National Institute of Technology 2009-1st Sem M.B.A International Business IV Sem - - Question Paper

The political, legal, social, economic and geographic environments affect how a company operates and the amount of adjustment I must make to its operations in a particular country such as how it produces and markets its production staffs its operations and maintain its accounts,

Q: two (B) How is environmental scanning useful to international business?

Ans:

International companies rely on environmental scanning, which is the systematic assessment of the external conditions that might affect their operations. For eg: a company might assess societal attitudes that could fore shadow legal modifications. Most MNCs employ at lowest 1 executive to conduct environmental scanning continuously. The most sophisticated of these companies tie the scanning to the planning process and integrate info in their scanning process and they depend heavily on managers based abroad to supply them with info.

They are also useful in allocation operational emphasis among countries, but there are other factors companies need to consider. We shall now explain 3 of them Reinvestment versus harvesting, the interdependence of location, and diversification versus concentration.

A company usually makes new foreign investments by transferring capital abroad. Reinvestment versus harvesting if the investment is successful the company will earn money that it may remit back to head quarters or reinvest to increase the value of the investment. Over time most of the values of a company’s foreign investment comes from reinvestment. If the investment is unsuccessful or if its output is less than possible investments in other countries the many consider harvesting the earnings to use else where or even to discontinue the investment.

Interdependence of locations: the derivation of worthwhile financial figures is not easy when foreign operations are concerned. Profit figures from individual operations may obscure the real impact those operations have an overall value of a foreign investment realistically, particularly if it bases part of the net value on exported capital equipment that is obsolete at home and useless expect in the country where it is being shipped. By stating a high value, a govt. may permit its company to repatriate a larger portion of its earnings,

Geographic diversification versus concentration: ultimately a company may gain a sizable presence and commitment in most countries however there are various paths to that position. Although any move abroad means a few geographic diversification. The term diversification strategy defines when the company moves rapidly into many foreign markets, gradually increasing its commitments within every one. A company can do this. For example through a liberal licensing policy to ensure sufficient resources for the initial widespread expansion

Earning:   Approval pending.