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SIKKIM MANIPAL UNIVERSITY INTERNAL ASSIGNMENT MBA (Revised) SEMESTER-4 INDEX SL. NO. SUBJECTS CODE PAGE N0 1. Strategic Management & Business Policy MB0036 03 – 29 2. International Business Management MB0037 30 – 49 3. Service Marketing And Customer Relationship Management MK0006 50 – 68

26 26 Smu Mba Solved Assignment Vi Semester

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Text of 26 26 Smu Mba Solved Assignment Vi Semester


SL. SUBJECTS NO. 1. Strategic Management & Business MB0036 03 29 CODE PAGE N0

PolicyInternational Business Management Service Marketing And Customer Relationship Management Advertising Management Sales Promotion E-Marketing

2. 3.

MB0037 MK0006

30 49 50 68

4. 5.

MK0007 MK0008

69 80 81 97


International Marketing


98 114

STRATEGIC MANAGEMENT & BUSINESS POLICY(MB-0036)ASSIGNMENT-1 Q.1 What do you understand by the term Strategy in the context of Business Management and Policy? And what are the stages in the formulation of a Strategy? Ans. A strategy is an operational tool to achieve the goals, and thus, the corporate mission. Strategies do not attempt to outline exactly how the enterprise is to accomplish its objectives. A company may view downsizing as a strategy in a competitive market to render cost-effective services. Thus, strategy provides a framework to guide thinking and action. Strategies are very much useful in organisations for guiding, planning and control. Strategy is a way of life both at the macro as well as micro levels for everyone, whether it is a nation or a company. To win over in a given complex situation, the organisations, even trans-nationals adopt strategies. They make changes, if necessary, even to their global strategies. An individual company may formulate its own strategy to bring out the desired results. The eventual success of the organisation depends upon strategy formulation and implementation. The recently initiated moves such as globalisation, privatisation and liberalisation are strategies to attain a globally competitive economy. Business management must focus on following issues

a. Vision- For proper growth of the company. b. Mission What the company wants to achieve. c. Goals To achieve the above mission. d. Objectives To achieve the set goals e. Strategies To achieve the above objectives f. Policies To control strategies g. Programmes For implementation of objectivesThe above list outlines some of the key issues at every stage of action illustrating how:

a. The mission springs out from vision statements b. Goals from the mission c. Objectives from goals d. Strategies from objectives e. And programmes from objectivesIt is the crux of the strategic management process. Strategy refers to the course of action desired to achieve the objectives of the enterprise. Formulation, together with its implementation, constitutes an integral part of the management activity. Managers use strategies for different purposes such as to overcome competition, to increase sales, to increase production, to motivate the employees to provide their best, and so on. Implementation of a strategy is a crucial task as the formulation of it. There may be a lot of resistance during the implementation process. It is necessary for the manager to be very tactful to involve the members of his group in the formulation of strategy to facilitate the implementation process. Stages in Strategy Formulation and Implementation

a. Identification of mission and objectives b. Environment scanning c.Generic strategy alternatives

d. Strategy variations e. Strategic choice f.Allocation of resources and formulation of organisational structure

g. Formulation of plans, policies, programmes and administration b. h) Evaluation and controlQ.2 What, in brief, are the types of Strategic Alliances and the purpose of each? Supplement your answer with one real life example of each. Strategic alliances constitute a viable alternative in addition to Strategic Alternatives. Companies can develop alliances with the members of the strategic group and perform more effectively. These alliances may take any of the following forms. Following are the different types of strategic Alliances:


1. Product and/or service alliance: Two or more companies may get together tosynergise their operations, seeking alliance for their products and/or services. A manufacturing company may grant license to another company to produce its products. The necessary market and product support, including technical know-how, is provided as part of the alliance. Example :- Coca-cola initially provided such support to Thums Up. Two companies may jointly market their products which are complementary in nature. Example :- 1) Chocolate companies more often tie up with toy companies. 2) TV Channels tie-up with Cricket boards to telecast entire series of cricket matches live. Two companies, who come together in such an alliance, may produce a new product altogether. Example :- Sony Music created a retail corner for itself in the ice-cream parlours of Baskin-Robbins.

2. Promotional alliance: Two or more companies may come together to promote theirproducts and services. A company may agree to carry out a promotion campaign during a given period for the products and/or services of another company. Example :- The Cricket Board may permit Cokes products to be displayed during the cricket matches for a period of one year.

3. Logistic alliance: Here the focus is on developing or extending logistics support.One company extends logistics support for another companys products and services. Example:- The outlets of Pizza Hut, Kolkata entered into a logistic alliance with TDK Logistics Ltd., Hyderabad, to outsource the requirements of these outlets from more than 30 vendors all over India for instance, meat and eggs from Hyderabad etc.

4. Pricing collaborations: Companies may join together for special pricingcollaborations. Example :- It is customary to find that hardware and software

companies in information technology sector offer each other price discounts. Companies should be very careful in selecting strategic partners. The strategy should be to select such a partner who has complementary strengths and who can offset the present weaknesses. Q.3 Ans. What is a Business Plan? What purpose does it serve? A business plan is a detailed description of how an organization intends to produce, market and sell a product or service. Whether the business is housing, commercial or some other enterprise, a good business plan describes to others and to your own board of directors, management and staff the details of how you intend to operate and expand your business. A solid business plan describes who you are, what you do, how you will do it, your capacity to do it, what financial resources are necessary to carry it out, and how you intend to secure those resources. A well-written plan will serve as a guide through the start-up phase of the business. It can also establish benchmarks to measure the performance of your business venture in comparison with expectations and industry standards. And most important, a good business plan will help to attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A well-written plan will serve as a guide through the start-up phase of the business. It can also establish benchmarks to measure the performance of your business venture in comparison with expectations and industry standards. And most important, a good business plan will help to attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A good business plan will help attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A good business plan serves the following purposes:

1. Revenue Generation Your organization may hope to create a business that willgenerate sufficient net income or profit to finance other programs, activities or services provided by your organization.

2. Employment Creation A new business venture may create job opportunities forcommunity residents or the constituency served by your organization.

3. Neighborhood Development Strategy A new business venture might serve asan anchor to a deteriorating neighborhood commercial area, attract additional businesses to the area and fill a gap in existing retail services. You may need to find

a use for a vacant commercial property that blights a strategic area of your neighborhood. Or your business might focus on the rehabilitation of dilapidated single family homes in the community.

4. Establish Goals: Once you have identified goals for a new business venture, thenext step in the business planning process is to identify and select the right business. Many organizations may find themselves starting at this point in the process. Business opportunities may have been dropped at your doorstep. Depending on the goals you have set, you might take several approaches to identify potential business opportunities.

5. Local Market Study: Whether your goal is to revitalize or fill space in aneighborhood commercial district or to rehabilitate vacant housing stock, you should conduct a local market study. A good market study will measure the level of existing goods and services provided in the area, and assess the capacity of the area to support existing and additional commercial or home-ownership activity. A bad or insufficient market study could encourage your organization to pursue a business destined to fail, with potentially disastrous results for the organization as a whole. Through a market study you will be able to identify gaps in existing products and services and unsatisfied demand for additional or expanded products and services.

6. Analysis of Local and Regional Industry Trends: Another method of investigatingpotential business opportunities is to research local and regional business and industry trends. You may be able to identify which business or industrial sectors are growing or declining in your city, metropolitan area or region. The regional or metropolitan area planning agency for your area is a good source of data on industry trends.

7. Internal Capacity: The board, staff or membership of your organization maypossess knowledge and skills in a particular business sector or industry. Your organization may wish to draw upon this internal expertise in selecting potential business opportunities.

