MGT488 · TU past paper
International Business Management 2080 question paper
The complete TU 2080 exam paper for International Business Management (MGT488), all 15 questions with solved model answers written to the mark scheme.
Tap a question to open its answer.
- 110 marksConcept of domestic, international and gloHideAnswer
Describe international business and opportunities of international business.[10]
International business refers to the business activities that take place between individuals, companies, or governments across different countries. It involves the exchange of goods, services, resources, technology, and capital beyond na...
- 210 marksTypes of globalizationHideAnswer
What is globalization? Explain different types of globalization.[10]
Globalization is the process of increasing interconnectedness, integration, and interdependence among countries across the world in terms of economics, culture, technology, politics, and production. It refers to the growing interaction a...
- 310 marksImpact of political environment on internaHideAnswer
Describe about political system. Explain the impact of political environment in international business.[10]
A political system refers to the set of formal institutions, processes, laws, and structures through which a country is governed and through which political decisions are made. It defines how power is acquired, exercised, and transferred...
- 410 marksForeign exchange marketsHideAnswer
State the meaning of foreign exchange market. Mention the factors affecting foreign exchange rate.[10]
Foreign Exchange Market: Meaning and Factors Affecting Exchange Rate
Part 1: Meaning of Foreign Exchange Market
The foreign exchange market (also known as the forex market or FX market) is a global, decentralized marketplace where currencies of different countries are bought and sold. It is the mechanism through which one country's currency is converted into another country's currency to facilitate international trade, investment, and financial transactions.
In simple terms, the foreign exchange market is the platform where the exchange rate between currencies is determined. It involves participants such as central banks, commercial banks, financial institutions, corporations, governments, and individual traders.
Key Features:
- It operates 24 hours a day across different time zones globally.
- It is the largest financial market in the world by trading volume.
- It facilitates international trade and investment by enabling currency conversion.
- The exchange rate (the price of one currency in terms of another) is determined in this market.
Exchange Rate is the price at which one currency can be exchanged for another. For example, if 1 USD = 130 NPR, then 130 is the exchange rate of USD in terms of Nepali Rupees.
Part 2: Factors Affecting Foreign Exchange Rate
The exchange rate between currencies is influenced by several important factors. These are explained below:
1. Relative Interest Rates
Relative interest rates are directly related to a nation's real interest rate and can drastically affect the direction and stability of a nation's economy. The relative interest rate is not a fixed real number; it is a prediction or estimate used by buyers and sellers in the international marketplace.
- When a country offers higher interest rates, it attracts more foreign capital investment.
- This increases the demand for that country's currency, causing it to appreciate.
- Conversely, lower interest rates may lead to currency depreciation.
2. Relative Income Levels
Relative income refers to the income of a country compared to a particular reference income of other countries.
- Countries with stronger economic performance and higher income levels tend to attract more foreign investment.
- This leads to an increase in demand for their currency, causing it to appreciate.
- Weaker economic performance reduces demand for the currency, leading to depreciation.
3. Inflation Rate
The inflation rate of a country significantly affects its exchange rate.
- A country with a lower inflation rate maintains the purchasing power of its currency, making it more attractive to foreign investors.
- A country with a higher inflation rate sees its currency depreciate relative to currencies of countries with lower inflation.
4. Government Controls
Governments and central banks can directly intervene in the foreign exchange market to influence their currency's value.
- They may implement capital controls to restrict the flow of foreign currency.
- They may buy or sell their own currency in the open market to stabilize or adjust its value.
- They may implement monetary policies (such as adjusting money supply) that impact exchange rates.
- Under a fixed exchange rate system, the central bank actively buys and sells its own currency to maintain the set official rate.
5. Market Expectations
Exchange rates can be significantly influenced by market participants' expectations about future economic conditions.
- Expectations about future interest rates, inflation, political stability, and government policies can drive currency demand up or down.
- If market expectations differ from actual reality, it can lead to sudden and sharp currency fluctuations.
- For example, if investors expect a country's economy to grow strongly, they may buy that currency in advance, causing it to appreciate even before actual growth occurs.
6. Supply and Demand Forces
Under a floating exchange rate system, the value of a currency is determined purely by the market forces of supply and demand.
- If demand for a currency increases (e.g., due to higher exports), its value rises.
- If supply of a currency increases (e.g., due to higher imports), its value falls.
- Factors such as trade imbalances, capital flows, and investor sentiment all affect supply and demand.
7. Trade Balance (Imports and Exports)
- A country that exports more than it imports (trade surplus) will see higher demand for its currency, causing appreciation.
