Course code E 6313: Global Business Strategy

Questions for Mid-term Examination (TAKE HOME exam) Fall 2019 (Oct, 2019)

Total Marks: 50 Faculty: Dr. Mohammad Abu Yusuf Time: 2 hours

Student Name: Md.Thoufiqur
Rahman ID No. 16-99599-3 Sec: A

Permit: Proctor's signature:

Instructions:
1. This is an open book exam.
2. Answer any two questions including question no. 3
3. Write your name and ID on the question paper & Answer Script.
4. Marks of each question are indicated separately.

1. Legal, Economic and Cultural factors play important role in the successful operation of a
global business. Explain the role of any two with examples. 25 marks
2. Discuss in brief, the factors/variables a company should consider when deciding whether and
where to expand abroad. [i.e. variables in country comparison tools) 25 marks

3. Please analyse the CASE ‘What Panasonic Learned in China?’ and answer to the
following: (a) what did Panasonic learnt about the unique features of Chinese market? (b)
Discuss the importance of understanding ‘lifestyle’ of people of the destination country in getting

success in global business. 25 marks.

4. Write short notes (with examples) on any three: 25 marks

a. Liability of foreignness (LOF)

b. Japanese style of apology and lesson for our business
c. Multinational Company (MNC)
d. Factors that drive Globalisatin
e. Lessons from Microsoft’s corporate foreign policy (Schumpeter: The Redmond
doctrine, source: The Economist, Business, Sept 4th, 2019
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 Answer to the question No: 1
Legal Factor for global business operation: Conducting business in foreign markets
is achievable if the business is flexible enough to work within the local laws and
regulation guidelines. Review aspects such as:
When reviewing legal and regulatory commitments, it is highly advised that you
seek experienced legal counsel for overseas business practices to identify hazards
that may cause barriers for your business. Don't skimp on the cost of using
overseas expert legal counsel, it can save you in the long run.
The stability of the local government and its authority are very important when
reviewing overseas business options. Aspects to consider are:
Currency exchange rates
Access to needed resources and materials
Communication and transportation options
Government assistance programs for businesses
Access to affordable capital
Protection policies for businesses
Immigration and employment Laws
Government stability holds the key to contract integrity, employee security and
rights, trademark and intellectual property and many other facets in conducting
business. Make sure to seek "local" expertise over the political and business factors
before entertaining any overseas expansion.
There are many legal issues to consider when expanding globally – creating new
entities, tax implications, employee hiring, etc. One of our partners, Osborne
Clarke helps US-based companies looking to expand internationally, and has
created a Top 10 list of issues to consider before expanding.
Subsidiary or not?
Many businesses assume that by not establishing an entity overseas, they will not
be bound by laws and regulations of the markets in which they are operating. This
is almost always wrong – especially if you are selling to consumers. Individuals
generally are protected by the laws of their own country: whether under consumer
laws, employee regulations or data protection rules. Allowing access to your
website is likely to trigger local obligations and actively selling within a market
will lead to a permanent establishment requiring registration and filings…as well
as tax. Failing to put in place the correct structure can lead to filing obligations
relating to US financial information which private corporations usually prefer to
keep confidential.
Employees
Most European countries have similar laws to the US relating to distinguishing
between contractors and employees. Generally, if an individual is under the
management and direction of your business (and has office space and/or business
cards and an email address with your business name), then they’re likely to be
categorized as an employee. As well as filing and payroll obligations, the
employee is protected by the laws of their country of residence. You should
therefore ensure you provide them with a local employment contract and definitely
not a US offer letter: European employment laws offer significant protection to
employees and as an employer the contract is there to protect you and clarify the
terms under which the employee has been hired (and can be fired).
Stock Options
If you plan incentivizing your employees using stock options, you should check the
local tax laws to ensure you localize where required and check if there is a tax
efficient plan which can be used for your overseas employees. Failure to do so can
lead to unnecessarily large tax bills for the employee AND employer on exercise of
options. Certain countries have such harsh tax rules that employees prefer not to
accept options as part of their remuneration (because they are often required to pay
tax on their value on grant rather than on exercise – when it’s possible that they’re
worth a lot less!)
Intellectual Property
Your IP (trademarks, patents and design rights) should be registered in the markets
in which you are operating – they are not protected by your US filings. If you plan
to sell into 3 or more European markets, you should consider applying for EU-
wide protection, but individual country filings are also possible if you plan
focusing on limited markets.
Terms of Service/Sales Contracts
Localization of terms should be considered. If you are selling to consumers, you
will need to ensure you localize you terms legally as well as translate them into
local language. Failure to do so will allow complaints to be filed and considered on
terms which you have not dictated (and worse under which you have not limited
your liability). B2B contracts need not be localized legally, although may need to
be if negotiating with larger overseas customers who insist that their local laws
govern your contract.
Acquisition
If you plan buying an existing business overseas, you should definitely take local
advice – even if you plan acquiring under a US contract. At a minimum, due
diligence will require a local expert’s review and many of the reps and warranties
will need to be localized to make sense under local laws. Market standards can
vary considerably, so it’s definitely worth spending time with the seller and
ensuring you are both aligned on basic terms of the acquisition.
Tax
Taxes vary from country to country, but one consistent approach is that every Tax
Authority prefers to maximize the contribution it receives from businesses
operating within its borders. Tax structuring advice can help minimize tax
obligations and inter-company agreements can clarify responsibilities under global
transfer pricing rules. Local payroll taxes and social security payments often need
to be deducted at source (and can be managed by payroll providers) and many
sales need to have sales tax or VAT added (and often quoted in prices).
Data protection
Europe has strict data protection laws which require businesses that receive or
process personal data to follow strict rules regarding it’s receipt, retention and use.
Specific consent or disclosure needs to be made to the owners of the data and may
not be transferred outside the EU without appropriate registrations being made to
ensure its protection and proper use.
Real estate
Short term flexible office space is widely available overseas but advice should be
taken when taking larger space – whether office or manufacturing real estate.
Obligations on tenants are not the same globally so it is important to understand