8. Internal







theorganization frequently purchases a particular service or product. If nearby affiliate organizations also use this service or product, this may present a business opportunity. Examples of such products or services include printing or copying services, travel services, transportation services, property management services, office supplies, catering services, and other products.


What is the chief purpose of a Business Continuity Plan and what are its components for effective implementation. Explain in a sentence or two as to how it is different from a Business Plan. The Business Continuity Plan is a tool to allow organizations to consider the factors and steps necessary to prepare for a crisis (disaster or emergency) so that it can manage and survive the crisis and take all appropriate actions to help ensure the organizations continued viability. The advisory portion of the plan is divided into two parts:


Planning process: It provides step-by-step Business Continuity Plan preparationand activation guidance, including readiness, prevention, response, and recovery/ resumption.

Implementation and maintenance: It gives the details of tasks required for theBusiness Continuity Plan to be maintained as a living document, changing and growing with the organization and remaining relevant and executable. The purpose of the business continuity plan is to prepare to face the unthinkable situations that may threaten an organizations future. This new challenge goes beyond the mere emergency response plan or disaster management activities that we previously employed. Organizations now must engage in a comprehensive process best described generically as Business Continuity. It is no longer enough to draft a response plan that anticipates naturally, accidentally, or intentionally caused disaster or emergency scenarios. Todays threats require the creation of an on-going, interactive process that serves to assure the continuation of an organizations core activities before, during, and most importantly, after a major crisis event. In the simplest of terms, it is good business for a company to secure its assets. CEOs and shareholders must be prepared to budget for and secure the necessary resources to make this happen. It is necessary that an appropriate administrative structure be put in place to effectively deal with crisis management. Following steps are required to fulfilled for effective implementation of the business continuity plan:

1. Educate and Train: The BCP is only as valuable as the knowledge that othershave of it. Education and training are necessary components of the BCP process. They require a time commitment from the Crisis Management Team, the Response Teams, and the general employee population.

2. Educate and Train Teams: The Crisis Management and Response Teams shouldbe educated about their responsibilities and duties. Check lists of critical actions and information to be gathered are valuable tools in the education and response processes.

3. Educate and Train All Personnel: All personnel should be trained to perform theirindividual responsibilities in case of a crisis. Such training could include procedures for evacuation, shelter-in-place, check-in processes to account for employees, arrangements at alternate worksites, and the handling of media inquiries by the company.

4. Review of BCP: The BCP should be regularly reviewed and evaluated. Reviewsshould occur according to a pre-determined schedule, and documentation of the review should be maintained as necessary. The following factors can trigger a review and should otherwise be examined once a review is scheduled:

Risk Assessment Sector/Industry Trends Regulatory Requirements Event Experience Test/Exercise Results 5. Maintenanceof BCP: Regular maintenance of the BCP cannot be overemphasized. Clear responsibility for BCP maintenance should be assigned. Maintenance can be either planned or unplanned and should reflect changes in the operation of the organization that will affect the BCP. Difference between a Business plan & Business continuity Plan

a. A Business plan is a detailed description of how an organisation intends toproduce, market and sale a product or service. A Business continuity plan is an ongoing process supported by senior management and funded to ensure that the necessary steps are taken to identify the impact of potential losses, maintain viable recovery strategies and plans, and ensure the continuity of operations through personnel training, plan ,testing and maintenance.

b. A Business continuity plan is a tool which allows organisations to consider thefactors and steps necessary to prepare for a crisis.(disaster or emergency). Whereas a business plan is not prepared for such type of disaster or emergency.

c. In a business continuity plan, a necessary Administrative structure is put in place

to effectively deal with crisis management, whereas,in a business plan, no such administrative structure is available. Q.5 Take any three examples of the components of a Decision Support System and explain how they help decision making Following are the three components of a Decision Support System


1. Annual Budget: It is really a business plan. The budget allocates amounts ofmoney to every activity and/or department of the firm. As time passes, the actual expenditures are compared to the budget in a feedback loop. During the year, or at the end of the fiscal year, the firm generates its financial statements: the income statement, the balance sheet, the cash flow statement. When putting together, these four documents are the formal edifice of the firms finances. However, they can not serve as day-to-day guides to the General Manager.

2. Daily Financial Statements: The Manager should have access to continuouslyupdated statements of income, cash flow, and a balance sheet. The most important statement is that of the cash flow. The manager should be able to know, at each and every stage, what his real cash situation is as opposed to the theoretical cash situation which includes accounts payable and account receivable in the form of expenses and income.

3. The Daily Ratios Report: This is the most important part of the decision supportsystem. It enables the Manager to instantly analyse dozens of important aspects of the functioning of his company. It allows him to compare the behaviour of these parameters to historical data and to simulate the future functioning of his company under different scenarios. It also allows him to compare the performance of his company to the performance of his competitors, other firms in his branch and to the overall performance of the industry that he is operating in. The Manager can review these financial and production ratios. Where there is a strong deviation from historical patterns, or where the ratios warn about problems in the future management intervention may be required. Examples of the Ratios to be Included in the Decision System

SUE measure deviation of actual profits from expected profits ROE the return on the adjusted equity capital Debt to equity ratios ROA the return on the assets

The financial average ROS the profit margin on the sales ATO asset turnover, how efficiently assets are used Tax burden and interest burden ratios Compounded leverage Sales to fixed assets ratios Inventory turnover ratios Days receivable and days payable Current ratio, quick ratio, interest coverage ratio and other liquidity and coverage ratios Valuation price ratios And many others

A decision system has great impact on the profits of the company. It forces the management to rationalize the depreciation, inventory and inflation policies. It warns the management against impending crises and problems in the company. It specially helps in following areas:

a. The management knows exactly how much credit it could take, for how long (forwhich maturities) and in which interest rate. It has been proven that without proper feedback, managers tend to take too much credit and burden the cash flow of their companies.

b. A decision system allows for careful financial planning and tax planning. Profits goup, non cash outlays are controlled, tax liabilities are minimized and cash flows are maintained positive throughout. The decision system is an integral part of financial management in the West. It is completely compatible with western accounting methods and derives all the data that it needs from information extant in the company. So, the establishment of a decision system does not hinder the functioning of the company in any way and does not interfere with the authority and functioning of the financial department, but infact helps the manager to take quick decisions and make profit to the company. Q.6 Ans. Name and explain any three ways in which a Companys CSR can be expressed CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary

basis as they are increasingly aware that responsible behaviour leads to sustainable business success. CSR is also about managing change at company level in a socially responsible manner. This happens when a company seeks to set the trade-offs between the requirements and the needs of the various stakeholders into a balance, which is acceptable to all parties. If companies succeed in managing change in a socially responsible manner, this will have a positive impact at the macro-economic level. Following are the different ways in which company's CSR can be expressed.

1. Employment and Social Affairs PolicyWithin a business CSR relates to quality employment, life-long learning, information, consultation and participation of workers, equal opportunities, integration of people with disabilities anticipation of industrial change and restructuring. Social dialogue is seen as a powerful instrument to address employment-related issues. Employment and social policy integrates the principles of CSR, in particular, through the European Employment Strategy, an initiative on socially responsible restructuring, the European Social Inclusion Strategy, initiatives to promote equality and diversity in the workplace, the EU Disability Strategy and the Health and Safety Strategy. In its document "Anticipating and managing change: a dynamic approach to the social aspects of corporate restructuring", the Commission has stressed that properly taking into account and addressing the social impact of restructuring contributes to its acceptance and to enhance its positive potential. The Commission has called upon the social partners to give their opinion in relation to the usefulness of establishing at Community level a number of principles for action, which would support business good practice in restructuring situations. Deeply rooted societal changes such as increasing participation of women in the labour market should be reflected in CSR, adapting structural changes and changing the work environment in order to create more balanced conditions for both genders acknowledging the valuable contribution of women as strategies which will benefit the society as well as the enterprise itself.

