Assignment Code: MMPC-016 / TMA / JULY / 2022

Course Code: MMPC-016

Assignment Name: International Business Management

Year: 2022

Verification Status: Verified by Professor

Q 1. Discuss the evolution of globalization and the effects of globalisation.

Ans) Globalization refers to the process of increasing interconnectedness and interdependence among people, businesses, and governments around the world. It is a multifaceted phenomenon that has been driven by advances in technology, transportation, and communication, as well as changes in trade policies, political systems, and economic conditions. Over the past several decades, globalization has been transforming the world in profound ways, leading to both opportunities and challenges for individuals, communities, and nations.

The evolution of globalization can be traced back to the early days of human civilization, when people first began to trade goods and ideas across distances. However, the process of globalization really accelerated in the 19th and 20th centuries, with the rise of imperialism, colonialism, and the growth of international trade and commerce. The process was further fuelled by technological advances such as the telegraph, telephone, and internet, which made it easier for people to communicate and exchange information and goods across great distances.

Effects of Globalization

These areas of effects of globalization are as follows:

Integration of Economies: Globalization increases country interdependence. China produces the most Active Pharma Ingredients and Excipients. India imports large amounts of APIs and Excipients from China to make generic drugs for the global market. India is known as the world's pharmacy because it can supply generic drugs to developing nations at a fraction of the cost. China and India supply low-cost generic drugs to global markets, benefiting humanity.

Integration of Strategy: A global strategy would require establishing the brand name and products in prominent markets globally, in order to reap the benefits of competitive advantage through scale, scope, systems and synergy economies. This further facilitates integration of global vision, business strategy and business activities throughout the world.

Integration of Industries: Globalization promotes production integration and global distribution of value-added goods based on competitive advantages. Global industries become interdependent, taking advantage of location advantages in host, parent, or third-world countries, and using cost-effective production factors in their supply chains. Integration: Globalization lowers tariff and nontariff barriers, opening markets. Cultural globalisation helps consumers use developed country products. Under socioeconomic globalisation, product names and brands are well-known. This has homogenised product tastes and preferences in specific markets.

The effects of globalization are also unevenly distributed, with different regions and populations experiencing different impacts. For example, developed countries have generally benefited more from globalization than developing countries, as they have been better able to take advantage of new opportunities and adapt to changes in the global economy. However, developing countries have also been affected by globalization, often in negative ways, as they have had to compete with developed countries for markets and resources.

To summarise, globalisation has been a complex and dynamic process with far-reaching consequences for the world. While globalisation has provided many benefits, such as increased economic growth and increased cultural exchange, it has also raised a number of concerns, including increased income inequality, job outsourcing, and worker exploitation. Globalization's effects are unevenly distributed, with different regions and populations feeling different effects. As globalisation continues to evolve, it will be critical for individuals, communities, and governments to collaborate in order to address the challenges and capitalise on the opportunities that this process presents.

Q 2. What are the problems that companies face when they misjudge the cultural leanings of a country? Explain with relevant examples.

Ans) When companies misjudge the cultural leanings of a country, they can face a variety of problems that can impact their business and reputation. Companies that enter a new market without a thorough understanding of local customs, values, and attitudes can make serious missteps that can damage their brand, offend local customers, or even lead to legal problems.

One of the main problems that companies face when they misjudge the cultural leanings of a country is marketing and advertising. Companies that are not sensitive to local cultural norms and attitudes can easily offend customers with their advertising messages. For example, an advertisement that is considered funny or clever in one country may be seen as insensitive or even offensive in another. This can lead to negative public relations, loss of customers, and damage to the company's reputation.

Another problem that companies face when they misjudge the cultural leanings of a country is product design and development. Companies that do not take into account local customs, values, and preferences can create products that are not well-received by local customers. For example, a company that develops a product for a Western market may find that the same product is not well-received in an Asian market, where different preferences and values exist. This can result in poor sales and a failure to penetrate the local market.

In addition to marketing and product design, companies that misjudge the cultural leanings of a country can also face problems with their distribution and supply chain. For example, a company may find that its distribution channels are not well-suited to the local market, or that its suppliers are not meeting local quality standards. This can result in disruptions to the supply chain, loss of customers, and damage to the company's reputation.

