MNB3701 – OUTCOMES AND EXAM PAPERS WITH SOLUTIONS.

MNB3701 – OUTCOMES AND EXAM PAPERS WITH SOLUTIONS. Explain the phenomenon of globalisation. Globalisation refers to the increasing integration of production, development and communication amongst nations on a worldwide/international scale. Globalisation is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. Globalisation is the process by which businesses or other organisations develop international influences or start operating on an international scale. 2. Identify the types and drivers of globalisation. Globalisation is the growing interdependence of countries worldwide through the increasing volume and variety of cross border transactions in goods and services, as well as international capital flows Changes in political environments - Can be credited with two developments namely: Creation of global economic/trade regulatory bodies and the collapse of communism - Creation of economic/trade regulatory bodies included General Agreement on Tariffs and Trade (GATT) in 1947- served as a medium through which international trade negotiations and arrangements were conducted and the World Trade Organization (WTO) in 1995- aids international trade and safeguards the rights and privileges of entrepreneurship, innovation and invention - Collapse of communism allowed the spread of capitalism and the trade liberalization across the globe Changes in the technology environment - Email and videoconferencing has made it easier for multinational enterprises to communicate, transmit and share large information and allows for discussion in a virtual environment - The Internet and the World Wide Web (WWW) provide enterprises the opportunity to monitor and respond to competition and provide consumers with products at reduced prices. - Company intranets and extranets enable for fast distribution of large volume of information throughout the organisation Changes in the transportation, innovations - Air and speed rail are some of the modern advances in the field of transportation. 3. Clarify the implications of globalisation for international business. 4. Identify emergent themes in discourses on globalisation. ACTIVITY 1.1 1. Briefly explain the history of globalisation, highlighting the milestones in its evolution. The evolution of globalisation is rooted in historical events. Indeed, this was a forerunner of inter-regional, symbiotic trading arrangements between people, countries and nation-states. It served as a catalyst to the development of undeveloped countries, foreshadowing a greater degree of regulated trade in these countries. But, the real focus of the historicity of globalisation concentrates on the advent and duration of slavery and colonisation, as more countries fell under the political jurisdiction of more powerful nations such as the United Kingdom and France. This state of affairs persisted for centuries; only the emancipation of slaves and the liberalisation of these countries served as a stimulus to further globalisation. The evolution of modern trading and investment arrangements, with their corresponding financial and capital operations, together with various economic integrations, stemmed, it is argued, from this emancipation process. Ultimately it also gave rise to unprecedented political and economic alliances. 2. Explain how globalisation is changing, in consequence of the efforts of anti-globalists. The positive aspects of globalisation are the benefits of economic integration, trade liberalisation, knowledge transmission and diffusion, cultural stability, power coalitions, globalisation and free markets and the phenomenon of socio-political control, coupled with improvements in world health care. These affirmations are constantly being countered by the antagonism emanating from the anti-globalists who argue against the alleged benefits of globalisation. They do so, citing the “impervious weaknesses” of globalisation as evidenced by negatives such as the risks involved, the inequitable apportionment of resources to the disadvantage of poor countries, and the capricious policies of institutions such as the IMF (the International Monetary Fund is an international organisation that aims to promote global economic growth and financial stability, to encourage international trade, and to reduce poverty), The World Bank - The World Bank is an international financial institution that provides loans to countries of the world for capital programs. It comprises two institutions: the International Bank for Reconstruction and Development (IBRDs), and the International 1 Development Association (IDA), the WTO (deals with the global rules of trade between nations. Its main function is to ensure that trade flows smoothly, predictably and freely as possible), and the International Labour Organisation (ILO) (The ILO has integrated many of its existing technical projects into five flagship programmes, designed to enhance the efficiency and impact of its development cooperation with constituents on a global scale). It is enlarged upon with reference to the poor employed in agricultural communities, who are feeling the effects of the imposition of agricultural tariffs. The aggressive manifestation of globalisation in the form of the establishment of international trade agreements (such as the North American Free Trade Agreement (NAFTA), with its preference for tariff eradication, at the expense of the poor) is also discussed in this chapter. LEARNING UNIT 2: INSTITUTIONAL FRAMEWORKS AND THE ROLE OF GOVERNMENTS LEARNING OUTCOMES 1. Provide an overview of global institutional frameworks. Business interactions between MNCs and national institutional frameworks are delineated by the provisions/codes of practice of global supervisory institutions. Business interactions between Multinational Corporations (MNCs) and national institutional frameworks are bound by the codes of practice of global supervisory institutions. The major global supervisory institutions are the World Bank, the International Monetary Fund and the World Trade Organisation. The World Bank - It comprises two institutions: the International Bank for Reconstruction and Development (IBRD), and the International Development Association (IDA). The World Bank is a component of the World Bank Group. - These international financial institutions were created with the objective of financing the reconstruction of European countries out of the destruction caused by World War II. - The World Bank was created with the mission of financing the reconstruction of European countries out of the desolation