2. Enterprise policyOnly competitive and profitable enterprises are able to make a long-term contribution to sustainable development by generating wealth and jobs without compromising the social and environmental needs of society. In fact, only profitable firms are sustainable

and have better chances to adopt/develop responsible practices. The role of enterprise policy is to help create a business environment, which supports the Lisbon objective of becoming the worlds most dynamic knowledge-driven economy, supports entrepreneurship and a sustainable economic growth. Its objective is to ensure a balanced approach to sustainable development, which maximises synergies between its economic, social and environmental dimensions.

3. Consumer PolicyCSR has partly evolved in response to consumer demands and expectations. Consumers, in their purchasing behaviour, increasingly require information and reassurance that their wider interests, such as environmental and social concerns, are being taken into account. Consumers and their representative organisations have an important role to play in the evolution of CSR. If CSR is therefore to continue to serve its purpose, strong lines of communication between enterprises and consumers need to be created.

STRATEGIC MANAGEMENT & BUSINESS POLICY(MB-0036)ASSIGNMENT-2 Q.1 Having formulated a Business Strategy, what are the steps in its implementation? Explain each in a sentence or two. A strategy is an operational tool to achieve the goals, and thus, the corporate mission. Strategies do not attempt to outline exactly how the enterprise is to accomplish its objectives. A company may view downsizing as a strategy in a competitive market to render cost-effective services. Thus, strategy provides a framework to guide thinking and action. Strategies are very much useful in organizations for guiding, planning and control. Strategy is a way of life both at the macro as well as micro levels for everyone, whether it is a nation or a company. To win over in a given complex situation, the organizations, even trans-nationals adopt strategies. They make changes, if necessary, even to their global strategies. An individual company may formulate its own strategy to bring out the


desired results. The eventual success of the organization depends upon strategy formulation and implementation. Strategy refers to the course of action desired to achieve the objectives of the enterprise. Formulation, together with its implementation, constitutes an integral part of the management activity. Managers use strategies for different purposes such as to overcome competition, to increase sales, to increase production, to motivate the employees to provide their best, and so on. Implementation of a strategy is a crucial task as the formulation of it. There may be a lot of resistance during the implementation process. It is necessary for the manager to be very tactful to involve the members of his group in the formulation of strategy to facilitate the implementation process. Following are the steps for implementing the business strategy

1. Identification of mission and objectives 2. Environment scanning 3. Generic strategy alternatives 4. Strategy variations 5. Strategic choice 6. Allocation of resources and formulation of organizational structure 7. Formulation of plans, policies, programmes and administration 8. Evaluation and control.After formulating a business strategy, the process of strategy implementation calls for an integrated set of choices and activities. These include

1. Allocating Resources: A good strategy with effective implementation has a higherprobability of success. There source allocation decisions, such as, which department is sanctioned how much of money and resources, in the name of the budget, and so on set the operative strategy of the firm. Budgets are formulated after a series of negotiations across different levels in the organization. Budgets may be of different types: corporate budgets, capital budgets, departmental budgets, sales budgets, expense budgets, and others.

2. Organising: An effective co-ordination and efficient division of labour requires anappropriate organizational structure. The best structure is one, which fits into the organizational environment. Also its internal characteristics should give rise to an effective strategy. Appropriate changes in the organization structure may be initiated to ensure strategic implementation of the proposed strategy. Effective strategic management practices suggest that organization structure should also change if the

strategy changes or if the organization experiences any bottlenecks in this regard

3. Formulation Of Policies, Plans, Programmes And Administration: Theresources allocated are said to be well-utilized only when they are well-monitored. For this purpose, it is essential:

To develop policies and plans. To assign and reassign leaders the tasks and decisions to support the chosen strategy. To provide a conducive environment in the organization through proper administration to achieve the given objectives directly and indirectly.

The implementation of plans and policies is designed in accordance with the strategy chosen. The firm creates plans and policies to guide managerial performance, and these make the chosen strategies work. The corporate success lies ultimately in the ability to convert corporate strategy into plans and policies that are compatible and workable.

4. Evaluation And Control Of Strategy: Evaluation is the last phase of the strategicmanagement process. It is at this stage that the success of the programmes can be assessed. There should be a built-in mechanism to examine the deviations and initiate corrections as and when required. This assures that the chosen strategies will be implemented properly. The control process requires identifying a set of parameters for evaluating and measuring the performance at the individual level and also at the department level. The performance has to be evaluated to identify deviations and take corrective action. The control and evaluation take place not only at the SBU level but also at the corporate level. This process may involve the participation of all the executives at all levels. Corrective actions are required wherever the evaluation reveals deviations between the actual performance and the projected one, over a given period of time. Q.2 How do we cope with crises and how do we use the Business Continuity Plan to manage and recover from crisis? The Business Continuity Guideline is a tool to allow organizations to consider the factors and steps necessary to prepare for a crisis (disaster or emergency) so that it can manage and survive the crisis and take all appropriate actions to help ensure the organizations continued viability. The advisory portion of the guideline which helps us to cope with the crisis and to


manage and recover from the crisis is divided into two parts:

1. The Planning Process - provides step-by-step Business Continuity Planpreparation and activation guidance, including readiness, prevention, response, and recovery/ resumption. The following steps are important:

i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. xiv. xv. xvi. xvii.

Assign Accountability Perform Risk Assessment Conduct Business Impact Analysis (BIA) Agree on Strategic Plans Crisis Management and Response Team Development Mitigation Strategies Avoidance, Deterrence and Detection Potential Crisis Recognition Communications Resource Management Financial Support Financial Issues and Insurance Suppliers/Service Providers Mutual Aid Agreements Damage and Impact Assessment Resumption of Critical and Remaining Processes Return to Normal Operations

2. Successful Implementation And Maintenance - details those tasks required forthe Business Continuity Plan to be maintained as a living document, changing and growing with the organization and remaining relevant and executable. The various steps involved are:

i. ii. iii. iv.

Educate and Train Test the BCP Develop BCP Review Schedule Develop BCP Maintenance Schedule

In order to use the Business Continuity Plan to manage and recover from the crisis, the following checklists on the basis of the above advisory portion of the guideline needs to be checked and necessary requirements as per the same, needs to be kept in ready

mode for immediate applications. Accountability:

1. Does your organizations policy include a definition of crisis? 2. Has the person responsible for critical systems and business processes beenidentified?

3. Has a BCP Team been appointed, and does it include senior business functionleaders?

4. Has the BCP been communicated throughout the organization? 5. Has a person been assigned with the responsibility to update the BCP?Risk Assessment

1. Has your organization conducted a Risk Assessment? 2. Have the types of risks that may impact your organization been identified andanalyzed?

3. Has the likelihood for each type of risk been rated?Business Impact Analysis

1. Have the critical business processes been identified? 2. Have the business processes been ranked (low, medium, high)? 3. If a crisis were to happen, has the impact, in terms of human and financial costs,been assessed?