Another problem that companies face when they misjudge the cultural leanings of a country is the legal environment. Companies that are not familiar with local laws and regulations can easily run afoul of local authorities, resulting in fines, legal action, or even imprisonment. For example, a company that operates in a country where bribery is a common practice may find itself in legal trouble if it does not follow local laws and regulations. This can result in significant legal fees and loss of reputation.

Finally, companies that misjudge the cultural leanings of a country can also face problems with employee relations. Companies that are not sensitive to local values and attitudes can easily create a hostile working environment that is not conducive to good employee relations. For example, a company that operates in a country where women are not typically promoted to senior management positions may find it difficult to attract and retain female employees.

In conclusion, businesses that make incorrect assumptions about the cultural norms of a nation run the risk of encountering a wide variety of issues that may have an effect on their finances and reputation. Companies that are not sensitive to local customs, values, and attitudes can easily make serious mistakes that can damage their brand, offend local customers, or even lead to legal problems. These mistakes can occur anywhere along the supply chain, from marketing and product design to distribution and supply chain management. Before entering a new market, it is essential for businesses to conduct exhaustive research on the cultural norms of that country in order to minimise the risk of encountering unfavourable outcomes and to increase the likelihood of achieving their goals.

Q 3. What are the pros and cons of various entry modes? Critically comment upon them from the current perspective.

Ans) When companies want to expand their operations into a new market, they have several entry modes to choose from. Each mode has its own pros and cons, and companies must carefully consider these factors before making a decision. The most common entry modes are exporting, licensing, franchising, joint ventures, and wholly owned subsidiaries.

Exporting is one of the simplest and most straightforward entry modes. This mode involves selling products or services to customers in a foreign market without setting up a physical presence in the market. The main advantage of exporting is that it is relatively low risk, since companies can test the waters in a new market without making a major investment. However, exporting also has several disadvantages. For example, companies may face difficulties in navigating the complexities of foreign trade regulations and may face challenges in building relationships with customers in a foreign market.

Licensing is another entry mode that involves granting a license to a foreign company to use a company's intellectual property, such as patents, trademarks, or technology. This mode allows companies to enter a new market without having to make a significant investment, and it can also generate additional revenue from licensing fees. However, licensing also has several disadvantages, including the loss of control over the use of a company's intellectual property and the possibility that the foreign company may not use the intellectual property in the way that the company intends.

Franchising is another entry mode that involves granting a license to a foreign company to operate a business using the franchisor's brand and business model. This mode allows companies to enter a new market without having to make a significant investment, and it also provides a proven business model that can be easily replicated. However, franchising also has several disadvantages, including the loss of control over the franchisee's operations and the possibility that the franchisee may not operate the business in accordance with the franchisor's standards.

Joint ventures are another entry mode that involves forming a partnership with a foreign company to jointly pursue business opportunities in a new market. This mode allows companies to share the risks and rewards of entering a new market, and it also provides access to the knowledge and expertise of the foreign partner. However, joint ventures also have several disadvantages, including the possibility of disagreements over decision-making and the need to share profits with the foreign partner.

Wholly owned subsidiaries are another entry mode that involves setting up a separate business in a foreign market that is fully owned and controlled by the parent company. This mode provides complete control over the operations of the subsidiary, and it also allows the parent company to fully benefit from the profits generated by the subsidiary. However, wholly owned subsidiaries also have several disadvantages, including the need for significant investment, the difficulty of managing operations from a distance, and the need to navigate the complexities of foreign business regulations.

In conclusion, before settling on one mode of entry, businesses need to thoughtfully consider the benefits and drawbacks associated with all of the available options. Before making a choice, businesses need to give careful consideration to a number of factors, including the benefits and drawbacks associated with each mode. Companies may discover that a combination of entry modes, such as exporting and joint ventures, may be the best option for them, given the current state of affairs, as this enables companies to take advantage of the benefits that are associated with each mode while mitigating the risks that are associated with each mode. Before making a final decision, businesses need to give careful consideration to all of these aspects, as the mode of entry they choose will ultimately be determined by the particular requirements and objectives of each company.

Q 4. Discuss the key drivers of international marketing.

