International business (Engelska) - exam questions

As a global strategy consultant, you are advising a multinational corporation on entering a new international market. Outline a comprehensive political and legal due diligence framework the company should follow. What key risk indicators should they identify, and how might these risks influence their choice of market entry mode such as joint ventures, FDI, or exporting?

Political Due Diligence

• Government stability — regime volatility, policy continuity

• Corruption levels — bribery risk, transparency

• State intervention — subsidies, nationalisation risk

• Geopolitical alignment — sanctions, diplomatic tensions

Legal Due Diligence

• Property‑rights protection — expropriation risk

• Contract enforcement — judicial independence

• Foreign ownership rules — caps, JV requirements

• Regulatory transparency — licensing, compliance

• Labour and environmental laws — rigidity, cost impact

Key Risk Indicators

• Political instability

• Regulatory unpredictability

• Weak legal institutions

• High corruption

• Ownership restrictions

• Trade barriers and sanctions

Impact on Entry Mode

• High risk → Joint venture (local partner reduces exposure)

• Strong institutions → Wholly owned FDI (control + long‑term commitment)

• High political risk but attractive market → Exporting (minimal asset exposure)

Discuss the evolution of the international monetary system from the classical gold standard to the current managed float exchange rate system. Highlight the main characteristics, benefits, and drawbacks of each regime, and explain their implications for international business operations.

Classical Gold Standard

• Fixed exchange rates tied to gold

• Benefits: stability, low inflation, predictable trade

• Drawbacks: no monetary autonomy, deflation risk

• Business impact: high certainty, low flexibility

Bretton Woods System

• Fixed but adjustable rates anchored to USD

• Benefits: post‑war stability, growth in trade/FDI

• Drawbacks: dollar overhang, periodic realignments

• Business impact: stable but increasingly fragile environment

Managed Float (Current System)

• Market‑driven exchange rates with interventions

• Benefits: monetary autonomy, shock absorption

• Drawbacks: volatility, higher hedging costs

• Business impact: requires currency risk management, flexible strategies

Overall Implications

• Trade‑off: stability vs. policy autonomy

• Firms must manage volatility through hedging, diversification, and pricing strategies

Analyze the impact of cultural differences on international business negotiations. How can companies effectively manage cross-cultural communication to avoid misunderstandings and build successful global partnerships? Illustrate your answer with real-world examples.

Why culture matters in negotiations

• Shapes communication style (direct vs. indirect)

• Influences decision‑making speed and hierarchy

• Affects attitudes toward risk and uncertainty

• Determines expectations of trust and relationship‑building

Common challenges

• Misinterpreting silence or indirectness

• Conflicting expectations about decision authority

• Different negotiation pacing

• Varied attitudes toward contracts vs. relationships

How companies can manage cross‑cultural communication

• Cultural due diligence and training

• Adapt communication style to context

• Use local intermediaries or bicultural staff

• Combine relational trust‑building with clear documentation

Real‑world examples

• Toyota–US partnerships → success through cultural training

• Walmart in Germany → failure due to cultural misalignment

Discuss the environmental and social responsibilities of multinational enterprises (MNEs) operating in emerging markets. How can companies balance profit-making with sustainable development and ethical practices? Provide examples to support your arguments.

Environmental Responsibilities

• Reduce emissions and pollution

• Sustainable resource use

• Biodiversity protection

• Apply global standards (ISO 14001, SBTi)

Social Responsibilities

• Labour rights and safe working conditions

• Community engagement

• Supply‑chain transparency

• Respect for indigenous groups

• uphold code of ethics/conduct

Why responsibilities matter

• Weak regulations in emerging markets

• High reputational risk

• Long‑term market stability depends on social legitimacy

How MNEs balance profit and sustainability

• Shared‑value strategies

• ESG integration

• Third‑party audits and due diligence

• Transparent reporting (GRI, sustainability reports)

Examine the strategic considerations a company must address when deciding between licensing, franchising, and wholly owned subsidiaries as modes of foreign market entry. What factors influence the choice, and how do these modes differ in risk, control, and resource commitment?

Licensing

• Low cost, low risk

• Minimal control

• Risk of IP leakage

• Best for high‑risk markets or when capital is limited

Franchising

• Moderate control via contracts

• Strong for service industries

• Relies on local partners

• Vulnerable in weak legal systems

Wholly Owned Subsidiary

• High control, high resource commitment

• Protects technology and brand

• High exposure to political/economic risk

• Best in stable, high‑potential markets

Factors Influencing Choice

• Market size and strategic importance

• Political/legal risk

• Need for control

• Resource availability

• Cultural distance

Critically evaluate the different tools used by government to intervene in international trade. How do these interventions influence FDI? Use specific examples to illustrate your arguments.

• Tariffs: Raise import prices; encourage tariff‑jumping FDI (e.g., Japanese carmakers in US/EU).

• Quotas: Limit import quantity; push firms to invest locally (e.g., Nissan/Toyota in UK).

• Subsidies: Support domestic firms; can attract or deter FDI (e.g., US IRA attracting EV/battery FDI).

• Local content requirements, administrative policies: Standards, regulations, bureaucracy; often force local production (e.g., India solar LCR).

• Export Controls: Restrict sensitive tech; reshape FDI and supply chains (e.g., US chip controls on China).