4. Have the maximum allowable outage and recovery time objectives beendetermined?

5. Has the length of time your organizations business processes could be nonfunctional been determined?

6. Have the recovery time objectives been identified? 7. Have the resources required for resumption and recovery been identified?Strategic Plans

1. Have methods to mitigate the risks identified in the Business Impact Analysis andRisk Assessment been identified?

2. Have plans and procedures to respond to any incident been developed? 3. Have strategies that address short and long term business interruptions been


4. Are the strategies attainable, tested, and cost effective?Compliance with Corporate Policy & Mitigation Strategies

1. Have compliance audits been conducted to enforce BCP policy and procedures? 2. Have the systems and resources that will contribute to the mitigation process beenidentified, including personnel, facilities, technology, and equipment?

3. Have the systems and resources been monitored to ensure they will be availablewhen needed? Avoidance, Deterrence, and Detection

1. Are employees motivated to be responsible for avoidance and deterrence anddetection?

2. Have facility security programs to support avoidance and deterrence and detectionbeen established?

3. Have operational policy and procedures to protect the facilities been developed? 4. Is it ensured that sufficient physical security systems and planning are in place toprotect the facility? Response: Potential Crisis Recognition and Team Notification

1. Will the response program recognize when a crisis occurs and provide some levelof response?

2. Have the danger signals been identified that indicate a crisis is imminent? 3. Have personnel been trained to observe warning signs of an imminent crisis? 4. Has a notification system been put in place, including redundant systems? 5. Is the notification contact list complete and up to date?Assess the Situation

1. Has an assessment process to address the severity and impact of the crisis beendeveloped?

2. Has the responsibility for declaring a crisis, with first and second alternates, beenassigned? Declare a Crisis

1. Have the criteria been established for when a crisis should be declared? 2. Has the responsibility for declaring a crisis been clearly defined and assigned? 3. Has an alert network for BCP Team members and employees been established? 4. Is it ensured that there is an alternate means of warning if the alert network fails? 5. Have the activities that will be implemented in event of a crisis been identified,including notification, evacuation, relocation, alternate site activation, team deployment, operational changes, etc? Execute the Plan

1. Has consideration been given to developing the BCP around a worst casescenario?

2. Has the BCP been prioritized to save lives, protect assets, restore critical businessprocesses and systems, reduce the length of the interruption, protect reputation, control media coverage, and maintain customer relations?

3. Have the severity of the crisis and the appropriate response been determined?Communications

1. Has a crisis communications strategy been developed? 2. Are communications timely, honest, and objective? 3. Are communications with all employees occurring at approximately the same time? 4. Are regular updates provided, including notification of when the next update will beissued?

5. Has a primary spokesperson and back-up spokespersons been designated whowill manage and disseminate crisis communications to the media and others? Resource Management Logistics

1. Has a designated Crisis Management Center been identified, and does it have

necessary life support functions, including uninterruptible power supply and communications equipment?

2. Have alternate worksites for business resumption and recovery been identified? 3. Have critical and vital records been stored at an offsite storage facility? 4. How long can each business function operate effectively without normal data inputstorage processes?

5. What must be done to restore data to the same previous point in time within therecovery time objective?

6. Can any alternate data storage processes be used, after the initial data recovery,to speed the forward recovery to the present time? Resource Management Financial Issues and Insurance, Transportation, Suppliers/Service Providers, and Mutual Aid

1. Has the appropriate insurance coverage been identified and obtained? 2. Are cash and credit available to the BCP Team? 3. Have transportation alternatives been arranged in advance? 4. Have critical vendor and service provider agreements been established? 5. Have mutual aid agreements been established? 6. If so, are they legally sound, properly documented, and understood by all parties?Recovery and resumption

1. Damage and Impact Assessment, Process Resumption, and Return to NormalOperations

2. Has a damage assessment been performed as soon as possible? 3. Has the Damage Assessment Team been mobilized to the site? 4. Has business process recovery been prioritized to recover the most criticalbusiness processes first?

5. Is the schedule of the processes to be restored in accordance with the prioritization


6. Is there documentation of when the processes were resumed? 7. Has the organization returned to normal operations? 8. Has the decision to return to normal operations been documented andcommunicated? The preparation and readiness of the resources as per the above checklists on the basis of the Business Continuity Plan helps us to manage and recover from the crisis in a successful manner. Q.3 What are the main components of Business Plan, explaining the role of each in the Plan? A business plan is a detailed description of how an organization intends to produce, market and sell a product or service. A solid business plan describes who you are, what you do, how you will do it, your capacity to do it, what financial resources are necessary to carry it out, and how you intend to secure those resources. A well-written plan will serve as a guide through the start-up phase of the business. It can also establish benchmarks to measure the performance of your business venture in comparison with expectations and industry standards. And most important, a good business plan will help to attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A good business plan will help attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A business plan should contain the following components: 1. Executive Summary: The purpose of this component is to provide direction and help you establish your goals as clearly as possible. With this clearly spelled out, both management and employees can focus their efforts. Also it will help with investors and bankers in that they can clearly understand what your. It should include the following information. A history of the company (if you're already in business) or a history of the idea development. A description of the products or services you plan to develop and sell.


2. Company and Product Description: In this component one should provide type of business, reason of creating business unit, referencing the goal and attach references of business plan. Product or Service-Focus on the feature that distinguishes from rest of market and what will attract consumers to your product or service. Price-Provide realistic price estimate and discuss the rationale behind that price. Describe where this price positions you in the market place: at the high end, low end or in the middle of the existing range for a similar product or service. Place-Describe the location and its advantages where you will produce or distribute your product or provide your service. Customers-Providing detail description of the customer base depending upon their characteristics i.e. demographics, geography and socio economic status. Provide statistical data to describe the size of target customer base and its growth potential. Competition-Explain the reason for entering in the new venture and what differentiate your proposed venture from existing business. Sales Projections-Present an estimate based on size of your market, the characteristic of your customers and the share of market you will gain over your competition.

3. Market Description: A key composition of the operation of your business will beyour sales and marketing strategy, so one must describe how you will inform your target market about your product or service and how you will convince customer to purchase. Production Description:-Describe the steps from raw material to finished goods, packaged and ready for distribution and sale. Avoid using industry jargon to describe the production process. Staffing:-Describe the type of staff, their qualification, skill, salaries, other benefit and how they will be recruited.

4. Equipment and Material: In this component one must describe the special type ofmachines and materials required to purchase, their cost and source. Facility:-Facilities and other infrastructure required for the company, specialized features if any are to be described. Market Description:-Strategy for locating your target market, informing or educating customers about your product or service and convincing them to buy

it. Discuss the products feature you plan to emphasize to gain the attention of your target market.

5. Operations: In this component company must highlight the senior managerresponsible for overseeing the start-up and operation of your business, their background and their responsibility in the business. Ownership- Potential investors and lenders will be interested in ownership stake of the board of directors and also in what portion of the companys equity is available. An investor or banker must know this because each form has certain legal and tax implications. The typical forms are: y y y y y Sole proprietor. Partnership. Limited Liability Company Corporation. Sub-Chapter S Corporation

6. Management and ownership: Providing a brief description of the different financial statements of the business to be attached such as . Startup budget-Describe the initial expenses which may incur to get your business up and running. Cash flow projection-Provide month to month schedule of estimated cash inflow and outflows from the business for the first year. This include how much money and when. Income statement-Prepare a multiyear statement of projected revenue, expenses, capital expenditure and cost of goods sold. This should be supported by documents of growth pattern of similar companies or studies that forecast an industry wise forecast. Balance sheet-Provide a copy of balance sheet of sponsoring organization.

