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GITAM University 2009 M.B.A s,international business environment, - Question Paper

Monday, 21 January 2013 12:00Web




Time: one Hours Max. Marks: 15

part -A

I. ans any 2 of the subsequent 2x 2.5 = five Marks

a. What is meant by the term "balance of payment",
b. Explain the features of an economy.
c. State the objectives of Globalozation.
d. Differentiate the term command economy and mixed economy.


II. ans the subsequent one x five = five Marks

1. What are the different modes of international Business?
2. Explain the 3 major accounts in the balance of payment.
3. Explain how the behavioral practice affects international business.
4. Explain the features of contemporary democratic political system.


III. Analyse the subsequent case and ans the ques..
five Marks
Thames Water goes international

Thames Water plc is the largest British water company. The firm was created in 1989 after Prime Minister Margaret Thatcher privatized the water industry. Today the company supplies the water and sewage services to over 11 million people in the Thames Valley, from the quaint university of Oxford to 1 of the world's largest urban agglomerations in London.


While the industry is privatized, the, company's water utility division is still subject to regulation by QFWAT, the UK water regulator. This agency sets price controls and regulatory standards over water and sewage services every 5 years. The logic behind this approach is that it forces British regional water monopolies to make price cuts to the water bills of their customers on a periodic basis. The managerial paradox is that any increases in operating efficiency by a water utility essentii1lly are taxed away every 5 Years. However, in the intervening period there is an incentive for the company to use its economic efficiency improvements to help fund development of its, non-regulated commercially based business.

In an effort to take advantage of their competencies in this industry, a few water utilities have expanded into electricity and gas. Thames Water, however, has decided against this approach. Instead it has chosen for a two-pronged strategy. First, it has kept its focus of operations in the water industry. Today, half of its 12,000 employees are engaged in activities such as the design, engineering, and maintenance of water membrane systems and related water treatment products or in. the service and marketing of water-related businesses.

Second, Thames Water has chosen to use its expert¬ise to move into the international arena. Today it has major projects in Australia, Turkey, Indonesia, Malaysia, the Philippines, Thailand,. the Ukraine, and the US. Annual revenues in the international market for water are very high and the profit potential is much greater than that in Britain. Additionally, there are not many international competitors.

One of Thames Waters' international clients is Indonesia. The company has a 25-year contract to supply fresh water to half the population of the capital city, Jakarta. In March 1998 this contract was temporarily rescinded by the new president as he alleged that the contract was


signed with the son of the former head of government, President Suharto. However, within a month every thing had been resolved and things 'were back to normal. a different Thames water client is the city of Adelaide in Southeast Australia. The firm provides the tech. expertise for the reminder of the contract.

Thames Water is also beginning to .make acquisitions in the international arena. 1 of its initial moves was the purchase of a large US water utility, Etown in New Jersey for $1 billion. In October 2000 Thames Water was acquired by the massive German multi- utility RWE. Whose annual revenues are in the range of $60 billion. RWE is a major producer of electricity and natural gas, but the company is relatively inexperienced in the water business. So Thames Water is now the branch of the company that is responsible for RWE's international water business .Drawing upon RWE's capital, Thames recently purchased American Water Works of New Jersey for $4.6 billion in cash and presumed a different $ three billion in debt. American Water Works is the largest private water company in the US. It owns 25 water utilities, has operations in 23 states, and serves approximately 10 million customers. RWE has announced that American Water. Works' operations will be combined with those of Thames Water so as to achieve economies of scale.

At the current time over 80 per cent of the US water systems are public sector Municipal Mono¬polies. As many of these are privatized during this decade, RWE and Thames Water are likely to become major players in the US water market. And as they do, the role of Thames Water will become increasingly more important.

1. How has Thames Water used the UK move toward privatization to help create market opportunities for itself in the international arena?

2. How much political risk does a company like Thames Water face when doing business in a country like Indonesia?

3. How is Thames Water helping RWE expand its triad operations?
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