea exports will really be helpful. Excise duty drawback on export, if granted, may
compound the declinein unit values. This may temporarily improve our competitive
position and increase the quantum of exports. But at the same time this may firm up
domestic price to some extent and lead to further slackening of internal consumption,
which has already been affected by the high prices of sugar and mild.
Yet another factor needs consideration before attempting to step up the quantum of
exports by making tea cheaper through concessions. This is the discouraging trend in
production so far this year. During January - June 1981, estimated tea production at
173.7 million kg is down by as much as 27.4 million kg over the same period of last
year. If this trend continues in the remaining months of the year, the resultant lower
output itself may push up internal tea prices to some extent.
Moreover, most of the tea growers, who do not export directly and who deserve
government help the most, are unlikely to benefit from excise rebate or fiscal
concessions to tea exports. Instead, these would benefit substantially the FERA
companies who export their produce for sale in the London auctions and export under
forward contract and private sale. The other likely beneficiaries would be exporters of
blended tea and foreign buyer purchasing tea from public auctions in India.
What is needed, therefore, is a selective and judicious approach towards the whole
issue of fiscal incentives for tea exports. Because of lower production cost some of our
competitors have an edge over us in export markets and incentives may be necessary
to an extent for offsetting this price disadvantage. Similarly, assistance for exports of
non-traditional items such as tea bags and packet teas would be advantageous for
establishing markets for these high value-added items whose share in our overall tea
exports is small at present.
Question 1. Analyse the arguments for and against granting additional assistance to tea
exports.
Question 2. What in you opinion should be the ideal package of assistance for the tea
industry against the give perspective?