7. Financial information and timeline: Capital Requirement- Describe the Requirement of type of capital for financing and repayment period, amount of expected return and explain any commitment or investment that you may have already secured. Types of requirement of funds are. Seed Capital

Fixed asset financing Working Capital Initial Start-up timeline-Provide a timeline of task and events necessary to get your business operational. Be sure to record stage as on today also. Set realistic dead line to capacity to complete these tasks. There may be several reasons to delay the project which are in not ones hand but explain in details.

describe any asset that will be allocated to the start-up of the business. 8. Risks and their mitigation: Although it is impossible to know exactly what will go wrong in staring and running your business plan, thinking upon different challenges will strengthen plan. Q.4 Ans. Explain the concept, need for and importance of a Decision Support System. Concept: Decision support systems constitute a class of computer-based information systems including knowledge-based systems that support decision-making activities. It is also explained as a class of information systems (including but not limited to computerized systems) that support business and organizational decision-making activities. A properly designed DSS is an interactive software-based system intended to help decision makers compile useful information from a combination of raw data, documents, personal knowledge, or business models to identify and solve problems and make decisions. Typical information that a decision support application might gather and present are:y an inventory of all of your current information assets (including legacy and

relational data sources, cubes, data warehouses, and data marts),y comparative sales figures between one week and the next, y projected revenue figures based on new product sales assumptions.

Need: Many companies in developing countries have a very detailed reporting system going down to the level of a single product, a single supplier, a single day. However, these reports which are normally provided to the General Manager should not be used by them at all. They are too detailed and, thus, tend to obscure the true picture. A General Manager must have a birds eye view of his company. He must be alerted to unusual happenings, disturbing financial data and other irregularities.

As things stand now, the following phenomena could happen:y That the management will highly leverage the company by assuming excessive

debts burdening the cash flow of the company.y That a false Profit and Loss (PNL) picture will emerge both on the single product

level and generally. This could lead to wrong decision-making, based on wrong data.y That the company will pay excessive taxes on its earnings. y That the inventory will not be fully controlled and appraised centrally. y That the wrong cash flow picture will distort the decisions of the management and

lead to wrong (even to dangerous) decisions. Importance: A decision system has great impact on the profits of the company. It forces the management to rationalize the depreciation, inventory and inflation policies. It warns the management against impending crises and problems in the company. It specially helps in following areas:

The management knows exactly how much credit it could take, for how long (forwhich maturities) and in which interest rate. It has been proven that without proper feedback, managers tend to take too much credit and burden the cash flow of their companies.

A decision system allows for careful financial planning and tax planning. Profits goup, non cash outlays are controlled, tax liabilities are minimized and cash flows are maintained positive throughout. The decision system is an integral part of financial management in the West. It is completely compatible with western accounting methods and derives all the data that it needs from information extant in the company. So, the establishment of a decision system does not hinder the functioning of the company in any way and does not interfere with the authority and functioning of the financial department. Q.5 Explain the importance of any five aspects of a Licensing Agreement that you will look for when negotiating the right to use an Intellectual Property Ans. A licence is a grant of permission made by the patent owner to another to exercise any specified rights as agreed. Licensing is a good way for an owner to benefit from their work as they retain ownership of the patented invention while granting permission to

others to use it and gaining benefits, such as financial royalties, from that use. However, it normally requires the owner of the invention to invest time and resources in monitoring the licensed use, and in maintaining and enforcing the underlying IP right. A licence is merely the grant of permission to undertake some of the actions covered by intellectual property rights, and the patent holder retains ownership and control of the basic patent. Licences are often limited to specific rights, territories and time periods. If an inventor owns patents on the same invention in five different countries, they could assign (or sell) these patents to five different owners in each of those countries. Portions of a patent right can also be assigned so that in order to finance your invention, you might choose to sell a half-share to a commercial partner. A lot of aspects are to be taken care of very carefully while negotiating or making a licensing agreement to give right to use an intellectual property. Some of the important aspects of a Licensing Agreement that we will look for when negotiating the right to use an Intellectual Property are explained below:

1. The Parties To The Licence: The parties to the licence are the entities (individualpeople, companies or institutions) that are bound by the licence as a legal contract. They normally sign (or execute) the licence to confirm in a legally clear-cut way that they agree to comply with its terms. The parties can be individual persons, but they are normally legal entities such as a research institution, a university or a company. It is important to ensure that the licence is signed in a way that is legally binding, and by a person authorized to sign for their institution. In some cases, the licence is not directly signed (think of the I Agree block which you are often asked to click when installing a software package on a computer), and in the national law of many countries, contractual obligations can arise even without a formal signed document.

2. Licensor And Licensee: The person granting the licence the licensor typicallyholds rights to technology, biological material, IP rights, know-how, or other information. The person receiving the licence the licensee is the party which is seeking to use or exploit that material. The basic idea of the licence is that the person granting the licence (the licensor) is giving another person (the licensee) the right to do something that they could otherwise prevent them from doing, in exchange for some kind of benefit (this may be financial, but may be other forms of benefit). So the licensor might permit the

licensee to use a technology that is covered by a patent and if there was no license, the licensor could take legal action under the patent to prevent this use of the technology.

3. Sole, Exclusive Or Non-Exclusive Licences: The choice taken among theseoptions is very important.

An exclusive licence means that the licensor agrees not to grant anotherlicence to any other party, and agrees not to use the licensed rights (in other words, the licensor cannot become a competing user of the licensed technology).

A sole licence means that the licensor grants a licence to only one licensee,the sole licensee, but the licensor retains the right to use the technology itself.

Under a non-exclusive licence, the licensor grants the licensee a right to usethe technology, but the licensor can still give the same rights to other licensees. The kind of license granted will depend on several factors, and will do much to influence the pattern of use, and the scale of royalties or other payments, made by the licensee.

4. Sub-Licences: A sub-licence is a further licence, when the licensee of the originallicence itself grants a licence to a third party. The sub-licence may extend to some or all of the rights granted under the original licence. The original licence may need to make clear whether sub-licences can be granted, and if so, to who, and on what terms or conditions. There may be issues such as protecting the confidentiality of licensed material, liability for use of the technology, or the interests of the licensor in granting direct licenses to the same third parties. A sub-licensing program may be of considerable benefit to the licensor, as it will increase the scope of use of the licensed technology, and may be an effective way of exporting the technology to new overseas markets. The original licensor might retain an entitlement to a share of any royalties or other payments paid by the sublicensee. The original licensor might retain the right to investigate and approve the eligibility of a sub-licensee, especially if the sub-licensee has no direct relationship with the original licensee.

5. Diligence And Milestones: The licensee may be relying on the license as theprincipal mechanism for recovering its investment in research and for deriving benefits from the patent or other IP. So it may be important to the licensor to ensure

that the licensee does everything they can to develop and commercialize the licensed IP. If a licensee gains an exclusive licence, subject to a royalty payment on profits, and then decides to shelve the technology for several years because its immediate interests lie elsewhere, then the whole value of the IP is lost to the licensor. So licenses will frequently include obligations on the licensee to develop and apply the licensed technology diligently and to meet specific deadlines. Where possible, certain defined points or milestones should be identified possibly based on the business plan originally proposed by the licensee. The license could require the licensee to bring the product to the market as soon as practicable, and to continue to make the product available to the public on reasonable terms. These obligations may also be built into sub-licenses granted under the licence.