Ans) International marketing is the process of planning and executing the conception, promotion, pricing, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

The key drivers of international marketing are discussed below:

Economic Growth: The growth of global economies is the major driver of international marketing. Companies are looking to tap into growing markets to increase their revenue and profitability. With the rise of emerging economies, multinational companies are looking to expand their operations globally to take advantage of new customers and markets. For example, companies from developed economies are looking to expand into emerging markets like India and China due to the high potential for economic growth.

Technology: The rapid advances in technology have made it easier for companies to reach global customers and conduct business across borders. The internet has opened up new channels for marketing and e-commerce has created new opportunities for international business. Companies can reach customers around the world through websites, social media, and other digital platforms. For example, e-commerce giant Amazon has expanded its operations to several countries, offering a platform for local businesses to reach global customers.

Competition: Companies are motivated to enter international markets to stay competitive with other firms. In today's global marketplace, companies are looking to expand their reach to meet the needs of their customers.

Consumer Trends: Changes in consumer preferences, such as the rise of health and wellness, sustainable products and eco-friendly initiatives, are driving companies to develop new products and to expand into new international markets.

Political and Legal Environment: The political and legal environment can greatly influence international marketing. For example, the globalization of the world economy has created a more favourable environment for international business, but companies must still navigate complex regulations and cultural differences.

Increased Market Size: Entering new international markets can greatly increase the size of a company's market. This can lead to increased revenue, profitability and growth. By entering new markets, companies can also mitigate the risk of relying on a single market and reduce the impact of any economic downturns in one region. For example, Coca-Cola has expanded its operations to over 200 countries, greatly increasing its market size and reducing its dependence on any one market.

Diverse Customer Base: Companies can tap into new customer segments and increase their customer base by entering new international markets. Companies can tailor their marketing strategies to meet the unique needs of customers in different regions, resulting in increased customer loyalty and satisfaction. For example, a fashion brand entering the Asian market may cater to different cultural and stylistic preferences, resulting in increased customer engagement and sales.

In conclusion, international marketing is driven by a range of factors including economic growth, technology, competition, consumer trends, political and legal environment, and cultural diversity. Companies that are successful in international markets have a thorough understanding of these drivers and have developed strategies that help them to effectively navigate the complexities of the global marketplace.

Q 5. Discuss the major challenges associated with appraisal of expatriate managerial performance. What should be the main objectives of a multinational firm with regard to its compensation policies?

Ans) Expatriate managerial performance appraisal is a complex and challenging process, as it involves evaluating the performance of managers who are working in a foreign country.

Some of the major challenges associated with appraisal of expatriate managerial performance are:

1. Cultural differences: Expatriates are often working in countries with different cultures and norms. This can make it difficult for appraisers to accurately evaluate their performance, as cultural differences may affect the manager's behavior and work style. For example, what is considered a successful performance in one culture may not be viewed similarly in another culture.

2. Communication barriers: Communication barriers between expatriates and their appraisers can pose a challenge in performance appraisal. Language differences and lack of direct interaction can lead to misunderstandings and misinterpretations of the expatriate's performance.

3. Different organizational culture: The expatriate may be working in an organization with a different culture, structure, and policies, making it challenging to accurately evaluate their performance. For example, an expatriate working in a hierarchical culture may have a different approach to decision-making than what is familiar to the appraiser.

4. Lack of objectivity: The appraiser may have personal biases, preconceived notions, or limited knowledge of the expatriate's work, which can affect the objectivity of the appraisal process. This can lead to an inaccurate evaluation of the expatriate's performance.

5. Different performance criteria: Different countries may have different performance criteria, making it difficult for the appraiser to accurately evaluate the expatriate's performance. For example, the manager may be expected to adhere to different regulations and laws, which the appraiser may not be familiar with.

6. Isolation: Expatriates may experience feelings of isolation and loneliness, which can impact their performance and motivation. This can make it difficult for the appraiser to accurately assess their performance, as personal factors can influence an expatriate's work.

7. Time constraints: The expatriate may be working in a different time zone, which can make it challenging for appraisers to schedule and conduct performance evaluations.