what your rights and responsibilities are whilst occupying the space and after you
move out.
Disputes
Obviously everyone hopes to avoid disputes and by entering a market with eyes
open (and proper advice) can minimize the circumstances for things to go wrong.
However, if they do, early advice should be taken to ensure you don’t exposure
yourself to unnecessary liability and if a dispute does become serious, most
international jurisdictions have dispute resolution procedures and options for
arbitration over litigation. Enforcement of judgements across borders can often be
achieved, but may require additional steps or filings.
Economic role in global business operation: All businesses, whether domestic or
international, are affected by the dynamic economic environment conditions
prevalent in the market. Among many economic factors affecting business some
are; interest rates, demand and supply, recession, inflation, etc. Let us take a look
at such economic factors.
All businesses want to maximize on their profits. All this can be achieved by
analysis of demands of consumers, provision of appropriate supplies to them and
the maintenance of high quality of goods and services. As simple as this operation
is, many factors affect it. The sales, production and procurement processes of a
business are greatly impacted by these economic elements. Below is a list of
economic factors that affects businesses. Consider, all of them are interconnected.
Demand and Supply
There are two great economic factors affecting business models work – demand
and supply. Demand is how willing and able a consumer is to purchasing what a
business offers and supply is how able the business is to make available what the
consumer needs. For example, when a mobile phone infused with the latest
technology is introduced to the market, it fetches a higher price due to the high
demand in markets, and the prices remain high if the demand is more than the
supply.
Here is another example. Bad weather in 2000 messed the sugar crop in Brazil,
arguably the largest producer of sugar in the world. Because of this, there was a
decrease in the supply of sugar globally, and so the prices of sugar rose steeply.
This led to other suppliers capitalising in opportunity and increasing the supplies
which brought the cost down.
Marginal and Total Utility
The amount of satisfaction that is derived by consumers from the amount of goods
they have is referred to Utility. After continuous and successive consumption of
units of same goods, the fulfilment that is experienced by the consumer starts
depreciating. This results in short-term or long-term fall in sales of the business.
Most Organization prepare for the launch of a different brand before the collapse in
utility and sales is experienced. The hurl of a new brand ensures that the revenue
trend of business does not drop down. The fall down of utility is one of the
economic factors affecting businesses.
Such is, when we purchase a pizza, the first few pieces give us great satisfaction.
Nonetheless, there is a down fall in the satisfaction levels when we continue eating
the rest of the pizza. Suppose, the marginal utility derived on consuming the first
slice was 90%. Nonetheless, due to the dwindling of utility, the second piece had
the score of 80% and the third piece had 70%. The satisfaction derived on
consumption will be in a deteriorating order.
Money and Banking
Banking facilitates monetary and fiscal policies that affect business and the
economic environment also the consumers of business. Money in circulation
dictates the demand of the consumers. On the contrary, banking facility dictates the
borrowing capacity of individuals as well as the business. Banking polices play a
crucial role in affecting the prices of goods and interest rates together with assets
prices and investments. The economic environment activities and inflation are
influenced by the monetary policies of a particular country. This whole dynamic
situation is also known as monetary policy transmission mechanism.
Economic Growth and Development
The amount of money that is being invested into channels of long-term
upgradation and the finances of the people living in the society at large in a
particular country is decreed by the economic growth of a country. Among all the
economic factors that are affecting business, development is the upmost important
one. As a business needs to cater for the demands of an economic environment
potent society.eg, The luxury brands perform hearty during an economic upswing,
much more than the organizations which their outcome is essential offerings.
Income and Employment
Another crucial aspects of the economy that affects a business operation, are the
rate of income and employment varsity in a particular country. The density of
employment determines the rate of demand in a company and even the country
including the purchasing power of individuals.
Example
During an economic upswing, opportunities for work are available to enable
people to generate income and have a stronger purchasing power. Nonetheless, the
purchasing power of most people goes down, as employment density and the rate
of income goes up during the recession period in a given economic environment.
General Price Level
General price levels of commodities is also a key economic factor affecting
businesses and plays a huge part in its growth. You could talk about the cost of raw
materials for the production of commodities in any economic environment, the
paying power of potential clients, the cost of production and transportation rates as
some of the most important elements that end up contributing to the retail price,
thereby lowering the profits generated by a business.
Example
In most economic environments, when prices go up, the total revenue generated
has a high chance to go down because there might be a decrease in demand.
Assuming consumers have bought sixteen pizzas for the price of $4. But because
of increase in price of the pizzas, the consumers may only be able to afford 8
pizzas for a higher cost of $6.
Trade Cycles
This too plays an integral part in the fluctuation of cost of goods and services sold
by a business. The cycles include but are not limited to; depression, recession,
recovery, prosperity. These are all phases that make up a business cycle that
dictates the demand and supply of all goods and services and general prices of all
commodities, whether essential or non-essential.
Inflation
Inflation usually occurs when the supply of money is too much in the economic
environment market while not equally supported by a similar availably of goods
and services. Now, there is a lot floating around in this situation. The prices of
goods have to increase one way or the other, in order to sustain the businesses. And
so there is an increase in the cost of raw materials needed for production. This
upsurge in the cost of raw materials obviously translates to the retail price.
Let’s break this down. The buying power of consumers decreases, their incomes
remain constant, but the prices of products and services shoots up. This will
definitely affect the businesses in that, the demand for the goods is directly
dependent on its availability and its price.
Example
In 2008, the worst case of inflation affected the central African nation, Zimbabwe.
This proved very disastrous for its economy leading to the country adopting a
foreign currency as a way of solving the crises.
Recession
Companies usually make great losses and face dips in sales and profits during
recession. And in order to reduce their costs most of them usually resort to staff
cuts, retrenchment and firing, reducing capital expenditure, advertising budgets,
research and development activities, and so on. Of course this affects companies
and organizations of all sizes regardless of the economic environments they are in.

