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INTERNATIONAL BUSINESS

APRIL 2021 EXAMINATION

 

Ques 1. It would be interesting to foray into the history of globalization. John Maynard Keynes referred to the period (1871-1914) as the golden age of globalization when countries based on gold standard and fixed exchange rates traded in a world when transportation was cheap and travel passport free. After the two world wars and Great Depression of 1930s, the major powers of the world brought in sanity to the financial system by constituting IMF for exchange rate stability and World Bank for providing medium term loan to war ravaged Europe.

Discuss how the systems of exchange rate determination have evolved till now and their role for facilitating International trade for MNCs. (10 Marks)

Ans 1.

Introduction 

In the fast-growing economy, business organizations and multinational corporations can succeed due to the monetary system's improvement and development. The International Monetary System controls the economic and the financial environment, incorporating investors, multinational corporations, banks, and financial institutions. The organizations’ primary purpose is to formulate and plan a formal

 

Ques 2. Use the two-country, two-sector Ricardo model of International trade theory and explain the concept of comparative advantage using the table below:

Labour units required to produce one unit of output
	Food	Chemicals	Total Available Labour
EU	2	8	200
Kenya	4	24	120

Ans 2.

Introduction

The Ricardian model is one of the easiest models. Still, introducing the comparative advantage precept gives a number of the maximum compelling motives assisting worldwide trade. By utilizing this model, much less efficient international locations can gain from unfastened exchange with their extra efficient neighbors. Low-salary international locations will not allow their manufacturing value gain in lots of circumstances. On the other hand, the Ricardian model is regarded as one of the models which lack concepts and one of the compelling models for trading internationally. Several

 

Ques 3. Read the passage and answer the questions given below it:

Foxconn will set up a new subsidiary called FuKang Technology Co Ltd as a part of their $270 million investment to diversify production beyond China. Apple is planning to diversify its location of facilities to reduce the impact of Sino-US trade war. Hence Foxconn that manufactures iPads and other Apple devices is planning to shift its assembling facilities from China to Vietnam at Apple Inc. request, said a person close to the development. According to a report by Reuters, Foxconn is building assembling facilities for Apple tabs and MacBooks at a plant in Bac Giang province, northeast of Vietnam. The plant will come online in the first half of 2021. The development comes as over the outgoing Donald Trump administration pressing US firms to shift production facilities from China to other Asian countries. The Trump administration restricted the supply of electronic components produced with U.S technology to Chinese firms that it finds to be a risk to national security and imposed higher import tariff on made-in-China electronics.

Hence Taiwanese manufacturer who does not want to be a pawn to the trade war wants to move their production facilities from China to Mexico, Vietnam and India. Shifting production to Vietnam will make the company’s first time setting up a plant outside China. The manufacturing giant is also planning to invest $1 billion to expand its iPhone assembly line in India as ‘strongly requested’ by Apple Inc, the unidentified source further said.

Foxconn, formally Hon Hai Precision Industry Co Ltd, the Taiwanese multinational electronics contract manufacturer recently announced it will set up a new subsidiary called FuKang Technology Co Ltd as a part of their $270 million investment to diversify production beyond China. Television sets for clients including Japan’s Sony Corp will also me manufactured at its Vietnam plant with production slated for early 2021. Foxconn Chairman Liu Young-way had earlier told investors in August how he aims at providing two sets of supply chains will Sino-U. S trade wars impacting their business. The company’s competitors like Pegatron Corp also an assembler for Apple Inc. are planning to diversify its facilities by building plants in Mexico.

a. In the context of the passage, discuss the internationalization strategy of Foxconn. What are the main determinants of this strategy?

Ans 3a.

Introduction 

Business organizations and multinational corporations prefer to globalize and internationalize their business organizations to expand their operations, exploit the host country's resources, and bring more and more return to the parent company. However, this happens due to the increasing globalization and the political satire of an economy. And the relationship between the most significant world countries. Similarly, in this portion, the researcher has been talking about Foxconn Technology co. Ltd has been

 

3b. Discuss political risks of business environments that impact the host country attractiveness for globalizing firms.

Ans 3b.

Despite the globalization of business, the organization should maintain its local rules and regulations where they operate the business. Currently, the government is directly implementing business rules and regulation in the host country based on political and legal philosophies. The main regulating factor is the internet; the

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