mgf2351tutorial 12 week 12 revision

Business and Economics

WEEK 12 – EXAM REVISION

EXAM - 50%100 MarksHurdle requirement

SEMESTER TWO, 2015 – MGF 2351

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Section A: Short Answer Questions ANSWER ONLY 4 OUT OF 6– worth 10 marks each each worth 7.5

marks (Total 30 marks)

1. Culture in International Business (Week 3)2. Theories of International Trade and Investment (Week 4)3. The Regulatory Framework (Week 5)4. Foreign Direct Investment and the Multinational Enterprise (Week

6) 5. Cooperation among Nations (Week 7)6. 6.Foreign Exchange and the International Monetary System (Week

8)7. Strategies of International Business (Week 9)

8. Entry Strategies for Internationalising (Week 10)

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Section B: Essay Questions ANSWER ONLY 1:

Section B

Questions drawn from two topics covered in

– Weeks 1,2 & 11

The International Business Environment

– (Weeks 1 & 2)

Globalisation and International Business

– (Week 11)

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Common Pitfalls Not answering question

Not providing examples

Not answering the required number of questions

Avoid these!

28th February 2011Presentation title 5

Indicate question number clearly (must correspond to the number on the exam paper)

Start a new question on a new page Write legibly Two hour CLOSED book examination 10 minutes reading time


PRACTICE EXAM The practice exam is a carbon copy of the

structure of the final exam. Familiarise yourself! Actually do it, under timed conditions!! Think of other questions that may be asked in the

actual exam..


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Read the question carefully Look for key words Address all components of the question

- They will all be assigned marks Provide examples No need for an essay structure – JUST MAKE IT

CLEAR, Bullet points are also fine, Prefer a Paragraph WE don’t need you to reproduce the exact textbook

definition!

Answering Short Answer Questions

ANSWERING ESSAY QUESTIONS Use a more formal essay style of writing. Do not try to spill out everything you know!!

Remember to look back at the question and ensure you stay on track.

Answer all the sub parts in the question. Remember to clearly number your questions.

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Use reading time well– Understand what the question is asking– Choose which questions you will answer– Think of examples

If you don’t know, guess!– You cant lose marks, only gain them!

Relax!!!

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Plenty of case studies in the text book Also throughout the course we mention

many others!! When you are writing your revision notes,

include examples and how they can be used to support each topic.

EVERY Exam question requires examples. Don’t make up examples!

WHERE TO FIND EXAMPLES??

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What is a political economy?– Political, economic, and legal systems of a country are interdependent

Political systems– Collectivism (socialism, communism) vs. individualism– Democracy vs. totalitarianism (communist, theocratic, right-wing, and tribal)

Economic systems– Command– Market– Mixed

INTERNATIONAL BUSINESS ENVIRONMENT

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Legal systems– Common, civil, and theocratic law

Important issues for international business– Contract law– Property Rights and Corruption– Protection of Intellectual Property– Product Safety and Liability

Economic development– GNI, PPP, HDI

Transition economies– Attractiveness, costs, risks

INTERNATIONAL BUSINESS ENVIRONMENT


A system of values and norms that are shared among a group of people and that when taken together constitute a design for living.

Culture, society and the nation-state

Monocultural & multicultural societies, Western, Asian, African culturesCross-cultural literacy

Generalisation, stereotypes, ethnocentrismElements of culture

Political and economic philosophy, language, education, religion, and social structure

Hofstede’s cultural dimensions

Individualism/collectivism, power distance, uncertainty avoidance, masculinity/femininity, long-term/short-term orientation, indulgence/restraint

CULTURE


THEORIES OF INTERNATIONAL TRADE What is free trade?

Government does not intervene in matters relating to trade

Classical country-based trade theories – Mercantilism – Absolute Advantage – Comparative Advantage

Modern firm-based trade theories – Product Life Cycle Theory (Vernon)– New Trade Theory – Porter’s National Competitive Advantage


Why Governments Intervene in Trade: Political

– Protecting jobs and industries– National security– Retaliation– Protecting consumers– Furthering foreign policy objectives– Protecting human rights

Economic– Infant industry– Strategic trade policy

THE REGULATORY FRAMEWORK

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THE REGULATORY FRAMEWORK How Governments Intervene in Trade/Instruments of Trade

Policy:– Tariffs– Subsidies– Import Quotas– Voluntary Export Restraints– Local Content Requirement– Administrative Policies– Anti-dumping policies

The World Trade Organisation– Purpose– Benefits– TRIPS– What do the critics say?

