M.B.A. DEGREE EXAMINATION, NOVEMBER/DECEMBER 2017.
Third Semester
INTERNATIONAL BUSINESS
2 90131-A
Time 3 Hours Max. Marks 70
SECTION — A
Answer all FIVE questions. 2 10 Marks)
1. Global economy.
2. Political environment
3. NAFTA
4. Functions of IMF
5. BOP
SECTION — B
Answer FIVE questions. (With internal choice)
10 50 Marks)
6. Explain the importance and scope of international business.
Or
Explain the integration of global trade.
7. Discuss in brief about international business environment.
Or
Explain in detail the technological environment with reference to
international business.
8. Explain the benefits of multinational corporations.
Or
Explain in brief about trading blocks in International Business.

9. Discuss about organizational structures of WTO.
Or
Explain in detail about anti dumping measures in India.
10. What are the causes for disequilibrium in BOP?
Or
What are the methods of correcting disequilibrium.
SECTION — C
11. Case study (Compulsory) (10 Marks)
Electrolux is Sweden's largest manufacturer of electrical household appliances and
was one of the world's pioneers in the marketing of vacuum cleaners. However, not
all the products the Electrolux name are controlled by the Swedish firm. Electrolux
vacuum cleaner sold and manufacturer in the United States, for example, have not
been connected with the Swedish Firm since the U.S subsidiaries were sold in the
1960s. The Swedish Firm reentered the U.S. market in 1974 by purchasing
National Union Electric, which manufacturers Eureka vacuum cleaners.
Electrolux pursued its early international expansion largely to gain economies of
scale through additional sales. The Swedish market was simply too small to absorb
fixed costs as much as the home markets for competitive firms from larger
countries. When additional sales were not possible by exporting, Electrolux was
still able to gain certain scale economies through the establishment of foreign
production. Research and development expenditures and certain administrative
costs could thus be spread out over the additional sales made possible by foreign
operations. Additionally, Electrolux concentrated on standardized production to
achieve further scale economies and rationalization of parts.
Until the late 1960s, Electrolux concentrated primarily on vacuum cleaners and
the building of its own facilities in order to effect expansion. Throughout the
1970s, though, the firm expanded largely by acquiring existing firms whose product
lines differed from those of Electrolux. The compelling force was to add appliances
lines to complement those developed internally. Its recent profits million in
1983) have enabled Electrolux to go an acquisitions binge. Electrolux acquired two
Swedish firms that made home appliances and washing machines. Electrolux
management felt that it could use its existing foreign sales networks to increase
the sales of those firms in 1973, Electrolux acquired another Swedish firm, Facit,
which already had extensive foreign sales and facilities. Vacuum cleaner producers
were acquired in the United States and in France; and to gain captive sales for
vacuum cleaner. Electrolux acquired commercial cleaning service firms in Sweden
and in the United States. A French Kitchen equipment producer, Arthur Martin,
was bought, as was a Swiss home appliance firm. Therma and a U.S. cooking
equipment manufacturer, Tappan.
Except the Facit purchase, the above acquisitions all involved firms that produced
complementary lines that would enable the new parent to gain certain scale
economies, However, not all the products of acquired firms were related, and
Electrolux sought to sell off unrelated businesses. In 1978 for example, a Swedish
firm, Husgvarna, was bought because of its kitchen equipment lines. Electrolux
was able to sell Husqvarna's motorcycle line but could not get a good price for the
chain saw facility. Reconciled to being in the chain saw business. Electrolux then
acquired chain saw manufacturers in Canada and Norway, thus becoming one of
the world's largest chain saw producers. The above are merely the most significant.
Electrolux acquisitions: the firm made approximately fifty acquisitions in the
1970s.
In 1980, Electrolux announced a takeover that was very different from those of the
1970s. It offered $175 million, the biggest Electrolux acquisition, for Granges
Sweden's leading metal producer and fabrication Granges was itself a
multinational firm (1979 sales of 1.2 billion) and made about 50 percent of its
sales outside of Sweden. The managing Directors of the two firms indicated that
the major advantage of the takeover would be the integration of Granges
aluminum, copper plastic, and other materials into Electrolux production of
appliances. Many analysts felt that the timing of Electrolux's bid was based on
indications that Baijerinvest, a large Swedish conglomerate, wished to acquire a
non--ferrousmatels mining company. Other analysis felt that Elctrolux would be
better off to continue international horizontal expansion as it had in the 1970s. The
analysts pointed to large appliance makers such as AEG Telefunken of West
Germany that were likely candidates for takeover because of recent poor
performance.
Questions:
What are Electrolux's reasons for direct investment?
How has Electrolux's strategy changed over time? How has this affected its
direct investment activities?
Which of Electrolux's foreign investments would be horizontal and which
would be vertical? What are the advantages of each?
What do you see as the main advantages and possible problems of expanding
internationally primarily through acquisitions as opposed to building one's
own facilities?
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