Case Study 3
The Daewoo Group and the Asian Financial Crisis
In 1999, the Daewoo Group, Korea's second largest chaebol, or family owned business
conglomerate, collapsed under $57 billion in debt and was forced to split into
independent companies. The Asian Financial crisis and its aftermath finally took its toll
on the expansion-minded Daewoo and forced both Daewoo and the Korean
government to decide how to dissolve the chaebol.
Kim Woo-Choong started Daewoo in 1967 as a small textile company with only five
employees and $10,000 as capital. In just 30 years, Mr Kim had grown Daewoo into a
diversified company with 250,000 employees worldwide as well as over 30 domestic
companies and 300 oversear subsidiaries that generated sales of more than $100
billion annually. However, some estimates that Daewoo and its subcontractors
employed 2.5 million people in Korea. Although Daewoo started in textiles, it quickly
moved into other fields, first heavy and chemicals industries in the 1970, and then
technology intensive industries in the 1980s. By the end of 1999, Daewoo was
organized into six major divisions :
Trading Division
Heavy Industry and Shipbuilding
Construction and Hotel
Motor Vehicle Division'
Electronics and Telecommunications
Finance and Services
However, Daewoo was struggling. Its $50 billion debt was 40 percent greater than in
1998, equaling 13 percent of Korea's entire GDP. A good share of that total $10 billion,
was owed to overseas creditors. Its debt-to-equity ratio (total debt divided by share-
holders equity) in 199 was 5 to 1, which was higher than the 4 to 1 average of other
large cheabol, but it was significantly higher than the U.S average, which usually is
around 1 to 1 but which rarely climbs above 2 to 1. Of course, there is no way of
knowing the true picture of Daewoo's financial information because of the climate of
secrecy in Korean companies. In addition it is possible that Daewoo's estimated debt
might be greatly underestimated because no one knows whether or not the $50 million
figure included debt of foreign subsidiaries.
How did Daewoo get into such a terrible position, and how much did the nature of the
Korean economy and the Asian Financial crisis affect Daewoo?
Korean Economy
The impact of the Asian financial crisis on Korea was partly a result of the economic
system of state intervention adopted by Korea in the mid-1950s. Modeled after the
Japanese economic system, the Korean authoritarian government targeted export
growth as the key for the country's future. Initially, the government adopted a strategy of
import substitution, and that later gave way to a strategy of "export or die". Significant
incentives were given to exporters, such as access to low cost money (often borrowed
abroad in dollars and loaned to companies at below market interest rates in Korean
won), lower corporate income taxes, tariff exemptions, tax holidays for domestic
suppliers of export firms, reduced rates on public utilities, and monopoly rights for new
export markets. Clearly, the government wanted Korean companies to export
The chaebol, of which the four largest were Hyundai, Daewoo, Samsung and the
LGgroup, become the dominant business institutions during the rise in the Korean
economy. They were among the largest companies in the world and were very
diversified, as can be seen by the Daewoo's investment and business choices. They
were held together by ownership, management and family ties. In particular, family ties
played an key role in controlling the chaebol. Until the 1980s, the bank in Korea
provided most of the funding to the chaebol, and were owned and controlled by the
government. Because of the importance of the exporting the chaebol were all tied to
general trading companies. The chaebol received lots of support from the government,
and they were very loyal to the government, giving rise to the charges of corruption.
Most chaebol were initially involved in the light industry, such as textile production, but
the government realized that companies first shift to heavy industry and then to
technology industries. Daewoo transitioned to heavy industry in 1976 when the Korean
government asked President Kim to acquire an ailing industrial firm rather than let the
firm go out of business and create unemployment.
Asian Financial Crisis and Its impact on Korea
The country continued to liberalize, and democracy finally came into being in 1988 with
the introduction of a new constitution and the election of Kim Young-Sam, the first
democratic president in Korea's history. The economy also continued to grow at 5 to 8
percent annually during early to mid-1990s, led primarily by exports and the World Bank
predicted that Korea would have the seventh largest economy in the world by 2020.
However, the Asian financial crisis brought that growth to halt. After the Thai bhat was
devalued on July 2, 1997, the Korean won soon followed, and the Korean stock market
crashed as well. By the end of 1997, the South Korean won was 46.2 percent lower
than its pre devaluation rate. At the time the crisis hit, Korea's external debt was
estimated to be $110 billion to $150 billion, 60 percent of it maturing in less than one
year. In addition, Korea had another $368 billion of domestic debt.
Korea's banks had been a tool to state industrial policy, with the government ordering
banks to make loans to certain companies even if they were not healthy. Banks
borrowed mony in dollars and lent them to firms in won, shifting the burden of foreign
exchange from the firms to the banks. Hanbo steel and Kia Motors went bankrupt
leaving some banks with huge losses. The Korean won fell in the fall of 1997 causing
the government to raise interest rate to support the won and resulting in more problem
loans. Bad loans at the nine largest financial institutions in Korea ranged from 94
percent to 376 percent of the banks capital, making the banks technically insolvent.
The chaebol were also very overextended. The top five chaebol were in average of 140
businesses, ranging from semi-conductor manufacture to shipbuilding to auto
manufacturing. This was happening during a time when most companies in the
industrial world were selling off unrelated businesses and focusing on their core
competencies. Twenty five of the top 30 chaebol had debt-to-equity ratio of over 5 to 1,
