International Business Management
MB0053 SEMESTER 4 ASSIGNMENT
Roll No: 510915106 By Sonia Jadhav
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Master of Business Administration in Information System MBA- Semester 4 MB0053- International Business Management – 4 Credits Assignment Set- 1 (60 Marks) (Book ID: B1315)
1. Define ‘Globalization’. What are its benefits? Ans: Globalization (or Globalisation) refers to the increasingly global relationships of culture, people, and economic
activity. It is generally used to refer to economic globalization: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import quotas. Globalization contributes to economic growth in developed and developing countries through increased specialization and the principle of comparative advantage. The term can also refer to the transnational circulation of ideas, languages, and popular culture. Globalization refers to in which activities of large number of business enterprises is carried out in many different locations across national boundaries. It is much more than just importing or exporting from one country to another. True globalization involves one firm procuring form, manufacturing in, and selling in many different countries. There has been an increasing trend in the world towards globalization is characterized by trends such as:
Increased trade across national boundaries. One company having subsidiary companies and plants in many countries. One company procuring material required from multiple countries. One company selling its products in many different countries. Growth of joint ventures and technical collaborations between companies from different countries. Lowering of trade barriers and simplified import and export procedures.
Globalization offers many advantages to the people and businesses. These include:
Greater employment opportunities for people. Availability of greater variety of goods and services to the consumers. More competitive price to the competitors. Ability of companies to achieve lower costs. Access to bigger markets to business firms. Faster and wider spread of new technologies across the world.
2. Discuss the impact of economic environment on international business? Ans: International business is a term used to collectively describe all commercial transactions (private and
governmental, sales, investments, logistics,and transportation) that take place between two or more regions, countries and nations beyond their political boundary. Usually, private companies undertake such transactions for profit; governments undertake them for profit and for political reasons. It refers to all those business activities which involve cross border transactions of goods, services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc.. A multinational enterprise (MNE) is a company that has a worldwide approach to markets and production or one with operations in more than a country. An MNE is often called multinational corporation (MNC) or transnational company (TNC). Well known MNCs include fast food companies such as McDonald's and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony, and energy companies such as ExxonMobil, Shell and BP. Most of the largest corporations operate in multiple national markets.
Areas of study within this topic include differences in legal systems, political systems, economic policy, language, accounting standards, labor standards, living standards, environmental standards, local culture, corporate culture, foreign exchange market, tariffs, import and export regulations, trade agreements, climate, education and many more topics. Each of these factors requires significant changes in how individual business units operate from one country to the next. The conduct of international operations depends on companies' objectives and the means with which they carry them out. The operations affect and are affected by the physical and societal factors and the competitive environment.
Impact of Economic Environment on International Business
Economic forces are the factors that help to determine the competitiveness of the environment in which the firm operates.These factors include: 1. 2. 3. 4. Unemployment level Inflation rate Fiscal policies Government changes etc.
These factors determine an enterprise’s volume of demand for its product and affect its marketing strategies and activities. The economic system is made up of three main steps. The first one being production and then there is distribution of the produced goods and then the last step is consumption of the same. Now all this is possible because of two factors- Human resource and Natural resource.Natural resources include the raw material which is generally used in the production process, and human resources help to convert the raw materials to finished products which are then ready for distribution.When an economic activity is carried out, it mostly affects the environment and the effect is adverse. This is the case of a firm which pollutes the environment. The society considers the cost of cleaning up of the environment as a relevant cost but the firm doesn’t. But when the negative effects of pollution and the cost of treatment are added, the total cost most of the times adds up to be more than the production cost. And when this cost is added to the production cost, the overall price becomes higher and leads to a fall in demand of the product. With this again the pollution level is reduced.Taking another example where a firm pollutes and throws its waste in a private pond. The owner of the pond may charge the firm the polluting cost and the firm has to pay. But if the same firm dumps its waste in a river, it does not have to pay anything as the river is a public good. But the dumping of the waste in the river causes many environmental problems. It damages the aquatic life, may lead to a lower water standard and health problems.Hence to reduce the pollution emissions from these firms in water and air, a pollution tax can be charged from these firms which can be indexed (in slabs) in accordance of the pollution level done by the firms.
3. What is the need to understand cultural differences in international business context? Ans:
Culture is defined as the art and other signs or demonstrations of human customs, civilisation, and the way of
life of a specific society or group. Culture determines every aspect that is 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 characterise the dominant groups’ values and practices in society, and not of the marginalisedgroups, even though the marginalised groups represent a majority or a minority in the society. Culture is very important to understand international business. Culture is the part of environment, which human has created, it is the total sum of knowledge, arts, beliefs, laws, morals, customs, and other abilities and habits gained by people as part of society. Culture is an important factor for practising international business. Culture affects all the business functions ranging from accounting to finance and from production to service. This shows a close relation between culture and international business. The following are the four factors that question assumptions regarding the impact of global business in culture:· National cultures are not homogeneous and the impact of globalisation on heterogeneous cultures is not easily predicted.· Culture is not similar to cultural practice.· Globalisation does not characterise a rupture with the past but is a continuation of prior trends.· Globalisation is only one of many processes involved in cultural change. Cultural differences affect the success or failure of multinational firms in many ways. The
company must modify the product to meet the demand of the customers in a specific location and use different marketing strategy to advertise their product to the customers. Adaptations must be made to the product where there is demand or the message must be advertised by the company. The following are the factors which a company must consider while dealing with international business:· The consumers across the world do not use same products. This is due to varied preferences and tastes. Before manufacturing any product, the organisation has to be aware of the customer choice or preferences.· The organisation must manage and motivate people with broad different cultural values and attitudes. Hence the management style, practices, and systems must be modified.· The organisation must identify candidates and train them to work in other countries as the cultural and corporate environment differs. The training may include language training, corporate training, training them on the technology and so on, which help the candidate to work in a foreign environment.· The organisation must consider the concept of international business and construct guidelines that help them to take business decisions, and perform activities as they are different in different nations. The following are the two main tasks that a company must perform: °Product differentiation and marketing – As there are differences in consumer tastes and preferences across nations; product differentiation has become business strategy all over the world. The kinds of products and services that consumers can afford are determined by the level of per capita income. For example, in underdeveloped countries, the demand for luxury products is limited .°Manage employees – It is said that employees in Japan were normally not satisfied with their work as compared with employees of North America and European countries; however the production levels stayed high. To motivate employees in North America, they have come up with models. These models show that there is a relation between job satisfaction and production. This study showed the fact that it is tough for Japanese workers to change jobs. While this trend is changing, the fact that job turnover among Japanese workers is still lower than the American workers is true. Also, even if a worker can go to another Japanese entity, they know that the management style and practices will be quite alike to those found in their present firm. Thus, even if Japanese workers were not satisfied with the specific aspects of their work, they know that the conditions may not change considerably at another place. As such, discontent might not impact their level of production. Hofstede’s cultural dimensions According to Dr. Geert Hofstede, ‘Culture is more often a source of conflict than of synergy. Cultural differences are a trouble and always a disaster. ‘Professor Hofstede carried out a detailed study of how values in the workplace are influenced by culture. He worked as a psychologist in IBM from 1967 to 1973. At that time he gathered and analysed data from many people from several countries. Professor Hofstede established a model using the results of the study which identifies four dimensions to differentiate cultures. Later, a fifth dimension called ‘long-term outlook’ was added. The following are the five cultural dimensions: -Power Distance Index PDI -Individualism -Masculinity -Uncertainty Avoidance Index UAI -Long term Orientation LTO