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FDI and the MNE What is FDI / What is an MNE?Trends and direction of FDI

Flows of FDI increased, North-North, now increasingly North-South, increasing in service sector

Forms of FDI–Greenfield Investment–Mergers and Acquisitions

Why Choose FDI over other modes of entry?Benefits/Costs of FDI to home and host nationsPolitical Ideology

–Radical view–Free Market View–National Pragmatism

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COOPERATION BETWEEN NATIONS What is economic integration? Different types of economic integration

– Bi-lateral, multi-lateral, regional, international Why pursue economic integration?

– Nation-state perspective– Business perspective

Trade related concepts

– Trade creation, diversion, and deflection

Different levels of economic integration

– Free trade area, customs union, common market, economic union, and political union. Examples of each.

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International monetary System WWII, Bretton Woods, IMF, World Bank What is the Foreign Exchange Market?

– Currency conversion– Insure again foreign exchange risk

Types of Foreign Exchange Systems– Floating – Pegged– Dirty float– Fixed

Role of the IMF Monetary union Influences on exchange rate

FOREIGN EXCHANGE AND THE INTERNATIONAL MONETARY SYSTEM

Demand and supply of foreign exchange

Occurs for multiple reasons Influences on exchange rates

Free market forces, government intervention, IMF Monetary union (e.g. Euro)

Benefits and costs Factors influencing currency fluctuations

Interest rates, inflation rates, market expectationsInternational Monetary Fund (IMF)

Manage & control global financial flows, lender of last resort,moral hazard

World Bank

Providing loans for economic development


What is strategy?Profitability and profit growth; low cost vs. differentiation

Configuration of firm operations

Primary activities (R&D, marketing, production, customer service)Support activities (HRM, logistics, information systems)

How Internationalisation Improves Profitability

–Market Expansion–Location Economies–Experience Effects–Subsidiary Competencies

Pressures of the Global Market

– Local Responsiveness– Cost Reductions/COST

EFFICIENCY

Strategies for International Business

– International– Localisation– Global Standardisation– Transnational


STRATEGIES OF IB

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Which market? When to enter? On what scale? How to enter?

– Exporting, turnkey projects, licencing, franchising, joint ventures, FDI– Consider core competencies– Pressures for cost reduction vs. local responsiveness

Core competencies and entry mode

– Technological know-how vs. managerial know-how• Pressures for cost reduction and entry mode

– Exporting or wholly owned subsidiaries

ENTRY STRATEGIES

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GLOBALISATION What is globalisation? Production and Market, Interconnected and

Interdependent economy. Drivers of Globalisation

– Declining trade barriers– Technology– Environmental standards– Civil society– Culture

Global governance and institutions– WTO, IMF, UN, World Bank Debate on Globalisation (Preble article)– Jobs– Inequality and poverty– National sovereignty and cultural diversity– The natural environment

LETS PRACTICE


Presentation title 27

SHORT ESSAY:Question: Identify the three types of economic systems. Explain the differences and similarities between them. Use valid examples in your answer. The three economic systems are: Command Economy, Market EconomyMixed Economy. They are different from each other with respect to “ownership”, “role of government” and “type of government system”.

Free Market Command MixedResources are owned privately. The consumers and firms decide the allocation of resources. Government has no control over the economy. E.g. USA

Resources are owned by the government. The government decides the allocation of resources; that is what to produce, how to produce and for whom to produce. Firms are not very efficient as they do not earn profits. E.g. Soviet Union, Cuba

Resources are owned both privately and by the government. Important sectors like health,medical,education are under the government and less important ones are under private ownership. Eg.India

Your Turn

What are the four basic strategies that firms use to compete in international markets? Under what conditions is each strategy most appropriate? Use valid real-life examples in your answer.

Why is Vernon's product life-cycle theory considered not relevant for explaining modern patterns of international trade and investment? Use valid real-life examples in your answer.


Part B: Long EssayQuestion: The degree to which a country’s political system is individualist or collectivist is critical in determining a firm’s ability to enter and succeed in that market as an international business. Critically discuss this statement with the use of relevant theory and real-life examples.

Answering Strategy:

1.UNPACKING

1. Key Terms and definitions2. Impact of individualism3. Impact of collectivism4. Examples

2. STRUCTURING

3. WRITING UP


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THE END

GOOD LUCK

mgf2351tutorial 12 week 12 revision

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