as noted earlier. Compare this to Toyota Motor of Japan, which had a debt-to-equity
ratio in 1998 of 0.7 to 1.
During this crisis, Korea began to negotiate with the IMF for help. The IMF agreed to
help, but only if Korea raised interest rates to support its currency, reduce its budget
deficits, reformed its banks, restructured its chaebol, improved financial disclosure,
devalued the currency (to stimulate export even more), promoted exports, and restrict
imports. In return for a pledge to introduce the reforms, the IMF released funds to Korea
to help it pay off its foreign debt and to keep its bank from going bankrupt. This in turn
brought in more money from foreign banks that were encouraged by Korea's pledge to
reform.
One of the IMF's key area was banking reform. The IMF encouraged Korea to open up
its banking sector to foreign investment, hoping that an infusion of foreign banking
expertise might help the Korean banks to make better loans. OF course, foreign banks
had made a sizable number of bad loans in Asia as well. In addition, the IMF
encouraged the Korean government to pass good bankruptcy laws to allow bad
companies, including banks to fail. However, IMF hoped that Korean banking
institutions would merge, forming fewer but stronger banks. In addition, the IMF
encouraged banking reforms in order to cut the links between bankers and politics,
tighten supervision and regulation of he banking industry, and improve accounting
disclosure.
Impact of the crisis on Daewoo
While the financial crisis was going on, Daewoo's president Kim ignored the warning
signs and continued to expand. In 1998, a year when the Daewoo Group lost money, it
added 14 new firms to its existing 275 subsidiaries. While Samsung and LG were
cutting back Daewoo added 40 percent more debt.
Finally Korean President Kim Dae Jung had enough. He ordered the banks to stop
lending to chaebol until they come up with and began to execute a plan to sell off
businesses and to focus on their core competencies. But that didn't stop Daewoo. TO
get access to more money to feed its growth, Daewoo issued corporate bonds. Which
were purchased by Investment Trust Companies (ITCs), finance companies associated
with chaebol. The ITCs purchased nearly $20 billion in corporate bonds.
In early 1999, Daewoo announced a plan to sell off some of its business to comply with
government restructuring requirements before the government took more drastic action,
such as nationalization. However, the plans limped along until July 1999. At that point,
with Korea still in deep recession, Daewoo announced that it would go bankrupt unless
its Korean creditors backed it off. It basically could not even its service its interest
payments of $500 million a month, let alone its principal. The government immediately
stepped in and froze Daewoo's loans until November 1999. This shock rippled through
Korea, because nobody thought a chaebol would ever be allowed to collapse. That had
never happened before, and the close ties between government and business were
such that is was never expected to happen. The shock of Daewoo's announcement
negatively affected the corporate bond market, and the ITCs came under pressure
because of their huge exposure to Daewoo. Negotiations in Korea involved 60 banks,
some owned by the government, others in the private sector. On September 16, 1999,
Daewoo asked its foreign creditors for a moratorium on interest payments until March
2000, so the instability spread to the international markets.
Daewoo's Future
By the nd of 1999, Daewoo's President Kim was left with few options to solve Daewoo's
problems. One possibility was to dismantle Daewoo and let it have only auto related
businesses. All of the other businesses would be sold off to domestic or foreign
investors, and the name would be changed to something other than Daewoo. Another
option for President Kim was to sell some of Daewoo's auto assest. Ford,
DaimlerChrysler and
General Motors showed interest, but selling Daewoo Motor, the second largest
automaker
in Korea, would be a big blow to the country.
As the Korean economy began to recover in 1999, some felt that the chaebol should
weather the storm and not allow themselves to be broken up. However, President Kim
Dae Jung had mandated that the chaebol get their debt-to-equity ratios from 5 to 1 to 2
to1 by the end of 1999, and that goal seemed impossible unless there was a huge
infusion of equity capital or either a write off of debt through debt restructuring with the
banks or selling off of debt-laden business to others. Under immense pressure caused
by the debt and by accusations of fraud and embezzlement, President Kim Woo-
Choong abandoned his company and fled the country. The government separated the
Daewoo subsidiaries and worked with creditors to convert the debt into equity, to set up
subsidiaries on debt workout programs and to look for buyers.
After a year of negotiations, General Motors purchased a portion of the $1.2 billion
Daewoo Motors in April 2002for $400 million. It agreed to keep only three manufacturing
plants- two in Korea and one in Vietnam- leaving creditors scrambling to sell its other
plants in Eastern Europe, Asia and the Middle east. By mid-2202, the Korean economy
was showing promising signs of recovery and reform. In 2001, the economy grew by 3
percent and was expected to grow by 5 to 6 percent in 2002. The government has done
away with debt-based management of the large chaebol and is working to dissolve the
large conglomerates to better compete internationally. Of the top 30 chaebol that
existed prior to the economic crisis only 14 remain.
The improving economy helped General Motors make its decision to purchase Daewoo
Motor, but GM is faced with new decision : How to market Daewoo cars and reduce the
$830 million of Daewoo debt. Should GM continue selling Daewoo cars in the United
States and Europe and and compete with its own brands? Without increasing its debt,
will it be able to restore 37% share of the market in Korea?
Question 1. What are the key mistakes Kim Woo-Choong made in formulating and
implementing Daewoo's strategy and how did the economic crisis in Korea and in rest of
Asia affect that strategy?
Question 2. How would you describe Korea's economic system before its economy was
affected by the Asian Financial crisis? What was the role of IMF in reforming the
economic system in Korea?