6. Payments And Pricing: A licence will normally involve a valuable consideration something of value which is given in exchange for the right to use this technology. It need not be financial consideration it could be a right in exchange to use another technology (a cross-licence), or valuable access to other facilities or resources. There are many potential models for payment. It is always difficult to establish a value for intellectual property, even more so if it relates to unproven technology that will require a licensee to take a considerable commercial risk. The options boil down to lump sum payments, and royalties based on the extent of use of the technology. It is not unusual to see a mixture of both. Q.6 What is Corporate Social Responsibility? Why is it becoming increasingly relevant in todays Business? Ans. Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or corporate social performance, is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, selfregulating mechanism whereby business would monitor and ensure its adherence to law, ethical standards, and international norms. Business would embrace responsibility for the impact of their activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, business would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a triple bottom line: People, Planet and

Profit. The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others yet argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. Corporate Social Responsibility has been redefined throughout the years. However, it essentially is titled to aid to an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. Relevancy In Todays Business: Business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia, descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with noneconomic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have re-branded their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt). The term CSR came in to common use in the early 1970s, after many multinational corporations formed, although it was seldom abbreviated. The term stakeholder, meaning those impacted by an organization's activities, was used to describe corporate owners beyond shareholders as a result of an influential book by R Freeman in 1984. Whilst there is no recognized standard for CSR, public sector organizations (the United Nations for example) adhere to the Triple Bottom Line (TBL). It is widely accepted that

CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones. However, businesses may not be looking at short-run financial returns when developing their CSR strategy. The definition of CSR used within an organization can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering. CSR may be based within the human resources, business development or public relations departments of an organisation, or may be given a separate unit reporting to the CEO or in some cases directly to the board. Some companies may implement CSR-type values without a clearly defined team or programme.

INTERNATIONAL BUSINESS MANAGEMENT(MB-0037)ASSIGNMENT-1 Q.1 Ans. Write a short note on Globalization. The term "globalization" has acquired considerable emotive force. Some view it as a

process that is beneficial a key to future world economic development and also inevitable and irreversible. Others regard it with hostility, even fear, believing that it increases inequality within and between nations, threatens employment and living standards and thwarts social progress. This brief offers an overview of some aspects of globalization and aims to identify ways in which countries can tap the gains of this process, while remaining realistic about its potential and its risks. Globalization offers extensive opportunities for truly worldwide development but it is not progressing evenly. Some countries are becoming integrated into the global economy more quickly than others. Countries that have been able to integrate are seeing faster growth and reduced poverty. Economic "globalization" is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political and environmental dimensions of globalization that are not covered here. At its most basic, there is nothing mysterious about globalization. The term has come into common usage since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity village markets, urban industries, or financial centers. Globalization is not just a recent phenomenon. Some analysts have argued that the world economy was just as globalized 100 years ago as it is today. But today commerce and financial services are far more developed and deeply integrated than they were at that time. The most striking aspect of this has been the integration of financial markets made possible by modern electronic communication. There are four aspects of globalization:

1. Trade: Developing countries as a whole have increased their share of world trade from 19 percent in 1971 to 29 percent in 1999. For instance, the newly industrialized economies (NIEs) of Asia have done well, while Africa as a whole has fared poorly. The composition of what countries export is also important. The strongest rise by far has been in the export of manufactured goods. The share of primary commodities in world exports such as food and raw materials that are often produced by the poorest countries, has declined.

2. Capital movements: Globalization sharply increased private capital flows todeveloping countries during much of the 1990s. It also shows that:

y y

the increase followed a particularly "dry" period in the 1980s; net official flows of "aid" or development assistance have fallen significantly since the early 1980s; and the composition of private flows has changed dramatically. Direct foreign investment has become the most important category. Both portfolio investment and bank credit rose but they have been more volatile, falling sharply in the wake of the financial crises of the late 1990s.


3. Movement of people: Workers move from one country to another partly to findbetter employment opportunities. The numbers involved are still quite small, but in the period 1965-90, the proportion of labor forces round the world that was foreign born increased by about one-half. Most migration occurs between developing countries. But the flow of migrants to advanced economies is likely to provide a means through which global wages converge. There is also the potential for skills to be transferred back to the developing countries and for wages in those countries to rise.

4. Spread of knowledge (and technology): Information exchange is an integral, oftenoverlooked, aspect of globalization. For instance, direct foreign investment brings not only an expansion of the physical capital stock, but also technical innovation. More generally, knowledge about production methods, management techniques, export markets and economic policies is available at very low cost, and it represents a highly valuable resource for the developing countries. Q.2 Ans. Describe the positives of trade liberalization. Policies that make an economy open to trade and investment with the rest of the world are needed for sustained economic growth. The evidence on this is clear. No country in recent decades has achieved economic success, in terms of substantial increases in living standards for its people, without being open to the rest of the world. In contrast, trade opening (along with opening to foreign direct investment) has been an important element in the economic success of East Asia. Opening up their economies to the global economy has been essential in enabling many developing countries to develop competitive advantages in the manufacture of certain products. In these countries, defined by the World Bank as the "new globalizers," the number of people in absolute poverty declined by over 120 million (14

percent) between 1993 and 1998. There is considerable evidence that more outward-oriented countries tend consistently to grow faster than ones that are inward-looking. Indeed, one finding is that the benefits of trade liberalization can exceed the costs by more than a factor of 10. Countries that have opened their economies in recent years, including India, Vietnam, and Uganda, have experienced faster growth and more poverty reduction. On average, those developing countries that lowered tariffs sharply in the 1980s grew more quickly in the 1990s than those that did not. Freeing trade frequently benefits the poor especially. Developing countries can ill-afford the large implicit subsidies, often channeled to narrow privileged interests that trade protection provides. Moreover, the increased growth that results from free trade itself tends to increase the incomes of the poor in roughly the same proportion as those of the population as a whole. New jobs are created for unskilled workers, raising them into the middle class. Overall, inequality among countries has been on the decline since 1990, reflecting more rapid economic growth in developing countries, in part the result of trade liberalization. Although there are benefits from improved access to other countries markets, countries benefit most from liberalizing their own markets. The main benefits for industrial countries would come from the liberalization of their agricultural markets. Developing countries would gain about equally from liberalization of manufacturing and agriculture. The group of low-income countries, however, would gain most from agricultural liberalization in industrial countries because of the greater relative importance of agriculture in their economies. Further liberalization by both industrial and developing countries will be needed to realize trades potential as a driving force for economic growth and development. Greater efforts by industrial countries and the international community more broadly, are called for to remove the trade barriers facing developing countries, particularly the poorest countries. Although quotas under the so-called Multi-fibre Agreement are due to be phased out by 2005, speedier liberalization of textiles and clothing and of agriculture is particularly important. Similarly, the elimination of tariff peaks and escalation in agriculture and manufacturing also needs to be pursued. In turn, developing countries would strengthen their own economies (and their trading partners) if they made a sustained effort to reduce their own trade barriers further. Enhanced market access for the poorest developing countries would provide them with the means to harness trade for development and poverty reduction. Offering the poorest countries duty and quota free access to world markets would greatly benefit these

