Test Papers / Previous Question Papers of Indira Gandhi National Open University MS97 (S) International Business June 2007

MANAGEMENT PROGRAMME

Term-End Examination

June, 2005

MS-97 : INTERNATIONAL BUSINESS

Time : 3 hours
Maximum Marks : 100
(Weightage 70%)

1. Distinguish between Theory of Absolute Cost Advantage and Theory of Comparative Cost Advantage. Critically examine both the theories in the modern context. Discuss the factors by which a nation could maximise its gains from intemational trade.

2. (a) What ownership strategies are available to an MNE? Examine their relative merits and demerits.

(b) What kind of information would an MNE like to gather under environmental scanning and what scanning mode could it adopt for this purpose?

3. How do MNEs control their international operations ? In what way do the cultural characteristics of a nation influence the control system?

4. What factors influence the decision regarding location of production facilities in international business ? What complexities and trade-offs might be involved?

5. Write notes on any four of the following :
(a) Flexible Manufacturing System (FMS)
(b) Factors affecting the bargaining power of the parties in international business negotiations
(c) Dynamics of Regional Trade Groupings
(d) WTO and international business
(e) ASEAN and its significance for India
(f) Project Performance Evaluation

SECTION B

6 (a) Indian market is attracting expatriates of all hues to the country. What are the changes over the past that have become points of attraction for foreign nationals to work in India?

(b) Some people say that trying to fit employees into the desi culture is a bit like trying to fit a square peg into a round hole. But as Indian companies globalize, thatrs one more skill they have to pick up. Comrnent and give your own views on the subject. What general rules should a globally aspiring company in India keep in mind while hiring foreign nationals ? (20)

7. Analyse the case study Smith & Robin and give your response to the question : Has Smith & Robin chosen the right entry strategy for the Indian market ? (20)

Smith & Robin

I knew we were right, Neil Simon thought to himself as the steward brought him a glass of Cardhu single malt. The whisky felt good after a week when he was allowed to drink nothing but champagne by his hosts in India. Ah, but then they had had reason to celebrate. Simon signalled to the steward that he'd like a refill he planned to take his time over the second one and thought about the week that had been.

Simon, the director in-charge of international franchise operations at Smith & Robin, a $S-billion marquee garment retailer, had arrived in India exactly seven days back with mixed feelings. He'd been at S&R less than eight months he had been hired when the company decided to abandon its twenty-year old strategy of expanding geographically through owned outlets as against franchised ones - but he knew the India trip was one of those things that could make or break his career.

This wasn't his first visit to India. He'd visited it as a backpacker in his second year at college, then, ds a middlelevel executive of a cola compang, and then again, soon after he joined S&R. It was during the last visit that he noticed the kind of brand equity the company enjoyed in India : S&R was a known name and there was huge demand for its offerings. The grey market did a thriving business in both real S&R products, smuggled into the country, and ersatz ones. so he had gone back and made a case for India.

"Let us go in now and seed the market and leverage our equity there," he'd told the board. Convincing the board hadn't been easy. India's restrictive regulations, when it came to foreign direct investment in retail, hadn't made his job any easier. Then, there were tales of poor infrastnrcture, horror stories about how foreign investors were treated, and wholly-inappropriate real estate options. Worse, some members of the board weren't fully convinced about the 'franchise strategy' S&R had moved to. "l see that we are shutting three of our profitable shops in Londoh," one of the board members Barbara Rutherford had sniffled. Fortunately for Simon, the chairperson Lucy Walters had come to his rescue. "We decided that franchising was the best way to grow last year Bartara; this meeting isn't about that."

Finally, a compromise had been reached. S&R would enter the country through one or two 'pilot outlets'. To Simon went the task of finding a suitable franchisee. That had been easy. The Kathuria family that ran S&R's Malaysia franchise had business interests in India, and it hadn't taken Simon much to convince them to take on the India franchise.

The two Kathuria-owned franchise stores had opened in upmarket malls in Delhi and Mumbai the previous week and Simon had winged it down to be there at the opening. The Mumbai outlet was 7,000 square feet large; the Delhi one, 3,000 square feet And both sold a range of garments for men and women, lingerie, and toiletries all imported, and all under the S&R brand name, io keeping with the company's policy of only selling the best quality products sourced at the least possible cost at all its outlets.

The tariff regime in India made some prices look ludicrous a women's shirt cost over Rs. Z,So0; men's jeans, Rs. 3,20a - and made S&R, which was perceived to be a high-end value-for-money brand into a premium one with aspirational trimmings. Indeed, the only other stores that stocked merchandise of comparable prices were boutiques devoted to designer-wear.

The India-strategy's detractors at He had raised objections over the size of the Delhi outlet ("S&R isn't associated with cramped buying spaces") and the price-tags (lndians aren't dumb, vou know). But Simon managed to steer clear of the flak. The fact that leading consulting firms estimated India's organised retail business to zoom from Rs. 5,500 crore in 2000, to Rs. 35,000 crore in 2005, helped his cause.

-- TABLE --

Then, he had landed in India; the Kathurias had welcomed him like he was royalty; he had been allowed to drink nothing but champagne ("Here's to the stop reopening"; "Here's to our first sale"; "Here's to our first ihdividual sale over Rs. 1,00,000"....); and things had gone like a dream.

The launches had coincided with India's equivalent of the Christmas season the festival of lights, they called Diwali. The two stores' initial stock had been sold out three days flat. And the fact that some of the products still carried their dollar prices oversight by the store and a full 40 per cent lower than their prices in Indian rupees, thanks to the duties hadn't deterred shoppers.