- A country that imports more than it exports (trade deficit) will see higher supply of its currency in the market, causing depreciation.
Summary Table
Factor Effect on Exchange Rate Higher Interest Rates Currency Appreciates Higher Income Levels Currency Appreciates Higher Inflation Currency Depreciates Government Intervention Can Appreciate or Depreciate Positive Market Expectations Currency Appreciates Trade Surplus Currency Appreciates Trade Deficit Currency Depreciates
In conclusion, the foreign exchange market plays a vital role in the global economy by facilitating international trade and investment. The exchange rate in this market is not static; it is continuously influenced by interest rates, income levels, inflation, government policies, market expectations, and trade balances.
- 55 marksChanging demographics of global businessHideAnswer
Explain about changing demographics of global business. [5]
The changing demographics of global business refer to shifts in the composition of the world's population and their impact on the international business landscape. These demographic changes significantly influence how businesses operate,...
- 65 marksMNCsHideAnswer
Explain different types of multinational company. [5]
A multinational company (MNC) is any company that has operations and trading activities in two or more countries across the globe. Generally, the number of countries involved ranges from two to ten. --- Multinational companies can be cla...
- 75 marksRegional economic integration levelsHideAnswer
Mention about customs union and political union. [5]
A customs union builds on the concept of a free trade area but takes integration one step further. It has two key features: - Elimination of tariffs on goods and services traded among member countries (similar to a free trade area). - Co...
- 85 marksInternational Economic OrganizationsHideAnswer
Explain about BIMSTEC. [5]
BIMSTEC stands for Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation. It is a regional international organization that brings together countries located in the Bay of Bengal region to promote technical and ec...
- 95 marksCultural differencesHideAnswer
What is cultural differences in international business? [5]
Cultural differences in international business refer to the variations in values, beliefs, behaviours, customs, communication styles, and business practices that exist among people from different countries and regions. These differences ...
- 105 marksIntellectual property rightsHideAnswer
Mention about intellectual property rights. [5]
Intellectual Property Rights
Definition
Intellectual property rights (IPR) are the rights given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time.
The creations can be in the form of:
- Inventions
- Artistic works
- Designs
- Symbols, names, and images
Purpose of Intellectual Property Rights
The purpose of IPR is to:
- Provide creators and innovators with exclusive control over their works or inventions
- Allow creators to benefit from their own creations
- Prevent others from using their creations without permission
Types of Intellectual Property Rights
The major types of intellectual property rights are as follows:
Type Description Copyright Protects original artistic and literary works such as books, music, films, and software Patent Grants exclusive rights to inventors over their inventions for a limited period Trademark Protects symbols, names, logos, and images used to identify goods or services Trade Secret Protects confidential business information that provides a competitive advantage Industrial Design Protects the visual or aesthetic aspects of a product
Importance of Intellectual Property Rights
- Encourages innovation and creativity by rewarding creators
- Promotes economic growth by enabling creators to commercialize their work
- Ensures fair competition in the marketplace
- Helps in the transfer of technology and knowledge sharing
- Provides legal protection against unauthorized use or copying
Conclusion
In summary, intellectual property rights play a vital role in protecting the creative and innovative efforts of individuals and organizations, ensuring they receive due recognition and economic benefit from their work.
- 115 marksLevel of economic developmentHideAnswer
Describe the level of economic development. [5]
The level of economic development refers to the degree to which a country has developed its economy in terms of income, industrialization, infrastructure, and living standards. The World Bank classifies economies into three broad categor...
- 125 marksTypes of exchange rate systemsHideAnswer
Mention in brief, the types of exchange rate system. [5]
Exchange rate systems refer to the mechanisms by which a country's currency is valued in relation to other currencies. There are three broad categories of exchange rate systems, described below: --- A fixed exchange rate is a rate that t...
- 135 marksMode of payment in international tradeHideAnswer
Explain the mode of payment in international trade. [5]
In international trade, several modes of payment are used to facilitate the exchange of goods and services between parties in different countries. The choice of payment method depends on the level of trust between buyer and seller, the n...
- 145 marksInternational strategic managementHideAnswer
State and explain about international strategic management. [5]
International Strategic Management refers to the process of formulating and implementing strategies to achieve organizational goals in a global context. It involves the analysis of various factors, both internal and external to the organ...
- 155 marksPolycentric, ethnocentric, regiocentric anHideAnswer
Describe the ethnocentric and regiocentric approach in functional management of international business. [5]
The EPRG framework (Ethnocentric, Polycentric, Regiocentric, Geocentric) is a model used in international business to determine how companies manage their operations and approach functional management in foreign markets. Below are two ke...