Q 1.

Comment on any 2 of the following:

2. Difference in Environmental Factors make domestic business firm from the

international Fund.
ANSWER:
Globalization of trade and the exchange of products and services on worldwide
marketplaces are referred to as international business. An ecosystem can be thought of as
the context in which a multinational corporation runs its daily business. Internationalized
business environments have a huge consumer base and are crucial for the growth of a
country's economy.

Running a firm involves a variety of issues, including cultural, regional, political, economic,
social, and geographic considerations. Before engaging in any foreign business, individuals
at all organisational levels are required to become familiar with state regulations, exchange
risks, and taxation restrictions. Many businesses with worldwide beginnings also have a
strong internet presence because it makes them more approachable to customers.

An ecosystem in which a business exchanges goods and services on a worldwide scale is

referred to as the international business environment. It involves many different factors,
including cultural differences, political problems, taxation, and legal concerns, and it is
crucial in determining the nation's economy. The best thing about doing business
internationally is the improved contact with customers throughout the world, which helps
brands grow, interact, and make more money.
Economic Environments in International Business

The development and reputation of multinational enterprises are influenced by the

economic activities that take place in a country. The most important factors that have an
impact on how businesses operate on a daily basis may vary from one country to the next,
but they include advancements in infrastructure, healthcare, education, and technology.
Depending on their level of economic development, countries can be categorised as
industrialised, less developed, or third-world countries that are experiencing economic
hardship. A company must evaluate the economic climate of the area in which it operates
and base its expansion thereupon. International enterprises pay particular attention to the
following factors:

 GDP levels and per-person earnings

 taxes, both direct and indirect
 Locations of suppliers, expenses of production, and raw material sourcing
 operational difficulties and the available infrastructure.
Other types of international business environments are:

1. Political Environment: Domestic business firms operate in a stable political environment

that is usually consistent with the laws and regulations of the domestic government.
International firms, however, face a much more unpredictable political environment with
varying regulations and laws in different countries.

2. Economic Environment: Domestic business firms operate in an environment with stable

economic conditions. International firms, however, must navigate different economic
environments with varying levels of economic growth, inflation, and currency exchange
rates.

3. Cultural Environment: Domestic business firms tend to operate within a familiar cultural
environment that is generally consistent with their own values and beliefs. International
firms, however, must be sensitive to different cultural norms and expectations in different
countries.

4. Technological Environment: Domestic business firms typically have access to the same
technological resources and capabilities as their competitors. International firms, however,
must be aware of varying technological capabilities and resources in different countries.

5. Legal Environment: Domestic business firms are subject to the laws and regulations of
the domestic government. International firms, however, must contend with different legal
systems in different countries.

6. Scale of operations: Domestic business firms typically operate on a much smaller scale
than international firms, which often have multiple branches and offices in different
countries.

7. Regulatory environment: Domestic business firms are generally subject to the laws and
regulations of their home nation, while international firms must also comply with the laws
and regulations of the countries in which they do business.

8. Customs and culture: Domestic business firms usually operate within a single cultural
framework, while international firms must be able to adapt their operations to different
cultural contexts.
9. Access to resources: Domestic business firms may have limited access to international
resources, such as capital markets, while international firms often have access to a wider
range of resources.

10. Risk: Domestic business firms generally face fewer risks than international firms, which
must contend with a host of political, economic, and cultural risks.

3. Cross border merger and acquisition have accelerated the pace of globalization.
ANSWER:
Recent years have seen a sharp increase in the number of cross-border mergers and
acquisitions (M&As), which has accelerated industry globalisation and altered the global
industrial structure. Foreign direct investment in the 1990s tended to prioritise mergers and
acquisitions over brand-new businesses.
Cross-border mergers and acquisitions have grown significantly over time, mostly as a result
of the desire to avoid tariffs and nontariff barriers brought on by arms-length international
trade and taxes, to obtain new financing options, to access technology, and to spread out
the cost of R&D across a larger base. A number of measures have been put in place to
restrain this rise, such as safeguarding important sectors, limiting control of interest rates,
and limiting the remittance of profits and dividends. The direction and size of cross-border
mergers and acquisitions (M&A) are influenced by their financial and economic (macro and
micro) foundations.
A business must have a clear vision and strategy for why it wants to grow internationally.
Finding the ideal M&A target in a foreign market that fits the profile of the buying firm and
can be effectively integrated would be simpler with the requisite due diligence and analysis.
Companies frequently enlist independent consultants to support M&A efforts at this stage—
and even earlier—since these advisors aren't reliant on the deal's success and can offer their
knowledge at any point in the process.
Cross Border Acquisition:
Cross-border acquisition refers to the purchase of a firm by one corporation from another
company headquartered in a different nation. Although there are certain difficulties for both
the acquirer and the acquired company, cross-border M&A can assist businesses in
expanding their operations globally without having to start from scratch.
Concept of Cross-Border Merger and Acquisition:
Cross border mergers and acquisitions (M&A) involve the acquisition of a business in
another country by a company based in a different country. The process of cross border
M&A allows companies to expand their operations and reach a new customer base, access
new technologies, and increase their competitive advantage. Cross border M&A also allows
companies to diversify their product lines and services, gain access to new markets, and
access to new sources of funding. By combining the resources of two companies, cross
border M&A can also create economies of scale and increase profitability. In addition to
expanding operations, M&A can also bring about restructuring and efficiency gains.

