Unit 1 Business Environment and IB PYQ’s 17th Oct 2020 Shift 1

The correct answer is – Ethnocentric. Polycentric. Regiocentric and Geocentric Orientations

EPRG framework in International Business refers to Ethnocentric. Polycentric. Regiocentric and Geocentric Orientations.

Hence Option2 is correct.

Additional Notes

It is a framework created by Howard V Perlmuter and Wind and Douglas in 1969. It is designed to be used in the internationalization process of businesses and mainly addresses how companies view international management orientations.

The correct answer is – Philanthropic, economic, legal and ethical

Corporate Social Responsibility refers to a business’s behavior, that it’s economically profitable, complies with the law, is ethical, and is socially supportive. Profitability and compliance with the law are the most important conditions for corporate social responsibility and when discussing the company’s ethics, and the level to which it supports the society it’s part of with money, time, and talent.

Key Takeaways

1. Carroll’s CSR pyramid is a framework that explains how and why organizations should take social responsibility.

1. The pyramid was developed by Archie Carroll and highlights the four most important types of responsibility of organizations.
2. Carroll’s four-part definition of CSR was originally stated as follows: “Corporate social responsibility encompasses the economic, legal, ethical, and discretionary (philanthropic) expectations that society has of organizations at a given point in time.”

1. The pyramid’s base is profit. This foundation is necessary for a company to meet all laws and regulations, as well as the demands of shareholders. Before a company can and should then take its philanthropic responsibility or discretionary responsibility, it must also meet its ethical responsibilities.

Thus, option 3 is the correct answer.

The correct answer is – Indonesia

The Association of Southeast Asian Nations, or ASEAN, was established on 8 August 1967 in Bangkok, Thailand. Currently, there are 10 permanent members of this association. Its headquarter is in Jakarta (Indonesia).

Key Points

1. The creation of ASEAN was motivated by a common fear of communism.
2. The Association of Southeast Asian Nations is a regional intergovernmental organization comprising ten countries in Southeast Asia, which promotes intergovernmental cooperation and facilitates economic, political, security, military, educational, and sociocultural integration among its members and other countries in Asia.
3. Members are Indonesia, Philippines, Vietnam, Thailand, Myanmar, Malaysia, Cambodia, Laos, Singapore, and Brunei. Observers are East Timor and Papua New Guinea.

1. India could not become a member of this association due to its geographical location. India is a part of South-Asia while ASEAN is an organization of South-East Asian Nations. On July 23, 1996; ASEAN gave advisory status to India.

Thus, option 1 is the correct answer.

The correct answer is – Common Market

Mercosur: South America’s Fractious Trade Bloc:

1. Mercosur is an economic and political bloc comprising Argentina, Brazil, Paraguay, Uruguay, and Venezuela.
2. Created during a period when longtime rivals Argentina and Brazil were seeking to improve relations, the bloc saw some early successes, including a tenfold increase in trade within the group in the 1990s.
3. However, many experts say Mercosur has since failed to live up to its ambitions of integrating the region.

Key Takeaways

How Mercosur Works:

1. Mercosur was created in 1991 when Argentina, Brazil, Paraguay, and Uruguay signed the Treaty of Asuncion, an accord calling for the “free movement of goods, services, and factors of production between countries.”
2. The four countries agreed to eliminate customs duties, implement a common external tariff of 35 percent on certain imports from outside the bloc, and adopt a common trade policy toward outside countries and blocs.
3. The charter members hoped to form a common market similar to that of the European Union and even considered introducing a common currency.

Therefore, Mercosur, a South American Trade block is a Common market.

Additional Notes

Free trade area:

1. It is a group of countries that have mutually agreed to limit or eliminate trade barriers among them.
2. They tend to promote free trade and the international division of labor, though the provisions of the agreement and the resulting scope of free trade is subject to politics and international relations.
3. They have benefits and costs, and corresponding boosters and opponents.

Common Market:

1. A common market is a formal agreement where a group is formed among several countries in which each member country adopts a common external tariff.
2. In a common market, countries also allow free trade and free movement of labor and capital among the members of the group.
3. It iis a name for the European Economic Community or European Union, used especially in the 1960s and 1970s.

Custom union:

1. A group of states that have agreed to charge the same import duties as each other and usually to allow free trade between themselves.
2. The most famous example of a customs union is the European Union (EU). Trade among the member states of the EU flows tariff-free, and regardless of which country in the EU imports a product, the same tariff is paid.

Economic Cooperation

1. Organization or ECO is an Asian political and economic intergovernmental organization that was founded in 1985 in Tehran by the leaders of Iran, Pakistan, and Turkey.
2. It provides a platform to discuss ways to improve development and promote trade and investment opportunities.

