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MB0053-International Business Management

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Winter-2015
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Master of Business Administration - MBA Semester 4
MB0053-International Business Management
(Book ID: B1724)
Assignment (60 Marks)
Note: Answer all questions must be written within 300 to 400 words each. Each Question carries 10
marks 6 X 10=60.
Q1. Why is Comparative Cost Theory considered as an improvement upon Absolute Cost Advantage
Theory? Explain Porter’s Diamond Model.
Comparative Cost Theory as an improvement on Absolute Cost Advantage Theory
Porter’s Diamond Model
Answer. Comparative Costs theory:
The principle of comparative costs is based on the differences in production costs of similar commodities
in different countries. Production costs differ in countries because of geographical division of labour and
specialization in production. Due to differences in climate, natural resources, geographical situation and
efficiency of labour, a country can produce one commodity at a lower cost than the other.
In this way, each country specializes in the production of that commodity in which its comparative cost of
production is the least. Therefore, when a country enters into trade with some other country, it will export
those commodities in which its comparative production costs are less, and will import those commodities
Q2. Explain Hofstede’s Cultural dimension.
Answer. Hofstede’s cultural dimensions
Professor Hofstede carried out a detailed study of how values in the workplace are influenced by culture.
He worked as a psychologist in IBM from 1967 to 1973. At that time he gathered and analyzed data from
many people from several countries. Professor Hofstede established a model using the results of the study
which identifies four dimensions to differentiate cultures. Later, a fifth dimension called ‘long-term
outlook’ was added.
Q3. “An economic union comprises of a common market and a custom union.” Explain.
Answer. Customs Union
When two or more countries agree to remove (essentially) all restrictions on mutual trade and set up a
common system of tariffs and import quotas vis-a-vis non-members, the result is referred to as a CU. The
adoption of a common external tariff (CET) and joint quotas necessitates closer co-operation with respect
to the sharing of customs revenues collected on non-member imports.
Rules of origin are no longer necessary: when a common external tariff exists, imports into the CU–area
face the same tariff in each CU-member country; hence there is no incentive for transshipment of imports
between members. The CET effectively creates “destination-neutrality” for imports into the CU.
Q4. Explain the components of International Financial Management.
Answer. An International financial system refers to a system which enables the transfer of money
between investors and borrowers from two different nations. A financial system could be defined at an
international, regional or organization level. The term “system” in “Financial System” indicates a group of
complex and closely linked institutions, agents, procedures, markets, transactions, claims and liabilities
within an economy.
Q5. What are the differences between International Accounting Standards and Domestic Accounting
Standards?
Answer. Accounting Standards are the key mandatory and regulatory mechanisms for training on
financial reports and conducting successful audit for the same. It is used almost in all countries
throughout the world. They are concerned with the structure of measurement, rules for preparation
and arrangement of financial statements. They emerge as a set of authoritative statements related to
exact type of transactions, events, and other costs that are recognized and reported in the financial
statements. They are designed to supply practical information to diverse users of the financial statements
such as shareholders, creditors, lenders, organisation, investors, suppliers, competitors, researchers,
regulatory bodies. These statements are designed and approved to develop and benchmark the quality of
Q6. Explain the key component of International Strategic management.
Answer. Key Components:Goal-Setting
The purpose of goal-setting is to clarify the vision for your business. This stage consists of identifying three
key facets: First, define both short- and long-term objectives. Second, identify the process of how to
accomplish your objective. Finally, customize the process for your staff; give each person a task with which
he can succeed. Keep in mind during this process your goals to be detailed, realistic and match the values
of your vision. Typically, the final step in this stage is to write a mission statement that succinctly
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