• free-trade zones: encourages FDI

• currency controls may hinder FDI

Compare and contrast sole-sourcing and multi-sourcing strategies in global procurement. What are the advantages and disadvantages of each approach? How do companies decide between these sourcing methods in times of global supply chain disruption?

Sole‑Sourcing

• Advantages: strong relationships, lower transaction costs, better quality coordination, economies of scale.

• Disadvantages: high disruption risk, low bargaining power, supplier dependency

Multi‑Sourcing

• Advantages: risk diversification, competitive pricing, supply flexibility.

• Disadvantages: higher coordination costs, weaker relationships, less supplier investment.

Decision During Disruptions

• Firms shift toward multi‑sourcing to increase resilience.

• Sole‑sourcing may persist when technology is unique or switching costs are high.

• Trade‑off: efficiency (sole) vs resilience (multi).

Explain the primary functions of a central bank and analyze how these functions contribute to economic stability. Provide examples from central banks like the Bank of Japan or the European Central Bank.

Primary Functions of Central Banks

• Monetary policy: control inflation, interest rates, liquidity.

• Financial stability: supervise banks, conduct stress tests.

• Lender of last resort: emergency liquidity during crises.

• Payment systems: operate secure settlement systems.

• Currency/FX management: issue currency, intervene in FX markets.

How These Functions Promote Stability

• Stabilize inflation and expectations.

• Prevent bank failures and systemic crises.

• Maintain credit flow during shocks.

• Ensure smooth financial transactions.

• Support exchange rate stability.

1. regulating the market - setting the key interest rate

2. monitor the foreign currency reserves - control and monitor the value of its currency

3. managing the supply of money in circulation (control the economy)

What are the drivers of international trade? explain.

• Main drivers: comparative advantage, factor endowments, economies of scale, product differentiation, technology, trade policy, cost differences.

• Core idea: countries and firms trade to specialize, lower costs, access variety, and exploit scale and innovation.

What is transfer pricing? Explain with an example.

• Definition: internal pricing of goods/services between related entities in different countries.

• Key issues: affects tax allocation, profit distribution, and performance measurement

• Example: Swedish parent sells components to low‑tax subsidiary at a chosen internal price, shifting where profit is taxed.

If you were the manager of new global business development for a consumer products firm in Sweden,  discuss how you would review the prospects for starting a greenfield project in Nigeria. You may use CAGE theory to support your arguments

• Cultural: Moderate distance → requires product and marketing adaptation.

• Administrative: High distance → regulatory risk, but incentives may help.

• Geographic: Distance and infrastructure challenges → but local production improves regional access.

• Economic: Strong cost advantages + large market → biggest reason to consider greenfield.

Global companies transact business in multiple countries and currencies. Discuss some advantages of Centralised Depositories. 

better liquidity management, lower financing and transaction costs, improved FX and risk management, stronger control and standardisation, better information and capital allocation

Imagine that you work for a custom-bicycle company that has thus far only manufactured in the United States. You’re under pressure to reduce costs. What options would you explore? Would you consider sourcing some of the components from countries with lower material costs? Would you consider outsourcing some of the manufacturing? Would you set up a subsidiary in a country with lower labor and material costs to handle the manufacturing? Explain the advantages or disadvantages of these options.

• Sourcing components: lower input costs, moderate risk, keep assembly at home.

• Outsourcing manufacturing: big cost savings, but less control and higher dependency.

• Foreign subsidiary: highest control and long‑term savings, but high investment and risk.

"Going global, thinking local." Explain what this phrase means and critically discuss the potential benefits and conflicts for a company in following this logic

• Global expansion + local adaptation (glocalization).

• Benefits: better fit, legitimacy, competitiveness.

• Conflicts: higher costs, coordination tension, brand inconsistency.

What is the International Monetary Fund? Explain its purpose and objective.

“Going global, thinking local” means that a company expands internationally (global strategy) but adapts its products, marketing, and operations to fit each country’s culture, preferences, and conditions (local responsiveness).

This is also known as glocalization.

• Meaning: Global expansion + local adaptation (glocalization).

• Benefits: Better customer fit, stronger brand, competitive advantage, regulatory alignment.

• Conflicts: Higher costs, complexity, brand inconsistency, HQ–subsidiary tension.

What is the International Monetary Fund? Explain its purpose and objective.

• IMF: Global institution ensuring monetary stability.

• Purpose: Support stable exchange rates + global financial system.

• Objectives: Lending, surveillance, technical assistance, crisis prevention. promote financial stability

• main purpose: sustainable economic growth, financial stability, promote foreign monetary cooperation, support the elimination of foreign exchange restrictions

The Solarenergy, an American private company wants to raise 300 million dollars to expand its business to Sweden. If they hire you as a consultant, what measures will you suggest them to adopt before entering the Capital market that will improve their public opinion and attract more investors? What are the different options they have for funding?  

Measures

• ESG reporting

• Regulatory compliance

• Local partnerships

• Stronger governance

• Clear communication

Funding options

• IPO

• Private placement

• loans

“Wholly owned foreign operations offer the greatest product line flexibility, whereas exporting offers the least product line flexibility.” Is this statement true or false? Explain

True.

wholly owned operations = most flexibility because the firm controls production and can adapt products locally

exporting = least flexibility because products are standardized in the home country and costly to modify.