Answer To the question No :3

a) At first Panasonic aimed at using China for their lower costs of manufacturing
and the output gained in China was mostly destined for export. Besides this,
little effort was made to understand the Chinese market.
However, the leaders of Panasonic saw slow growth in China, thus they realized
that they needed to engage more deeply with customers in China. Consequently, in
2005, Panasonic created the Shanghai-based China Lifestyle Research Center,
which was the first attempt to develop a deep understanding of consumer lifestyles
in a market outside Japan.
Panasonic adjusted certain products to Chinese local needs and became more
effective on these local markets. By fostering formal and informal relationships
among market-research staff members in China and engineers in Japan, Panasonic
ensured that the center’s staff could address both local adaptation and worldwide
integration. Panasonic changed from a rather Japanese to a global powerhouse.
The purpose of the article is to analyse Panasonic’s activities on Chinese markets
and to inform the reader about this subject. The author’s major findings and
conclusions are that Panasonic has successfully emerged into the Chinese markets
after adapting to Chinese local needs. Besides this, the author states that the
overseas shares of sales increased highly so the company has successfully
introduced locally developed models. In addition, by adjusting to these markets
Panasonic has developed itself as a successful worldwide market player.
b) The truly global dimension of the twenty-first century’s economy has redefined
the playing field on which international companies compete. The ability to offer
the right products and services in the right markets at the right prices is no
longer the sole factor of success.

Having the right people with a high level of cultural awareness and intercultural
competence is now key when working across borders and cultures. Rating cultural
awareness as an optional skill can come at a cost for a company working globally.
Cultural awareness is essential for all employees working across cultures.
Cultural awareness is a skill that can be developed at both professional and social
levels, and can make an overseas assignment, an international business meeting or
cross-cultural negotiation a successful one. On the other hand, a lack of cultural
awareness can lead to major miscommunication, and, ultimately, rejection by host-
culture colleagues, clients, acquaintances and neighbors.
Arguably an asset for any major international employee, cultural awareness is
particularly important for employees being sent abroad to live and work,
organizations planning to merge with or acquire another company or individuals
who work with counterparts and clients around the world.

Intercultural training programs can ensure your employees are equipped with a set
of skills and strategies to be successful when working across cultures. International
assignees moving to another country might benefit from a “Living and Working
in” cross-cultural relocation program, whereas someone Doing business in another
culture could benefit from a country-specific cross-cultural training program for
Business and Management.
By providing your employees with opportunities to participate in a cross-cultural
training program, you will increase their cultural awareness which will help them
avoid the risk of major miscommunication or international failure.
References:
https://www.bizjournals.com/bizjournals/how-to/growth-
strategies/2015/02/considerations-for-taking-your-business-global.html
https://bluemarblepayroll.com/top-10-legal-issues-to-consider-when-expanding-
overseas/
https://www.marketingtutor.net/economic-factors-affect-business-environment/
https://www.communicaid.com/cross-cultural-training/blog/cultural-
awareness-training/
https://hbr.org/2012/12/what-panasonic-learned-in-china
https://studymoose.com/what-panasonic-learned-in-china-essay