BUS 312: INTERNATIONAL BUSINESS
FINAL EXAMINATION Duration: 2 hours
PART A: MULTIPLE CHOICE QUESTIONS (20 marks)
Part A of the test consists of 10 multiple choice questions that carry 2 marks each and
which you must answer all.
1.
Which of the following is NOT an advantage of Foreign Direct Investment?
A.
B.
C.
D.
E.
2.
Which of the following is the best internationalisation strategy in terms of low risk?
A.
B.
C.
D.
E.
3.
Economic Efficiency worldwide
Tax Revenues for the host country
New technology brought to the country
Changes in culture observed
None of the above
Joint Venture
Foreign Direct Investment
Licensing
Strategic Alliance
None of the above
Which of the following is the best internationalisation strategy in terms of potential higher
returns?
A.
B.
C.
D.
E.
Licensing
Franchising
Joint Venture
Foreign Direct Investment
None of the above
Assume that we have two countries, Sri Lanka and China. As the Table shows, both countries can
produce Tea and Rice and their respective productivity is measured in unit labour requirements
i.e. number of hours of labour required to produce a kilo of rice or a pack of tea leaves. Use the
table below to answer question 4.
RICE
TEA
LABOUR HOURS
SRI LANKA
3
5
100
CHINA
15
6
100
4.
According to the comparative advantage theory what should China produce?
A.
B.
C.
D.
E.
5.
Leontief’s paradox implies that:
A.
B.
C.
D.
E.
6.
Hecksher-Ohlin theory of factors endowments is invalid
Absolute advantage theory is wrong
Comparative advantage theory does not comply with existing data
USA is just the exception to all the other countries
None of the above
The country-similarity theory of Steffan Linder says that:
A.
B.
C.
D.
E.
7.
Rice
Tea
Both rice and tea
Nothing
None of the above.
International trade theories explain well all aspects of industrial trade
Absolute advantage theory is better than the comparative advantage theory
International trade theories explain only intra-industry trade
International trade theories explain only inter-industry trade
None of the above
What does Porter’s Diamond theory suggest as the determinants of whether a firm will be
successful in international trade?
A. The interaction of absolute and comparative advantage of a firm
B. The interaction of the country and firm factor conditions, rivalry, demand and related
industries
C. Only the adequacy of capital and labour in the country and the firm
D. The adjustment to the cultural differences
E. None of the above
8.
What does the Balance of Payments measure?
A. Business transactions within a country for a certain period of time
B. The flow of economic transactions between the residents of a country and the residents of
the rest of the world for a certain period of time
C. Only goods and services imports and exports of a country within a year
D. Investments and transfer payments between the business firms of a country and the
business firms of the rest of the world for a certain period of time
E. None of the above
9.
What is a “Swap”?
A. exchange of currencies in the spot market accompanied by an agreement to reverse the
transaction in the future
B. exchange of currencies in the spot market with no right to reverse the transaction anytime
in the future
C. exchange of currencies in the spot market at a fixed exchange rate
D. exchange of currencies in the forward market at a privileged exchange rate
E. None of the above
10.
When dealing with foreign exchange transactions what is the potential usefulness of a
“Forward” for a multinational manager?
A.
B.
C.
D.
E.
Minimises profit prospects and helps in planning
Minimises risk and facilitates planning
Helps making a foreign exchange profit from international transactions in the future
Appears as the best solution when the manager has to re-convert currency in the future
None of the above
PART B: TRUE-FALSE STATEMENTS (20 marks)
Part B includes 10 statements which you must state whether they are TRUE or FALSE. Each
correct answer gives 2 marks.
1. Exports, Imports and Foreign Direct Investment are types of international business
activities.
2. The main difference between licensing and franchising is that licensing does not
require signing a contract.
3. Japan had the greater growth in internationalisation activities in the last 40 years as a
source but not as a destination.
4. Porter’s Diamond theory suggests that only the adequacy of capital and labour in the
country and the firm are the determinants of whether a firm will be successful in
international trade.
5. When dealing with foreign exchange transactions the potential usefulness of a
“Forward” for a multinational manager is that it minimises risk and facilitates planning.
6. A SWOT analysis identifies strengths, weaknesses, opportunities and threats for a
firm.