The correct answer is – (A), (B), (D) only

Negative impacts of FDI on domestic firms in host countries are

(A) Market monopoly

(B) Technology dependence

(D) Profit outflow

Key Takeaways

1. A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country.
2. However, FDIs are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies.
3. An increase in FDI may be associated with improved economic growth due to the influx of capital and increased tax revenues for the host country.
4. Besides, the trade regime of the host country is named as an important factor for the investor’s decision-making.
5. Host countries often try to channel FDI investment into new infrastructure and other projects to boost development.
6. Greater competition from new companies can lead to productivity gains and greater efficiency in the host country and it has been suggested that the application of a foreign entity’s policies to a domestic subsidiary may improve corporate governance standards.
7. Furthermore, foreign investment can result in the transfer of soft skills through training and job creation, the availability of more advanced technology for the domestic market, and access to research and development resources.

Important Note

Creation of a Competitive Market has a Positive impact:

1. By facilitating the entry of foreign organizations into the domestic marketplace, FDI helps create a competitive environment, as well as break domestic monopolies.
2. A healthy competitive environment pushes firms to continuously enhance their processes and product offerings, thereby fostering innovation.
3. Consumers also gain access to a wider range of competitively priced products.

The correct answer is – A – II, B – I, C – IV, D – III

Key Takeaways

Therefore, it is clear from the above explanation that option 2) is the correct answer.

The correct answer is – Both Statement (I) and Statement (II) are incorrect

Key Points

• Monetary policy does not cause a deliberate change in government revenue and expenditure with a view to influencing the price level and the quantum of national output, Fiscal Policy does.
• Fiscal Policy does not regulate the money supply and the cost and availability of credit, it is done by Monetary policy.

Key Takeaways

• Monetary policy
• It is the macroeconomic policy laid down by the central bank.
• It involves the management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth, and liqu
• Fiscal policy
• It is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy.
• The central bank influences a nation’s money supply.
• Fiscal policy in India is the guiding force that helps the government decide how much money it should spend to support the economic activity, and how much revenue it must earn from the system, to keep the wheels of the economy running smoothly.
• The importance of fiscal policy has been increasing to achieve economic growth swiftly, both in India and across the world. Attaining rapid economic growth is one of the key goals of fiscal policy formulated by the Government of India.
• Fiscal policy, along with monetary policy, plays a crucial role in managing a country’s economy.

The correct answer is – Consumers’ laws are not explained well in India

Key Points

• Option 1: The given statement is correct as consumers’ laws with remedies are time-consuming, in-adequate and expensive, which means there’s a need for quick, easy and affordable remedies for consumers. therefore we can say that consumer laws are not explained well in India.
• Option 2: the author is talking about the flawed system of the judicial process and not talking about any drastic reforms in the judicial process. Hence the given statement is not correct.
• Option 3: is not correct, it talks only about the manufacturer and we are not talking about the cleverness of the manufacturers or producers in the passage.
• Option 4: not correct, Indian consumers do have a remedy but it’s often time-consuming, tedious and expensive. Consumers get frustrated when a violator doesn’t get punished.
• Hence option 1 is the correct statement.

The correct answer is – None of the above could be ascertained on the basis of paragraph given here above

Key Points

• Option 1 and 2 are not stated in the passage as the author is suggesting ‘It is desirable for consumers to be aware of their rights, and to exercise those rights responsibly and intelligently’ which doesn’t confirm whether consumers in India are aware of their rights or exercising their rights responsibly.
• Option 3 is out of the context (passage), nothing has been mentioned in the passage about not being aware of the (consumer) rights.
• Hence, none of the statements given are correct.

The correct answer is – Legal environment for consumers in India is not conducive

Key Points

• Option 3: In India, the legal environment for consumers is not satisfactory, because ‘the remedies prescribed there under are time-consuming, inadequate and expensive’ and ‘Judicial Processes. the offenders are hardly caught. proceeded against and rarely. if ever, got convicted. When violators go scot-free‘ indicates legal remedies and the actual conviction of the violators is not up to the mark.
• Option 1 is not a correct statement as the author doesn’t talk about the sufficient numbers, rather he is speaking of the number of enactments already in place.
• Option 2 is out of context, as it doesn’t relate to the content the author is discussing, the author is focussed on the flawed nature of remedies.
• Option 4 is exactly the opposite of the idea that the author is trying to convey.

The correct answer is – Consumers

Key Points

• ‘The consumers’ are the center point in the passage, as the author is talking about the rights of the consumers and how producers (including manufacturers, distributors and dealers of various goods and services) use a flawed system to their advantage to lure the customers (consumers). Even after the various enactments; lengthy, tedious and expensive remedies make consumers frustrated. Consumers get nothing from the judicial process either.
• From all these points we can deduce that the consumers are the center point of the passage and others are part of consumerism.

The correct answer is – Producers and manufacturers are insensitive about consumers’ rights.

Key Points

• Producers are insensitive about the rights of the consumers,
• The following factors have given upper hands to the producers and manufacturers.
• ‘time-consuming, inadequate and expensive remedies’,
• ‘flawed judicial process where hardly any violators are convicted’ and
• ‘false claims by the producers’
• If the producers and manufacturers were aware (or neutral about) of the rights of consumers, they wouldn’t have involved in the all-pervasive, exaggerated and false claims, for services and goods.
• The passage doesn’t mention anything about the ethics and values that governs the producers and manufacturers.