of World War II. Later, poverty alleviation and various initiatives were also added to the World Bank activities. - Its stated goal is the reduction of poverty. - The activities of the banks were very limited and their relevance at the time was marginal. The brief was later expanded to include a focus on global poverty alleviation as well as various initiatives to boost economic growth and three other strategic components were incorporated in the World Bank Group eg. International Finance Corporation (IFC), the Multilateral Guarantee Agency (MIGA) and the International Centre for the Settlement of Investment Disputes (ICSID). - The World Bank and its subsidiaries provide various supports and concessions to sovereign states. Under such arrangements, a series of funding opportunities are provided to augment infrastructural development, skills and capacity development, education, health care, sanitation, and improved quality of life and life expectancy. The International Monetary Fund - The International Monetary Fund (IMF) was established after World War II at the United Nations conference held in Bretton Woods in 1944. The primary focus of the IMF was to try and avoid a repeat of the competitive currency devaluation as was the case in the 1930s which resulted in the Great Depression. - The organisation's objectives are to promote international monetary cooperation, capital market integration, ensuring and regulating financial stability, furthering international trade and investment, enhancing employment creation/stability, nurturing global economic growth and development, and creating poverty alleviation globally as well as making resources available to member countries in financial difficulty. - The most prominent policy prescription administered by the fund during the 1980s was the Structural Adjustment Programme (SAP). It was intended to address the debt burdened conditions of many developing countries, essentially as a result of ever increasing recurrent expenditures by their governments. - Given limited industrial capacity and weak growth, governments in many developing countries assume the responsibility of being the largest employers of labour. As a result of this the provision of wages, salaries, amenities and various forms of social support are central to socioeconomic stability. - The central focus of SAP was on the reduction of social spending and constricting the existing social support of the population. The World Trade Organisation - The World Trade Organisation (WTO) was also established at Bretton Woods in 1944 and originally known as the General Agreement on Tariffs and Trade (GATT), until it was transformed - The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world.[5][6] The WTO deals with regulation of trade in goods, services and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments[7]:fol.9–10 and ratified by their parliaments.[8] Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round e1986–1994s. - The organisation is charged with the responsibility of facilitating trade liberalisation / economic openness, 2 trade agreements/treaties negotiation, regulation trade relationships between and amount nations, trade dispute resolution / settlement, and facilitating growth through the free trade mechanism. --Trade liberalisation – organisation advocates for the removal of all barriers to trade openness. WTO is able to enforce conformity with the established global rules on the removal of tariffs and barriers that inhibit free movement of goods and services across international borders. --Negotiation of treaties and agreements – organisation serves as a referee for parties in potential trade negotiations. Of importance is the need to ensure equal partnership in trade agreements, ensure equity of purpose and equitable allotment of proceeds from trade between participants. This role helps to strengthen the negotiating power of less developed and developing countries in trade negotiations that involve more economically powerful and politically mighty countries. -- Regulate trade relationship between nations – organisation to monitor trade relations among nations, especially member countries, and ensure harmonious engagement through free, fair and unrestricted trade arrangements. 2. Outline the importance of the Corruption Perceptions Index. CORRUPTION PERCEPTIONS INDEX – scores countries on how corrupt their governments are believed to be, the score ranges from 0-100. - Is seen as an enormous hindrance to growth and development across the world, but its impact has been felt more in developing countries. Although documented evidence across the world suggests that every country has some traces of corrupt practices, its prevalence and recklessness in the developing world is a serious concern. - The globally recognised platform for judging a country’s level of corruption is Transparency International. Corruption Perceptions Index, 2017 - The CPI currently ranks 176 countries "on a scale from 100 (very clean) to 0 (highly corrupt)". Denmark is the least corrupt country in the world, ranking consistently high among international financial transparency - Corrupt practices occur mainly in situations of abuse of power, bribery, a lack of transparency in governance, little respect for the rule of law and imprudent/irresponsible governance. - In the developing countries, one of the notable characteristics of underdevelopment is a weak institutional framework and strong individual persona. Evidence abounds on abuse of power, not only by the political leadership, but also their cohorts as well. - Judicial rulings that contravene the personal interests of power individuals are disregarded. - Highest bidders can in some instances even buy justice. - There is documented evidence to suggest that a prevalence of corruption increases the cost of doing business. This proposition presupposes that corrupt countries are not particularly attractive to “clean” foreign investments, especially given the difficulties they may encounter for their refusal to pay bribes. 