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2007 Mahatma Gandhi University M.B.A Business Administration Global Business Environment Question paper

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2007 Mahatma Gandhi University M.B.A Business Administration Global Business Environment Question paper

Third Semester

Faculty of Management Sciences
Paper I – Global Business Environment

(Common for Branch I and II)

Time : Three Hours Maximum { 2004 admissions onwards : 60 Marks
{ 2003 admissions : 75 Marks

Section A

Answer any six questions.

Write short notes on :

1. Disequilibrium in Balance of Payments.
2. Most favoured Nation’s clause.
3. List out five trade barriers.
4. GDRS.
5. Multilateral Trade Agreements.
6. Export Assistances.
7. Objectives of IBRD.
8. Gains from International trade.
9. International Banks and its uses.
10. Effect of TARIFF.
(6 X 2½ = 15 marks)
(6 X 3 = 18 marks)

Section B

Answer any three questions.

11. Examine the implications of convertibility of rupee.
12. Discuss the merits and non-merits of fixed exchange rate.

13. Outline the role of multinational Corporations in creating International standard of quality of products produced in India.
14. How does exchange rates are determined under floating rate system?

15. What role do the IMF play in providing International Liquidity.

16. Give an account of the role of MNCs in the economic development of less developed countries.
(3 X 9 = 27 marks)
(3 X 11 = 33 marks)

Section C

17. The Italian Ceramic Tile Industry.
By the early 1990s Italian firms were by far the world leaders in the production and export of Ceramic roofing and floor tiles, accounting for over 30% of world production and 60% of world exports. The rise of global pre-eminence of the Italian Tile Industry was based on the superior mechanical and aesthetic qualities of Italian tiles. Italian tile production is concentrated in the Emilia-Romagina region of Northern Italy around small town of Sassuolo. In the Sassuolo region there are hundreds of firms involved in the Ceramic tile industry and in various supporting industries such as the manufacture of glazes, enamels and ceramic tile production equipment. As a result, Sassuolo boasts the greatest concentration in the world of firms in the ceramic tile and supporting industries.

The Ceramic Tile Industry in Sassuolo grew out of the earthernware and crockery Industry, which could be traced to the 13th century. Demand for ceramic tiles grew rapidly in Italy in the years immediately after the Second World Wars. Reconstruction after the War created a boom in the building industry. One reason for the high domestic demand was Italy’s Mediterranean Climate (Ceramic floor tiles were cool to the touch in Warm Weather). There was also a tradition in Italy of using natural stone material for flooring as opposed to carpeting or wood. Because of this tradition, per capita tile consumption in Italy has long been the highest in the world. In 1987 it stood at 3.33 square metres per capita followed by 2.55 in Spain and 1.81 in Switzerland.

As a result of blooming demand, the number of ceramic tile firms in the Sassuolo region grew rapidly during the 1950s and 1960s. In 1955 there were 14 tile firms in the region ; by 1962 the figure had leaped to 102. In addition to booming demand, the low cost of setting up ceramic tile business spurred this rapid growth in the number of enterprises. Rivalry between firms in Sassuolo region was intense. They had to complete vigorously against each other to get access to retail outlets. Retailers demanded high quality, low cost , and aesthetically pleasing tles. Firms constantly sought to gain an edge against each other in technology, design and distribution. Innovations were usually known within a matter of weeks and quickly copied by rivals. Firms seeking a leadership position, whether that be in the technology or productive efficiency, or design had to constantly improve their processes and turnover their product line in order to stay ahead of rivals.

As the industry grow around Sassuolo, process technicians from local tile companies left to start their own process equipment firms. Process equipment in tile making includes Kilns for firing the tiles, presses for forming tiles, and gluzing machines. By the mid-1980s more than 120 firms in the Sassuolo area were making process equipment for ceramic tile industries. These equipment manufacturers competed fiercely for the businesses of tile manufacturers. In an attempt to gain business they devoted considerable effort to upgrading the quality of their production equipment and driving down their own manufacturing costs. One result of this competitive process among equipment suppliers was the development of a number of important process innovations that significantly lowered the energy and labour costs of manufacturing Ceramic tiles. Advances in Kiln technology in particular soon made Sassuolo a leader not just in the tile industry but also in the supporting equipment industry.

By the 1970s the tile industry in Italy was beginning to mature. The long post-WWII boom in domestic demand was losing steam and excess capacity was beginning to develop among Italian tile firms. They responded to this problem by seeking international markets for their products ; particularly in North America. In the international market the Sassuolo firms found they had a competitive advantage over their nearest competitors, who were tipically from Spain and Germany. This advantage was based on higher productivity, lower costs, better design and the Italian reputation in style. As a consequence, by the early 1990s Italian firms enjoyed almost twice the global market share of their nearest competitors, the Spanish.

1. To what extent does the theory of comparative advantage explain the rise of Italian tile firm to global prominence in the tile Industry?
2. To what extent does the Heckscher-Ohlin theory explain the rise of Italian tile firms to global prominence in the tile Industry?
3. Use Michael Porter’s demand to analyze the rise to global pre-eminence of the Italian tile Industry. What does this analysis tell you about how firms gain a competitive advantage in the World Economy?
4. Which of the above theories, competitive advantage, Heckscher-Ohlin, or Porter’s gives the best explanation of the rise to global pre-eminence of the Italian tile Industry? Why?
(1 X 18 = 18 marks)
(1 X 24 = 24 marks)

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