The main objectives of a multinational firm with regard to its compensation policies should be to:

1. Attract and retain top talent: The compensation package should be competitive enough to attract and retain top talent, both domestically and internationally. This can help the firm maintain a strong workforce and reduce the costs associated with turnover and recruitment.

2. Foster motivation and engagement: The compensation policies should be designed to motivate and engage employees, by linking pay to performance and offering incentives for high levels of productivity. This can help to improve employee morale and increase motivation.

3. Promote equal treatment: The compensation policies should promote equal treatment of employees, regardless of their location, gender, race, or other factors. This can help the firm maintain a positive and diverse work environment and reduce the risk of discrimination lawsuits.

4. Align with cultural and legal norms: The compensation policies should align with the cultural and legal norms of each country in which the firm operates. This can help the firm avoid legal and cultural issues and ensure that the compensation policies are well-received by employees.

5. Balance cost and competitiveness: The compensation policies should balance cost and competitiveness, by offering a package that is both affordable for the firm and attractive to employees. This can help the firm maintain financial stability and attract top talent.

6. Foster loyalty and commitment: The compensation policies should foster loyalty and commitment among employees, by offering benefits such as retirement plans, health insurance, and other incentives. This can help to reduce turnover and promote a long-term commitment to the firm.

In conclusion, the main objectives of a multinational firm with regard to its compensation policies should be to attract and retain top talent, foster motivation and engagement, promote equal treatment, align with cultural and legal norms, balance cost and competitiveness, and foster loyalty and commitment among employees. By achieving these objectives, the firm can maintain a strong and motivated workforce, and support its long-term success.

Q 6. Write notes on the following:

a) Heckscher-Ohlin Theory.

Ans) The Heckscher-Ohlin Theory is a theory in international trade that explains how countries can benefit from trade based on their endowments of production factors such as labour, capital, and natural resources. The theory was developed by Swedish economists Eli Heckscher and Bertil Ohlin in the early 20th century. According to the theory, countries that are abundant in certain factors of production will specialize in producing and exporting goods that are intensive in the use of those factors. Conversely, countries that are scarce in certain factors will import goods that are intensive in their use.

For example, a country that is abundant in labour may specialize in producing labour-intensive goods such as textiles, while a country that is abundant in capital may specialize in producing capital-intensive goods such as machinery. The theory predicts that trade will increase the efficiency of resource use and lead to mutual gains for both trading countries.

The Heckscher-Ohlin Theory has been widely debated and modified over the years but remains an important contribution to the field of international trade. It has been used to explain patterns of trade between countries and to analyze the effects of trade policy on the distribution of income and wealth. However, the theory has been criticized for oversimplifying the complex realities of international trade and for not adequately capturing the role of technology, institutions, and other factors that influence trade and the allocation of production factors. Despite its limitations, the Heckscher-Ohlin Theory remains a fundamental concept in the study of international trade and continues to influence current thinking in the field.

b) Foreign Investment.

Ans) Foreign Investment refers to the acquisition of assets or the establishment of business operations in a foreign country by an individual or a firm. This type of investment can take various forms, such as direct investment, portfolio investment, and mergers and acquisitions. Direct investment refers to the establishment of a new business operation or the acquisition of an existing business in a foreign country. This type of investment often involves a significant commitment of resources and provides the investor with a significant degree of control over the operations in the foreign country.

Portfolio investment, on the other hand, refers to the purchase of financial assets such as stocks, bonds, and other securities issued by a foreign company or government. This type of investment provides the investor with a financial stake in the foreign country but does not provide direct control over the operations of the foreign company. Mergers and acquisitions involve the purchase of an existing foreign company by an individual or firm. This type of investment allows the investor to acquire an established business with existing operations and a proven track record, rather than starting from nothing.

Foreign investment can bring many benefits to both the investor and the host country. For the investor, foreign investment provides access to new markets, lower production costs, and the opportunity to take advantage of new technologies and business practices. For the host country, foreign investment can bring much-needed capital, create new jobs, and stimulate economic growth. However, foreign investment can also bring challenges, such as the risk of cultural conflict, the difficulty of managing operations in a foreign country, and the potential for negative effects on local businesses and workers. Therefore, it is important for both the investor and the host country to carefully consider the potential benefits and risks of foreign investment and to establish clear terms and conditions for the investment to ensure its success.