PART C
Multiple Choice Question Set 1
1. Which one of the following is not an assumption of the Ricardo Model :
i. Constant returns to scale
ii. Factors of production can be transferred easily one sector to another
iii. There is perfect competition in the market
iv. Technological innovation is a unique feature of the market structure
2. Which of the following is not a form of Non Tariff Barrier
i. Subsidies
ii. Local Content Requirement
iii. Ad valorem Duties
iv. Technical Standards
3. For a US trader a direct quote will be :
i. US$ 1 = 56.7 Yen
ii. GBP 1 = 34.5 Yen
iii. GBP 1 = 35.6 Euro
iv. None of the above
4. Which of the following is an example of depreciation of Indian Rupee
i. Now US$ 1 = 45 INR after 3 months US$ 1 = 50 INR
ii. Now US$ 1 = 50 INR after 3 months US$ 1 = 45 INR
iii. Both i and ii above
iv. None of the above
5. A currency is said to be at a premium when :
i. Spot rate is higher then the forward rate
ii. Forward rate is higher then the spot rate
iii. Forward rate is equal to the spot rate
iv. None of the above
6. Which of the following statement describes the Heckscher-Ohlin Theory
i. Countries should export goods that are made of factors of production that are
available in abundance in the economy
ii. Countries should produce and export those goods in which they have absolute
advantage
iii. Countries should produce and export those goods in which they have comparative
advantage
iv. Increase in the endowment of one of the factors will reduce the production of goods
that intensively use the other factor
7. "If US is capital rich and innovation increases the productivity of capital, then labour
intensive industries in US will get hurt" is
i. Stolper-Samuelson Theorem
ii. Leontief Paradox
iii. Rybczynski Theorem
iv. Heckscher-Ohlin Theory
8. Which of the following is not part of Current Account transactions of a country?
i. Merchandise trade
ii. Unilateral Transfers
iii. Receipts from FDI abroad
iv. Change in forex reserve of a country
9. In an economy which out of the following is not the reasons for internal debt i.e
excess of government expenses over revenue, are :
i. Poorly managed tax system
ii. Huge expenses on defense and welfare program
iii. State owned enterprises have huge losses
iv. Impressive economic growth
10. Which of the following is not an underlying principle of GATT?
i. Trade concessions by member countries will be reciprocated
ii. Countries should grant preferential treatment to other member countries
iii. Trade dispute between member countries to be settled by dispute settlement
mechanism of GATT
iv. Policies governing external trade should be transparent
11. Which of the following is not an objective of NAFTA:
i. Access to financial services
ii. To investigate environment and labour abuses
iii. No change in tariff
iv. Protection for investment
12. Which of the following is not a type of regional economic integration?
i. Free Trade Area
ii. Customs Union
iii. Common Market
iv. GATT
13. EU is an example of which type of regional economic integration?
i. Economic Integration
ii. Customs Union
iii. Free Trade Agreement
iv. Preferential Trade Agreement
14. Which of the following is an example of regional trade agreement among Asian
Countries?
i. SAPTA
ii. CARICOM
iii. EEC
iv. CACM
15. Which of the following is not founder member country of ASEAN?
i. Cambodia
ii. Singapore
iii. India
iv. Vietnam
16. GATT was formed in which year and by how many countries?
i. 1920, 15 countries
ii. 1947, 23 countries
iii. 1947, 15 countries
iv. 1935, 23 countries
17. Which of the following is not an example of Quantitative Restriction on trade?
i. Quotas
ii. Voluntary Export Restraint
iii. Embargo
iv. Subsidies
18. India is an example of which type of Economic System
i. Mixed Economy
ii. Command Economy
iii. Market Economy
iv. Centrally Planned Economy
19. In a command economy or centrally planned economy
i. Government owns and controls all resources
ii. Society owns and controls all resources
iii. Community owns and controls all resources
iv. Private entities owns and controls all resources