countries at little cost to the rest of the world. The recent market-opening initiatives of the EU and some other countries are important steps in this regard. To be completely effective, such access should be made permanent, extended to all goods, and accompanied by simple, transparent rules of origin. This would give the poorest countries the confidence to persist with difficult domestic reforms and ensure effective use of debt relief and aid flows. Q.3 Write a short note on GATT and WTO, highlighting the difference between the two. General Agreement on Tariff and Trade( GATT): The GATT, was established on a provisional basis after the Second World War in the wake of other new multilateral institutions dedicated to international economic cooperation notably the "Britton Woods" institutions now known as the World Bank and the International Monetary Fund. The original 23 GATT countries were among over 50 which agreed a draft Charter for an International Trade Organization (ITO) a new specialized agency of the United Nations. The Charter was intended to provide not only world trade disciplines but also contained rules relating to employment, commodity agreements, restrictive business practices, international investment and services. In an effort to give an early boost to trade liberalization after the Second World War and to begin to correct the large overhang of protectionist measures which remained in place from the early 1930s-tariff negotiations were opened among the 23 founding GATT "contracting parties" in 1946. This first round of negotiations resulted in 45,000 tariff concessions affecting $10 billion or about one-fifth of world trade. It was also agreed that the value of these concessions should be protected by early and largely "provisional" acceptance of some of the trade rules in the draft ITO Charter. The tariff concessions and rules together became known as the General Agreement on Tariffs and Trade and entered into force in January 1948. Although the ITO Charter was finally agreed at a UN Conference on Trade and Employment in Havana in March 1948, ratification in national legislatures proved impossible in some cases. When the United States government announced, in 1950, that it would not seek Congressional ratification of the Havana Charter, the ITO was effectively dead. Despite its provisional nature, the GATT remained the only multilateral instrument governing international trade from 1948 until the establishment of the WTO. Although, in its 47 years, the basic legal text of the GATT remained much as it was in 1948, there were additions in the form of "plural-lateral voluntary membership


agreements and continual efforts to reduce tariffs. Much of this was achieved through a series of "trade rounds". The biggest leaps forward in international trade liberalization have come through multilateral trade negotiations, or "trade rounds", under the auspices of GATT the Uruguay Round was the latest and most extensive. The limited achievement of the Tokyo Round, outside the tariff reduction results, was a sign of difficult times to come. GATTs success in reducing tariffs to such a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove governments to devise other forms of protection for sectors facing increased overseas competition. High rates of unemployment and constant factory closures led governments in Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade. Both these changes undermined the credibility and effectiveness of GATT. WTO World Trade Organization came into existence in 1995 after the desolation of General Agreement on Tariff and Trade (GATT). The WTOs overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by:

Administering trade agreements Acting as a forum for trade negotiations Settling trade disputes Reviewing national trade policies Assisting developing countries in trade policy issues, through technical assistance and training programs Cooperating with other international organizations

The WTO has nearly 150 members, accounting for over 97% of world trade. Around 30 others are negotiating membership. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTOs predecessor, GATT. The WTOs agreements have been ratified in all members parliaments. The WTOs top level decision-making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council which meets several

times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council. Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements. The WTO Secretariat, based in Geneva, has around 600 staff and is headed by a director-general. Its annual budget is roughly 160 million Swiss francs. It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the Secretariat does not have the decision-making role that other international bureaucracies are given with. The WTO is run by its member governments. All major decisions are made by the membership as a whole, either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva). Decisions are normally taken by consensus. Difference between WTO and GATT:The World Trade Organization is not a simple extension of GATT; on the contrary, it completely replaces its predecessor and has a very different character. Among the principal differences are the following:

a. The GATT was a set of rules, a multilateral agreement, with no institutionalfoundation, only a small associated secretariat which had its origins in the attempt to establish an International Trade Organization in the 1940s. The WTO is a permanent institution with its own secretariat.

b. The GATT was applied on a "provisional basis" even if, after more than forty years,governments chose to treat it as a permanent commitment. The WTO commitments are full and permanent.

c. The GATT rules applied to trade in merchandise goods. In addition to goods, theWTO covers trade in services and trade-related aspects of intellectual property.

d. While GATT was a multilateral instrument, by the 1980s many new agreementshad been added of a plural-lateral, and therefore selective, nature. The agreements which constitute the WTO are almost all multilateral and, thus, involve commitments for the entire membership.

e. The WTO dispute settlement system is faster, more automatic, and thus much lesssusceptible to blockages, than the old GATT system. The implementation of WTO dispute findings will also be more easily assured. Q.4 Ans. Think of any MNC and analyze its business strategy orientation. Multinational companies (MNC) may pursue business strategies that are home country oriented or host country oriented or world oriented. Perlmutter uses such terms as ethnocentric, polycentric and geocentric. However, "ethnocentric" is misleading because it focuses on race or ethnicity, especially when the home country itself is populated by many different races, whereas "polycentric" loses its meaning when the MNCs operate only in one or two foreign countries. According to Franklin Root (1994), an MNC is a parent company that

a. engages in foreign production through its affiliates located in several countries, b. exercises direct control over the policies of its affiliates, c. implements business strategies in production, marketing, finance and staffing thattranscend national boundaries. Business strategy of a MNC can be analyzed with the help of Three Stages of Evolution

1. Export stage y y yinitial inquiries - firms rely on export agents expansion of export sales further expansion - foreign sales branch or assembly operations (to save transport cost)

2. Foreign Production StageThere is a limit to foreign sales (tariffs, NTBs).Once the firm chooses foreign production as a method of delivering goods to foreign markets, it must decide whether to establish a foreign production subsidiary or license the technology to a foreign firm. Licensing is usually first experience (because it is easy)

y y y

it does not require any capital expenditure it is not risky payment = a fixed % of sales

e.g.: Kentucky Fried Chicken in the U.K. Problem that may arise while following a particular business strategy: The mother firm may find it difficult in exercise of any managerial control over the licensee (as it is independent). Secondly, the licensee may transfer industrial secrets to another independent firm, thereby creating a rival. The next stage for supplementing any particular business strategy is Investments involved. It requires the decision of top management because it is a critical step.

it is risky (lack of information) (for example-US firms tend to establishsubsidiaries in Canada first. Singer Manufacturing Company established its foreign plants in Scotland and Australia in the 1850s)

plants are established in several countries licensing is switched from independent producers to its subsidiaries. export continues 3. Multinational Stage: The company becomes a multinational enterprise when itbegins to plan, organize and coordinate production, marketing, R&D, financing, and staffing. For each of these operations, the firm must find the best location. This is how a MNC decides its business strategy orientation. Q.5 Ans. What does FDI stand for? Why do MNCs opt for FDI to enter international market? FDI stands for Foreign Direct Investment. New MNCs do not pop up randomly in foreign nations. It is the result of conscious planning by corporate managers. Investment flows from regions of low anticipated profits to those of high returns. When MNC incorporated in one country, invests in another country, it is said that the FDI has flowed into the other country from some foreign origin. The main reasons for MNCs to opt for FDI to enter international market is stated as follows:

1. Growth motive: A company may have reached a plateau satisfying domesticdemand, which is not growing. Looking for new markets.

2. Protection in the importing countries : Foreign direct investment is one way toexpand. FDI is a means to bypassing protective instruments in the importing country.

European Community imposed common external tariff against outsiders. US companies circumvented these barriers by setting up subsidiaries. corporations located auto assembly plants in the US, to bypass VERs. Japanese

3. High Transportation Costs : Transportation costs are like tariffs in that they arebarriers which raise consumer prices. When transportation costs are high, multinational firms want to build production plants close to the market in order to save transportation costs. Multinational firms that invested and built production plants in the United States are better off than the exporting firms that utilized New Orleans port to ship and distribute products through New Orleans, provided that they built plants in a safe area.

4. Exchange Rate Fluctuations: Japanese firms invest here to produce heavyconstruction machines to avoid excessive exchange rate fluctuations. Also, Japanese automobile firms have plants to produce automobile parts. For instance, Toyota imports engines and transmissions from Japanese plants, and produce the rest in the U.S.

5. Market competition: The most certain method of preventing actual or potentialcompetition is to acquire foreign businesses. GM purchased Monarch (GM Canada) and Opel (GM Germany). It did not buy Toyota, Datsun (Nissan) and Volkswagen. They later became competitors.