3. Identify the types of worldwide governance indicators. WORLDWIDE GOVERNANCE INDICATORS (WGI) - Are global measures of the efficiency and effectiveness of political leadership. This platform is one of many such platforms that is established and gauged by the World Bank. - The bank treats this specific objective as a project, with a pool of dedicated team members. The team created by the bank reports on the aggregate performance of countries on all the measurable indicators. The report also covers the individual performance of countries on specific measureable indicators of administrative efficiency. Dimensions of Governance - Voice and Accountability – looks at freed of speech and accountability of political leadership to the population/community. Counties are ranked based on their adherence to the principles of human liberty. It measures the extent to which the general population are free to express their views and opinions on issues of public interest or concerns, without fear of intimidation or persecution. - Political Stability and Absence of Violence – Peaceful transfer of power from one government to the other is an important measure of political maturity. It considers the smooth running of the political mandate and absence of social unrest, violent protests and destruction of lives and properties. Electioneering violence and diabolical prejudiced politics have continually manifested as an appalling characteristic of developing counties. - Government Effectiveness - The effectiveness of political leadership in ensuring objective policy formulation, efficient policy implementation and stringent evaluation of policy effectiveness are important components of virtuous leadership. The skill with which the political class recognises and appreciates efficient civil service/public services, which are resistant to the corruptions of biased politics, is a good indication of high performance on the Government Effectiveness ranking. - Regulatory Quality - The quality of regulatory framework, especially the historical architecture of the enabling rules and regulations, are important determinants of regulatory efficiency. Eg. It is important for any new promulgation or amendment to existing regulations to be based on the historical experience of the people and the new reality. - Rule of Law - relates to the perceptions and amount of respect that political leaders have for the regulatory and adjudicating instruments of state. 3 - Control of Corruption - is a major impediment to growth especially in developing countries. The World Bank Investment Climate Survey Database - A platform that was established to measure the level of transparency in the process of establishing a business in a country. The level of corporate competitiveness with a specific focus on the private sector is measured. The World Bank incorporates seven measurable indicators in the survey: - Firm’s perceptions – firms are interviewed to measure their general perception about the investment climate in the country of interest. Given a set of ranking ranges, their perception about the adequacy of the investment climate of the country is compiled and analysed. - Infrastructure and Services – for any business to take-of and be sustainable, the provision of, access to and affordability of necessary infrastructure and services are imperative. There is no denying that the availability, access and affordability of basic infrastructural facilities will go a long way in influencing the investment climate of a country. - Finance – operating capital, especially working capital, is the mainstay of every business. The availability of, and access to, required financial support for a start-up as well as for existing business is an important gauge of the conduciveness of the investment environment of a country. Although financial institutions profit by providing funding to entrepreneurial outfits, the cost of such capital as well as the ability of fledgling outfits to access such support remains daunting, and these challenges appear to be the most conspicuous hindrance to entrepreneurial development in developing countries. - Government Policies – the economic orientation of a political leader is influenced by their political philosophy. A political leader with a democratic philosophy would most likely embrace a free-market economy and resolve to provide an enabling environment for entrepreneurial development. Such a leader would most probably restrict government participation in economic activity to regulatory and supervisory commitments, while the market agents would be charged with the responsibility of determining the optimal allocation of production resources as they deem fit, with minimal government intervention. - Conflict Resolution and Crime – the working relationship between employees and employer may hit a wall at a point in time. While conflicts and disagreements are obstacles in business operations, especially between employees and employers, such challenges and their ultimate effects on business operations should be ephemeral and inconsequential. If any labour dispute or industrial relations actions precipitate - Capacity and Innovation - Input resources are converted into finished products through production processes with the aid of a qualified and skilled work force. The country’s competitiveness will be influenced by the availability of a workforce capable of helping a business achieve its targets and long term objectives as well as an appropriate human resources strategy. The ability of a country to provide the necessary support to spur innovation in a way that aids a firm’s competitiveness will influence the country’s rating. - Labour Relations - Labour relations and the strength of organised labour unions as regards dispute resolution is important for a healthy operational environment as well as a reduction of lost productive hours as a result of prolonged strike actions. Labour relations should be aimed at stimulating strategic human capital engagement and interaction with other resources to bolster a favourable perception about the investment climates of a country. Public Integrity Index This measures the accessibility of citizens as well as the existence, efficiency and effectiveness of institutions that hold a government accountable and responsive. Good governance requires proper assessment. Measure promoting integrity and countering corruption are no exception. In a global economy good governance is seen as a parameter of competiveness and investors account for such factors when deciding where to locate their operations. Governments are responsible for providing evidence based information on the results of their policies. This keeps them accountable. Transparency International developed a scientific toolkit for measuring the extent to which the civil service of a country is judged free from corrupt practices. The integrity of a political system and leadership are best measured through the quality of the social services that are delivered to the people, as well as the extent of fiscal discipline that is demonstrated by the political leadership.