20. Which of the following economic indicator is used to rank countries in terms of their
individual wealth by World Bank?
i. GDP per capita
ii. GNI per capita
iii. PPP
iv. GNI
21. Dumping which is a type of non tariff barriers means
i. Selling products at less than fair value
ii. Selling goods that are mass produced in an economy
iii. Selling goods utilizing old technology
iv. Selling goods of inferior quality
22. Which of the following pair is wrongly matched?
i. Theory of Absolute Advantage - Adam Smith
ii. Theory of Comparative Advantage - David Ricardo
iii. Heckscher-Ohlin Theory - Wassily Leontif
iv. Product Life Cycle Theory - Raymond Vernon
23. According to Porter, which of the following factors will not help in determining the
Global Competitive Advantage of the company?
i. Monopoly market conditions i.e Absence of Rivals
ii. Firm Strategy
iii. Presence of related and supporting industry
iv. Factor conditions
24. Observation that "US exports were less capital intensive the US imports" which is
the contradiction to the HO model is known as
i. Leontif Paradox
ii. Stopler-Samuelson Theorem
iii. Rybczynski Theorem
iv. New Product Life Cycle Theorem
25. In which type of trade agreement no duties are charged on imports from member
countries
i. Preferential Trade Agreement
ii. Free Trade Agreement
iii. Custom Union
iv. None of the above
26. GATT stands for
i. General Agreement on Trade and Tariffs
ii. General Agreement on Tariffs and Trade
iii. General Arrangement on Tariffs and Trade
iv. General Arrangement on Trade and Tariffs
27. Which of the following was not an achievement of the Uruguay Round of
negotiations?
i. Agreement on services
ii. Protection of Intellectual property rights
iii. 10 year phase out of MFA
iv. Agreement on Trade in Agriculture
28. Which of the following countries is not a member of ASEAN?
i. Thailand
ii. China
iii. Vietnam
iv. Singapore
29. Glasnost and Perestroika were introduced by which Soviet Leader?
i. Mikhail Gorbachev
ii. Leonid Brezhnev
iii. Yuri Andropov
iv. Konstantin Chernenko
30. Which of the following country was first to disintegrate from Soviet Republic?
i. Ukraine
ii. Lithuania
iii. Turkmenistan
iv. Tajikistan
31. Which if the following country was not the member of the European Coal and Steel
Community (ECSC)?
i. Belgium
ii. France
iii. Spain
iv. Germany
32. Neo-mercantilist theory is different from the Mercantilist theory as neo-mercantilist
theory proposes that
i. A country should have favourable balance of trade
ii. Countries should trade with each other for social and political objectives
iii. Country should promote import and restrict export
iv. Country should export those products which they can produce more efficiently
33. WTO was formed during which round of negotiations ?
i. Uruguay Round
ii. Doha Round
iii. Singapore Round
iv. Tokyo Round
34. Which of the following is an example of cross exchange rate?
i. USD 1 = 50.6 Euro
ii. USD 1 = 45.7 GBP
iii. Yen 1 = 34.5 Euro
iv. USD 1 = 45.9 INR
35. How inflation and Exchange rate are related to each other?
i. Higher inflation leads to currency devaluations
ii. Higher inflation leads to currency appreciation
iii. High inflation leads to currency stability
iv. There is no relation between inflation and exchange rate
36. External Debt is measured as
i. Total External Debt of a country
ii. Debt as percentage of GDP
iii. Total of Fiscal deficit and External borrowings
iv. Both i and ii above
37. What does transition to market economy means?
i. Liberalizing economic activity
ii. Control of economy by government
iii. Imposing trade restrictions
iv. All of the above
38. Which of the following countries is not a member of MERCOSUR?
i. Brazil
ii. Argentina
iii. Paraguay
iv. Mexico
39. What is a convertible currency?
i. Currency that can be freely traded with other currencies
ii. Currency that can be traded only with hard currencies
iii. Currencies of the Asian Countries
iv. Currencies of the developed countries
40. Currency Speculation is done to
i. Cover risk and earn profit
ii. Cover risk
iii. Maintain foreign currency account to earn interest
iv. None of the above

