3. Comment on the following: a) An international business firm should not monitor the foreign country's trade, monetary and balance of payments account. b) A major problem with laws in different countries is that the legal systems of the world are harmonized. c) Globalization has not influenced the Indian economy. d) FDI does not help in accelerating the rate of economic growth of the host country.

 

TUTOR MARKED ASSIGNMENT

COURSE CODE : IBO-01 

COURSE TITLE : International Business Environment 

ASSIGNMENT CODE : IBO-01/TMA/2024-2025 

COVERAGE : ALL BLOCKS

3. Comment on the following: 

a) An international business firm should not monitor the foreign country's trade, monetary and balance of payments account. 

b) A major problem with laws in different countries is that the legal systems of the world are harmonized. 

c) Globalization has not influenced the Indian economy. 

d) FDI does not help in accelerating the rate of economic growth of the host country.

Answer a)

This statement, "An international business firm should not monitor the foreign country's trade, monetary, and balance of payments account," fails to consider elements that make the presence significant in a global marketplace. An international firm needs to know the economic indicators about these economies. Why?

- Market Analysis and Decision-Making: Trade balances represent the health of importing/exporting in a country. A deficit could mean that importation must be restricted or policies changed, which may influence a firm's business. It can help in the making of informed strategic decisions on investments and market entry.

- Currency Fluctuations: The capital account also detailed inflows and outflows is linked to currency stability. Fluctuations in the currency can affect profitability for an internationally operating business. The trends, thus learned, better help in managing currency-related risks.

- Supply Chain and Pricing: Trade deficits lead to inflation or deflation. By monitoring these accounts, firms can be better aware of the costs of supply chains, estimate the degree of risk, and hence change their pricing strategies.

- Investment Risks and Opportunities: The balance of payments is an index of a country's economic strength. Permanent trading deficits often lead to foreign exchange restrictions, or higher tariffs, and affect business operations. It helps businesses monitor the risks associated with them and make the right opportunities for growth.

- Competitive Positioning: Economic indicators in foreign markets reflect how firms monitor competitors' strengths and weaknesses. Countries with strong trade and monetary accounts usually attract more competitors, thereby affecting competitive strategy.

With such characteristics, one may draw a conclusion that it is very essential to monitor these economic indicators so that a firm can strategize and plan long term while managing their risk and improving their position in the international market. Otherwise, poor decisions may lead to financial risks.

Answer b) 

Here's why different laws in different countries may be a problem:

- Different Rules, Different Places: Imagine if every country was like a different school with different rules. If you travel, you'd have to learn new rules each time. That's what happens with laws—each country has its own, and they don't always match up.

For someone traveling or on the move across countries, this situation often gets confusing. One gets confused because, for example, while things are allowed in one country, they could be a crime in another. Its like having a new instruction set every now and then.

The hard thing for businesses: Companies that operate in many countries have it tough. They have to follow different rules everywhere. It's like playing the sport where the rules keep on changing from one city to another. It is very hard to keep up with!

- Problems for Justice: Issues that cross international borders can become very confusing for two different countries over whose rules and laws to apply. For example, if a person commits an offense online, countries might not agree on the extent of punishment or even that it is a crime.

- Why Can't We All Agree? Some folks feel that it would be less confusing to have similar laws across borders. That's called "harmonization." Too bad; each country has its own thoughts, values, and culture.

So what is the end result of unharmonized legal systems? A rather confusing world for travelers, companies, and even judges!

Answer c )

- What is Globalization?

  Globalization is the joining of countries around the globe to trade, share, and work together, such as making friends in different classes.

- How it Influenced India:

  Globalization has benefited India's economy in every possible way, from business to culture.

- Increased Trade:

India started trading with others. It started selling spices, clothes, and software to other countries. It also bought technologies, cars, and toys from them.

 

-New Jobs: 

 Many companies making technologies and running call centers started setting up their centers in India. This gave people employment.

 

-New Ideas and Fashion: 

 People started using mobile phones. They started buying goods from the rest of the world. They started watching films from other countries. This introduced new ideas and fashions.

Contemporary Technology: Globalization also brought modern technology such as computers and smartphones to the country.

Challenges : Local businesses face stiff competitions, but it has motivated them to become better. 

Why It's Important?: Globalization has helped the country to become more modern connected to the world and diverse to learn cool new things in school from friends in another classes!

Answer d )

There are quite a few reasons why a person might think foreign direct investment may not always be something that will boost the host country's economy. One very simple kid-friendly definition in bullet form follows.

- What is FDI? 

  It is when a person from another country invests to start up a business or build a factory or to open up a store somewhere else in the world.

- FDI Doesn't Always Help Growth:

People believe that FDI does not always encourage local economies to grow faster. Here is why:

- Profits Tend to Go Home:

 The profits made in foreign countries tend to go back home, meaning money made in the host country is not necessarily spent locally to help grow it.

- Local Businesses Have Less Say:

The big foreign companies compete with the local firms making it hard for growth and success in the local firms.

- Few Jobs Generated:

 In most cases, FDI creates very few jobs. This is because the FDI may bring in labor from the country of the firm's origin. This creates limited new employment opportunities for locals.

Some foreign companies will not share the knowledge, skills, or technology with the available labor force in the host country. This slows up the innovation and learning processes in a host country.

Economic Dependence

Overdependence on FDI may not develop its indigenous industries, thereby becoming totally dependent on foreign firms, an unhealthy state of affairs if the latter decides to withdraw.

While increased FDI brings with it the promise of more businesses and better infrastructure, there is no guarantee to its corresponding impact of faster economic growth for a country as a whole.