Cross border M&A has accelerated the pace of globalization. By allowing companies to
access new markets, technologies, and resources, cross border M&A has allowed companies
to expand their operations and become more competitive. Cross border M&A has also
allowed companies to access new financing options and increase their ability to innovate.
Furthermore, cross border M&A has allowed companies to diversify their product lines and
expand their customer base. By combining the resources of two companies, cross border
M&A has allowed companies to achieve greater economies of scale, increase profitability,
and gain a competitive advantage.

Factors to be considered:
Foreign companies must conduct due diligence when considering an M&A agreement with a
domestic company because many domestic enterprises in many emerging areas exaggerate
their capabilities in order to attract M&A. This is the rationale behind why many overseas
businesses seek the assistance of management consultancies and investment banks prior to
entering an M&A transaction. In addition, the foreign companies take into account the risk
elements related to cross-border M&A, which include a mix of political risk, economic risk,
social risk, and general risk related to black swan events. By assembling a risk matrix from
each of these factors, the foreign companies assess possible M&A partners and nations.
Depending on whether the score is appropriate or not, they decide on the M&A deal.

Some recent examples of cross border M&A:

The Jet-Etihad agreement and the Air Asia deal in the Indian aviation industry are two recent
examples of cross-border M&A deals that demonstrate how they should be assessed. For
instance, there is support for and opposition to the Air Asia and Jet-Etihad agreements.
Other international businesses are now hesitant to enter India as a result of this. However, if
we look at cross-border M&A agreements in the opposite direction, from developing to
emerging markets, the Chinese oil company had to face with strong opposition from the US
Senate due to worries about security and potential problems with ownership patterns.
Unilever's recent acquisition of all of its global subsidiaries is undoubtedly an example of a
successful purchase.
Q3. Distinguish between:
1. Absolute and Comparative Advantages
ANSWER:

Absolute advantage and comparative advantage are two important concepts in economics
and international trade. They have a significant impact on how and why countries and
companies allocate resources to the creation of specific commodities and services. Absolute
advantage refers to a situation in which one party can produce a good more quickly and
profitably than another nation or rival company. Contrarily, comparative advantage
considers the opportunity costs involved in selecting to produce a variety of goods with
constrained resources.

Absolute advantage Comparative advantage

1. The ability of a country to produce 1. The ability of a country to produce
more goods with the same amount good better than another country
of resources than another country. with the same amount of resources.
2. Trade id not mutually beneficial. 2. Trade is mutually beneficial.
3. Benefits the country with absolute 3. Benefits of both the countries.
advantage.
4. The absolute cost of producing 4. The opportunity cost of producing
goods impacts if the country has an goods impact the Country’s
absolute advantage. comparative advantages.
5. It is not mutual and beneficial. 5. It is mutual and beneficial

Absolute Advantage:
The idea of absolute advantage is based on the distinction between the various capacities of
businesses and nations to create commodities efficiently. As a result, absolute advantage
considers how well a particular product is produced. Additionally, it considers how to
manufacture goods and services for less money than the competitors by using fewer inputs
during the production process.
This study aids nations in preventing the production of goods and services that would
generate little to no demand and ultimately result in losses. The kinds of goods a nation
choose to manufacture can be significantly influenced by its absolute advantage (or
disadvantage) in a given industry.
Some of the factors that can lead an entity to absolute advantage include:
  Lower labor costs
 Access to an abundant supply of (natural) resources
 A larger pool of available capital

Comparative advantage:

Comparative advantage looks at production as a whole. In this instance, the perspective

comes from the fact that a nation or company has the capacity to manufacture a range of
goods and services as opposed to concentrating on a single one.

The lost gains that could have been attained by selecting an alternative that was also an
option are equal to the opportunity cost of the supplied option. In general, analysts would
compute the opportunity cost of selecting one alternative over the other when the profit
from two items is recognised.

2. Tariff and Non- tariff Barriers:

ANSWER:

Tariff Barriers: Tariff barriers are taxes or duties imposed by a government on goods
imported into or exported from a country. These taxes are designed to make imported
goods more expensive than domestically produced goods, thus protecting domestic
industries from foreign competition. Tariff barriers can be used to protect domestic
industries from foreign competition, to raise revenue, or to protect certain industries from
being undercut by foreign producers.

Non-Tariff Barriers: Non-tariff barriers are any measures, other than tariffs, that a
government uses to restrict trade. These measures typically target specific products and
include quotas, licensing requirements, import bans, and other regulations. Non-tariff
barriers are intended to protect domestic industries from foreign competition and to ensure
that domestic products meet safety and quality standards. They can also be used to protect
certain industries from being undercut by foreign producers.

Key Differences Between Tariff and Non-Tariff Barriers:

1. Tariff barriers refer to the tax or charge imposed by the government of the nation on
the import of goods from a foreign nation in order to somewhat limit imports. Non-
tariff trade barriers, on the other hand, are laws and policies that a nation enacts in
order to safeguard and encourage its own industry.
2. Non-tariff barriers are more complex to comprehend and levy than tariff barriers,
which are also easier to levy.
3. Government revenue increases as a result of the implementation of tariff barriers.
Non-tariff obstacles, on the other hand, do not increase tax revenue for the
government.
4. The price of the imported good rises due to government-imposed tariffs. Contrarily,
non-tariff barriers like quantity limitations have an impact on both the volume and
occasionally the price of imported commodities.
5. Due to the government's imposition of import duties, monopolistic groupings can be
managed in the case of tariff barriers. In contrast, monopolistic organisations impose
high prices through low output when non-tariff restrictions are implemented.
6. With tariff barriers the government receives huge revenue, whereas with non tariff
barriers the government receives no revenue.s