Multiple Choice Question Set 2
Q1. The first phase of globalization started around 1870 and ended with ..
a) The World War I
b) The World War II
c) The Establishment of GATT
d) In 1913 when GDP was High

Q2. IBRD (International Bank for Reconstruction and Development) also known as
a) Exim Bank
b) World Bank
c) International Monetary fund
d) International Bank

Q3. Ultimately was replaced by the .on 1st Jan 1995
a) GATS, WTO
b) WTO, GATT
c) GATT, WTO
d) IMF, GATT

Q4. Which is the right sequence of a stages of Internationalization
a) Domestic, Transnational, Global, International, Multinational
b) Domestic, International, Multinational, Global, Transnational
c) Domestic, Multinatinal, International, Transnational, Global
d) Domestic, Internatinal, Transnational, Multinational, Global

Q5. Subsidiaries consider regional environment for policy / Strategy formulation is
known as
a) Polycentric Approach
b) Regiocentric Approach
c) Ethnocentric Approach
d) Geocentric Approach

Q6. According to this theory the holdings of a countrys treasure primarily in the
form of gold constituted its wealth.
a) Gold Theory
b) Ricardo Theory
c) Mercantilism
d) Hecksher Theory

Q7. The Theory of Absolute Cost Advantage is given by
a) David Ricardo
b) Adam Smith
c) F W Taylor
d) Ohlin and Heckscher

Q8. The Theory of Relative Factor Endowments is given by
a) David Ricardo
b) Adam Smith
c) F W Taussig
d) Ohlin and Hecksher

Q9. The theory of Comparative cost advantage is given by
a) David Ricardo
b) Adam Smith
c) F W Taussig
d) Ohlin and Hecksher

Q10. is application of knowledge which redefine the boundaries of global
business
a) Cultural Values
b) Society
c) Technology
d) Economy

Q11. Capitalistic, communistic and Mixed are the types of
a) Economic System
b) Social System
c) Cultural Attitudes
d) Political System

Q12. Which is not an Indian Multinational Company?
a) Unilever
b) Asian Paints
c) Piramal
d) Wipro

Q13. Globalization refers to:
a) Lower incomes worldwide
b) Less foreign trade and investment
c) Global warming and their effects
d) A more integrated and interdependent world

Q14. Which of the following is not a force in the Porter Five Forces model?
a. Buyers
b. Suppliers
c. Complementary products
d. Industry rivalry

Q15. Comparative Cost Trade Theory is given by
a) Adam Smith
b) David Ricardo
c) Gottfried Haberler
d) Heckscher Ohlin

Q16._____ is the payment method most often used in International Trade which
offers the exporter best assurance of being paid for the products sold
internationally.
a) Bill of Lading
b) Letter of Credit
c) Open Account
d) Drafts

Q17. Key controllable factors in global marketing are:
a) Government policy and legislation
b) social and technical changes
c) marketing activities and plans
d) all of the above.

Q18. Select example of Indian Multinational Company
a) Hindusthan Unilever
b) Videocon
c) Cargill
d) Tesco

Q19. The simplest way to enter a foreign market is through .
a) Direct investment
b) Joint venturing
c) Contract manufacturing
d) Exporting

Q20. IHRM is an area of academic study which focuses on:
a) Comparative research
b) The movement of individuals across national boundaries
c) The exchange of ideas and practices
d) The policies and practices of MNC's

Q21. Which of the following statements best describes the typical behaviour of
national governments towards imports and exports?
a) Exports are encouraged; imports are discouraged.
b) Both exports and imports are discouraged.
c) Imports are encouraged; exports are discouraged.
d) Both exports and imports are encouraged.

Q22. For destination countries, receipts from international tourism count as:
a) Exports.
b) Imports.
c) Both imports and exports,
d) None of the above.

Q23. Which of the following is true?
a) The United States is the world's largest importer and the largest exporter.
b) The Japan is the world's largest importer and the US is the world's largest
exporter.
c) The United States is the world's largest importer and China is the world's
largest exporter.
d) The United States is the world's largest importer and the Japan is the world's
largest exporter.