6. Cost reduction: United Fruit has established banana-producing facilities in Honduras.Cheap foreign labour. Labour costs tend to differ among nations. MNCs can hold down costs by locating part of all their productive facilities abroad. (Maquildoras) Q.6 Ans. Viewing culture as a multi-level construct, describe various levels it consists of. There are two kinds of approach construct of culture. One is a multi-level approach, viewing culture as a multi-level construct that consists of various levels nested within each other from the most macro-level of a global culture, through national cultures, organizational cultures, group cultures, and cultural values that are represented in the self at the individual level. The second is based on Scheins (1992) model viewing culture as a multi layer construct consisting of the most external layer of observed artifacts and behaviours, the deeper level of values, which is testable by social consensus, and the deepest level of basic assumption, which is invisible and taken for granted. The present model proposes that culture as a multi layer construct exists at all levels from the global to the individual and that at each level change first occurs at the

most external layer of behaviour, and then, when shared by individuals who belong to the same cultural context, it becomes a shared value that characterizes the aggregated unit (group, organizations, or nations). In the model, the most macro-level is that of a global culture being created by global networks and global institutions that cross national and cultural borders.

Figure-1: The dynamic of top-downbottom-up processes across levels of culture.

Given the dominance of Western MNCs, the values that dominate the global context are often based on a free market economy, democracy, acceptance and tolerance of diversity, respect of freedom of choice, individual rights, and openness to change. Below the global level are nested organizations and networks at the national level with their local cultures varying from one nation or network to another. Further down are local organizations, and although all of them share some common values of their national culture, they vary in their local organizational cultures, which are also shaped by the type of industry that they represent, the type of ownership, the values of the founders, etc. Within each organization are sub-units and groups that share the common national and organizational culture, but that differ from each other in their unit culture on the basis of the differences in their functions (e.g., R&D vs manufacturing), their leaders values, and the professional and educational level of their members. At the bottom of this structure are individuals who through the process of socialization acquire the cultural values transmitted to them from higher levels of culture. Individuals who belong to the same group share the same values that differentiate them from other groups and create a group level culture through a bottom-up process of aggregation of shared values. For example, employees of an R&D unit are selected into the unit because of their creative cognitive style and professional expertise. Their leader also

typically facilitates the display of these personal characteristics because they are crucial for developing innovative products. Thus, all members of this unit share similar core values, which differentiate them from other organizational units. Groups that share similar values create the organizational culture through a process of aggregation, and local organizations that share similar values create the national culture that is different from other national cultures. Both top-down and bottom-up processes reflect the dynamic nature of culture, and explain how culture at different levels is being shaped and reshaped by changes that occur at other levels, either above it through top-down processes or below it through bottom-up processes. Similarly, changes at each level affect lower levels through a topdown process, and upper levels through a bottom-up process of aggregation. Global organizations and networks are being formed by having local-level organizations join the global arena. That means that there is a continuous reciprocal process of shaping and reshaping organizations at both levels. For example, multinational companies that operate in the global market develop common rules and cultural values that enable them to create a synergy between the various regions, and different parts of the multinational company. These global rules and values filter down to the local organizations that constitute the global company, and, over time, they shape the local organizations. Reciprocally, having local organizations join a global company may introduce changes into the global company because of its need to function effectively across different cultural boarders.


ASSIGNMENT-2 Q.1 Ans. Write a short note on Bill of Lading. A Bill of Lading is a type of document that is used to acknowledge the receipt of a shipment of goods and is an essential document in transporting goods overland to the exporters international carrier. A through Bill of Lading involves the use of at least two different modes of transport from road, rail, air and sea. The term derives from the noun "bill", a schedule of costs for services supplied or to be supplied, and from the verb "to lade" which means to load a cargo onto a ship or other form of transport. In addition to acknowledging the receipt of goods, a Bill of Lading indicates the particular vessel on which the goods have been placed, their intended destination, and the terms for transporting the shipment to its final destination. Inland, ocean, through, and airway bill are the names given to bills of lading. Q.2 In terms of product design, most products fall in between the spectrum of two extremes. What are these two extremes? Describe on these extremes in brief. Most products decisions lie between two extremes. One of the extreme is to sell globally standardized products and the other extreme is to sell adapted products. Changes in design are largely dictated by whether they would improve the prospects of greater sales, and this, over the accompanying costs. Changes in design are also subject to cultural pressures. The more culture-bound the product is, for example food, the more adaptation is necessary. Most products fall in between the spectrum of "standardization" to "adaptation" extremes. The application the product is put to also affect the design. In the UK, railway engines were designed from the outset to be sophisticated because of the degree of competition, but in the US this was not the case. In order to burn the abundant wood and move the prairie debris, large smoke stacks and cowcatchers were necessary. In agricultural implements a mechanized cultivator may be a convenience item in a UK garden, but in India and Africa it may be essential equipment. As stated earlier "perceptions" of the products benefits may also dictate the design. A refrigerator in Africa is a very necessary and functional item, kept in the kitchen or the bar. In Mexico, the same item is a status symbol and, therefore, kept in the living room. Factors encouraging standardization are:


a. economies of scale in production and marketing b. consumer mobility the more consumers travel the more is the demand c. technology

d. image, for example "Japanese", "made in".The latter can be a factor both to aid or to hinder global marketing development. Nagashima1 (1977) found the "made in USA" image has lost ground to the "made in Japan" image. In some cases "foreign made" gives advantage over domestic products. In Zimbabwe one sees many advertisements for "imported", which gives the product, advertised a perceived advantage over domestic products. Often a price premium is charged to reinforce the "imported means quality" image. If the foreign source is negative in effect, attempts are made to disguise or hide the fact through, say, packaging or labelling. Mexicans are loathing taking products from Brazil. By putting a "made in elsewhere" label on the product this can be overcome, provided the products are manufactured elsewhere even though its company maybe Brazilian. Factors encouraging adaptation are:

a. Differing usage conditions These may be due to climate, skills, level of literacy,culture or physical conditions. Maize, for example, would never sell in Europe rolled and milled as in Africa. It is only eaten whole, on or off the cob. In Zimbabwe, kapenta fish can be used as a relish, but wilt always be eaten as a "starter" to a meal in the developed countries.

b. General market factors incomes, tastes etc. Canned asparagus may be veryaffordable in the developed world, but may not sell well in the developing world.

c. Government taxation, import quotas, non tariff barriers, labelling, healthrequirements. Non tariff barriers are an attempt, despite their supposed impartiality, at restricting or eliminating competition. A good example of this is the Florida tomato growers, cited earlier, who successfully got the US Department of Agriculture to issue regulations establishing a minimum size of tomatoes marketed in the United States. The effect of this was to eliminate the Mexican tomato industry which grew a tomato that fell under the minimum size specified. Some non-tariff barriers may be legitimate attempts to protect the consumer, for example the ever stricter restrictions on horticultural produce insecticides and pesticides use may cause African growers a headache, but they are deemed to be for the public good.

d. History. Sometimes, as a result of colonialism, production facilities have beenestablished overseas. Eastern and Southern Africa is littered with examples. In Kenya, the tea industry is a colonial legacy, as are the sugar industry of Zimbabwe and the coffee industry of Malawi. These facilities have long been adapted to local conditions.

e. Financial considerations. In order to maximize sales or profits the organization mayhave no choice but to adapt its products to local conditions.

f. Pressure. Sometimes, as in the case of the EU, suppliers are forced to adapt to therules and regulations imposed on them if they wish to enter into the market. Q.3 A Europe based MNC wants to introduce its fruit juice drink in India. What product strategy of international marketing do you think will be suitable for its product? Ans. There are five major product strategies in international marketing.

a. Product communications extension-This strategy is very low cost a