7. A PESTEL analysis is especially useful for examining the internal environment of a
company.
8. An international manager’s training programme should not incorporate anything about
culture of the host country.
9. The harmonisation of international accounting standards has resulted in the
International Financial Reporting Standards.
10. The international marketing mix includes product, price, promotion and distribution.
PART C: SMALL ESSAY QUESTIONS (30 marks)
Part C includes 3 small essay questions of which you must answer ONLY 2. Each correct
answer gives 15 marks.
1. Based on Porter’s Diamond theory explain what factors are critical for the
internationalisation of a firm in other countries.
2. State two advantages and two disadvantages of Foreign Direct Investment as a means
of internationalisation.
3. What are the main concerns that have to do with culture when doing international
business? State at least two.
PART D: CASE STUDY (30 marks)
Part D includes 3 case studies from which you have to pick ONLY 1. Each case study
contains 3 questions that carry 10 marks each.
Question 1
American Idol, a reality singing competition created by Simon Fuller as a spin-off of British Pop Idol
has entered its tenth season. As of January 2011, it has been able to maintain its position as the most
watched show in USA for six consecutive years. The audition for the show on the other hand is known
to draw more than 10,000 contestants in each city.
a. Explain why franchising may be an appropriate strategy for American Idol. (10 marks)
b. Assume that there is another similar singing competition of Chinese origin. Which singing
competition would have more chances to make success in Cyprus? Base your answer on
political and cultural factors. (10 marks)
c. Assume that the Chinese singing competition is internationalised in Cyprus by franchising.
Do you think that the judges should be Chinese or Cypriot? Justify your answer. (10
marks)
Question 2
Mott MacDonald is a large global management, engineering and development consultancy. A
consultancy contains experts who provide advisory services in a variety of fields. The Mott
MacDonald Group was formed in 1989 when two consultancy businesses merged. Since then, the
business has grown both organically by recruiting more staff in different fields and also by acquisition,
that is, taking over existing businesses in markets important to Mott MacDonald's development
strategy. For example, in 2007 Mott MacDonald bought an educational consultancy in Romania, an
environmental firm in the Netherlands and a power engineering company in the USA to help
strengthen its core market sectors in these countries. Today Mott MacDonald”s business spans 120
countries and employs more than 13,000 staff. Its experts work on thousands of projects across the
world in many areas. These include transport, energy, buildings, water, the environment, health,
education and communications. Every project requires a different set of skills from Mott MacDonald”s
experts. Its projects address the challenges of environmental issues, such as flood protection or
management of waste. It plans, manages and delivers projects to help its customers find more
sustainable solutions.
Mott MacDonald's customers are in both the public sector and the private sector. In the public sector,
it works with organisations to provide services for central and local government. In the private sector,
Mott MacDonald provides consultancy for private businesses. For example, in China the company is
project managing the building of what will be the world”s largest observation wheel much bigger than
the London Eye. Mott MacDonald has also been involved in over half the new wind farms in the UK
developed by privately-owned energy companies. These include one of the world’s largest offshore
wind farms off the coast of south-east England. At any time Mott MacDonald works on thousands of
projects around the world. These range from transport systems in Taiwan, healthcare initiatives in
Africa or education planning in the USA. Mott MacDonald consultants advise on many aspects,
including planning and design, quantity surveying, procurement advice and project management.
a. When Mott MacDonald bought the educational consultancy in Romania the environmental
firm in the Netherlands and the power engineering company in the USA what type of
internationalisation strategy was applied?
(10 marks)
b. Assume that the origin of Mott MacDonald is the UK. For the educational consultancy in
Romania Mott MacDonald hired a British manager and sent him to Romania. What could be the
reasons for hiring a British manager instead of a Romanian? (10 marks)
c. In designing a training programme for this manager what issues should Mott MacDonald
take into account? (10 marks)
Question 3
You are a manager running a company that intends to extend its operations to other countries. You
can choose any existing company or invent your own company and select any country of the world to
make a Foreign Direct Investment (FDI).
Prepare a) a SWOT analysis of the company, b) a PEST analysis for the country and c) a brief
marketing mix for the company to follow in the country of the planned FDI.