Q24. An arrangement in which one company allows another company to use its
name, products, patents, brands, trademarks, raw materials, and/or production
processes in exchange for a royalty is called
a) licensing.
b) a joint venture.
c) direct investment
d) a trading company
e) importing

Q25. The balance of payments includes which of the following?
a) a country's balance of trade
b) foreign investments
c) foreign aid
d) tourist expenditures
e) all of the above

Q26. Companies that want more control and are willing to invest considerable
resources in
a) trading company
b) licensing
c) direct investment
d) contract manufacturing
e) exporting

Q27. Which of the following organizations was established by industrialized nations to
loan money to underdeveloped and developing countries?
a) OPEC
b) NAFTA
c) The World Bank
d) The IMF
e) The United Nations

Q28. Before moving outside their own borders, companies must conduct
a) internal audits.
b) TQM programs.
c) language seminars
d) joint ventures.
e) environmental analyses.

Q29: When Colgate-Palmolive developed a hand-powered washing machine for
households in LDCs that do not have electricity, Colgate-Palmolive was following a
a) multinational strategy.
b) strategic alliance,
c) marketing strategy.
d) globalization strategy
e) joint venture.

Q30: When IBM and Apple joined together in hopes of obtaining a competitive
advantage on a worldwide basis, this exemplified a
a) cartel.
b) joint venture.
c) direct investment.
d) strategic alliance.
e) contract manufacturing deal.

Q31: Wendy's, Pizza Hut, and McDonald's are well-known with international
visibility.
a) franchisers
b) trading companies
c) joint ventures
d) contract manufacturers
e) strategic alliances

Q32: Subsidiaries consider regional environment for policy / Strategy formulation is
known as
a) Polycentric Approach
b) Regiocentric Approach
c) Ethnocentric Approach
d) Geocentric Approach
e) Multicentric Approach

Q33: According to this theory the holdings of a country's treasure primarily in the
form of gold constituted its wealth.
a) Gold Theory
b) Ricardo Theory
c) Mercantilism
d) Hecksher Theory

Q34: The Theory of Relative Factor Endowments is given by
a) David Ricardo
b) Adam Smith
c) FW Taussig
d) Ohlin and Hecksher

Q35: Capitalistic, communistic and mixed are the types of
a) Economic System
b) Social System
c) Cultural Attitudes
d) Political System

Q36: Which is not an Indian Multinational Company?
a) Hindusthan Unilever
b) Asian Paints
c) Piramal
d) Wipro

Q37: Which of the following is not a force in the Porter Five Forces model?
a) Buyers
b) Suppliers
c) Complementary Products
d) Industry rivalry

Q38: In some countries the ratio of older people to total population is rising rapidly.
This is important to business because:
a) It could lead to a falling tax burden.
b) It will increase the supply of labour.
c) It could change the pattern of demand for goods and services
d) It could increase economic growth.

Q39: The abolition of the Gold Control Act in 1992, allowed large import houses to
import gold freely. This will
a) Increase the price of imported Gold.
b) Decrease the price of imported Gold.
c) Have no effect on the price of gold
d) Decreased the quality of gold imported.

Q40: When two companies join hands to manufacture new products it is called as
a) Merger
b) Joint venture
c) Acquisition
d) Production agreement

Q41: Restrictions to trade also include non-tariff barriers, such as and
a) Taxes, Tariffs
b) Legislation, Quotas
c) C. Duty, Fee
d) Subsidies, Taxes

Q42: Which of the following was not identified in class as a driving force behind
globalization?
a) Advances in transportation
b) Advances in communication and transportation technology
c) Lower barriers to trade
d) Lower interest rates

Q43: Dumping refers to:
a) Exporting products no one in the producing country wants
b) Exporting products at a price below the cost of production
c) Exporting only the lowest quality products
d) Tossing unwanted cargo into the ocean during transport

Q44: The price of one country's currency in terms of another
a) the exchange rate.
b) the interest rate.
c) the Dow Jones industrial average
d) none of the above.

Q45: The WTO was established by the of multilateral trade negotiations.
a) Kennedy Round
b) Tokyo Round
c) Uruguay Round
d) Dillon Round