Download 2) Technological

PART_A
Question_01
A)‫ مهم‬Define the components for a STEP checklist, giving examples within each category.
STEP analysis of business is one of the environmental models which stand for:
S: Social (For example: values, age structure of population, class and income-structure of local
population, population growth, age distribution, lifestyle and demographic)
T: Technology (For example: Equipment available, technologies, products, rate of technology
change, IT and network)
E: Economic (For example: economic growth, exchange rate, inflation, market trends, local
economic and market circumstances)
P: Political (For example: legislation, regulations, policies, likely developments, tax, policy,
government rules)
Also, it represents the decision and frame work of macro-environment factors used in
environment scanning. In addition, it is further extended to legal, ethics,
It is a part of the external analysis when doing market search and given a certain overview of the
different macro-environment factors that the company has to take into consideration.
B)‫ مهم‬how does the STEP checklist help us to understand the business environment of
Abboud Enterprises?
STEP analysis of business is one of the environmental models which stand for Social,
Technology, Economic and Political. Also, it represents the decision and frame work of macroenvironment factors used in environment scanning. In addition, it is further extended to legal,
ethics,
It is a part of the external analysis when doing market search and given a certain overview of the
different macro-environment factors that the company has to take into consideration.
References to Abboud Enterprises there are many of evidences related to STEP checklist as
following below:
Social: Abboud Enterprises focus on dog toy for people how have interest to own pits.
Technology: in Abboud Enterprises research and development division were developing a new
concept for an all dog toy. And produces remote control which took over a rival firm whic based
in Germany. They maintained their original businesss of manufacturing electronic components
with regional sales and marketing staff and complex distribution networks. It was a growth
market
Economic: The Abboud Enterprises was making excellent profits and were selling components
across the world such as European countries and the USA. It listed on the USA Stock Exchange
which increases its profit. At the same time they have been lunched updated versions of Woof
every 2 years with great popularity with increasing sales in USA, Far East, Australasia, and
Europe 9 .
Political: The Abboud made outsource its Businesses to India and Vietnam which had not
taxation there and its legislation contribute to new business on its lands.
Reference to previous factors, which effect on Abboud Enterprises such as:
- Expansion its market and businesses.
- increase its profit.
- Its outsourcing gained global well-known.
C) ‫مهم‬Why do some Governments consider information technology as critically important
in their economic development strategy? Explain using materials from B200 environments,
and examples.
There many of different perspective about information as critically important are:
Rastogi's perspective:
There are 3 majors forces in financial markets have caused a truly global market to form:
1- Increase in international capital flows because of staff towards deregulation of trade and
financial market around the world.
2- Explosive advance in technology lead to tremendous growth in the scale and complexity of
financial market.
3- Financial management innovation has produced number of derivatives and extraordinary
number of innovations.
Daniel Bell's perspective:
The idea that we are moving toward an information society took root in the USA in the 1960's
In other word, he identified 3 stages of economic progress:
– The pre-industrial (agricultural)
– The industrial (manufacturing)
– The post industrial (service sector)
In his work on the 'information society', he refers to knowledge having replaced labour as the
source of value, it's a commodity which can be bought and sold; and the information-processing
occupations are becoming increasingly central.
Post-industrial society developed because of computer as a central role. The new social
framework based on telecommunication
There are 3 dimensions of the post-industrial society are relevant to the discussion of
telecommunications:
- The change from a good-producing to a service society.
- The centrality of the codification of theoretical knowledge of innovation in technology
- The creation of new ‘intellectual technology’ as a key tool of systems analysis and
decision theory.
There are many of criticism of the Information Society as following below:
(1) IT as central to contemporary society as is suggested. No since preceding technologies
(TV and radio) were seen as media which will expose everyone to the spoken word. (For
example: Unhealthy language, the people will loss their mother language because used
chatting within the internet).
(2) The criticism that it is not a march of progress from the primary, through the secondary to
the tertiary sector. Rather, much of the service sector has grown because of a growth in
manufacturing, rather than as a replacement for it. (For example: car company and
selling services, when the customer buys the car, he will get free service for certain
period as promotion).
(3) The empirical evidence about us moving towards a leisure (free time) society – with
automated manufacturing, political participation and an emphasis on the quality of life.
While automation of work has made a few jobs more skilled, many routine, semi-skilled
and unskilled, jobs remain- in deed, they are found in abundance in the burgeoning
service sector. (it depends on machine require skills).
(4) The IT managers have little chance to achieve boards of corporations, but in other
specialist the manger has chance to promote up.
(5) Dealing with information does not itself infer power. However; the information society is
here, in advanced industrial societies-whether we like it or not, or agree with it or not – in
that it is undoubtedly pervasive and important in our daily lives.
Hudson's perspective:
She examines the role of information and communication technologies in globalisation and she
access to:
• The global information revolution is modifying drastically (hugely) the world of
telecommunication. Furthermore, the way of life, the nature of work, the methods of
learning and the way people interrelate are changing rapidly.
•
She says that States need to establish links both internationally and between different
information and communication media.
•
She calls on Governments to harmonise their regulatory frameworks on
telecommunications and allow private business providers to invest in the technology
development.
•
She recommends education as a way of developing a common understanding of the
system and its objectives.
She has other opinion about major developments resulted from "the rapid introduction of new
technologies and services, the restructuring of the telecommunications sector; and globalization
of economies and of communication":
• The narrowing of distance
• The broadening of "information superhighways"
• The expanding omnipresence of communications based on wire technologies
• The increasing contribution and competition of developing countries for data entry and
word processing and for computer programs.
 Global networking has major role for changing the geography of business:
The huge progress in global networking offers great opportunities for developing new business.
The electronic security protection and improved code are encouraging consumers and businesses
to use the Internet.
The companies will sell their production and have links with employees and sub-contractors
worldwide.
For example: Nike company the head office in USA and the company in China as branch, so by
the network will be communicated between employees and sub-contractors)
(e.g amazon.com)
Businesses can exploit telecommunications to develop a competition advantage internationally
For example: 4 engineers made a car through the internet without meet each other.
The demand for services will expand and require access to a wider range of frequency
(bandwidth) to be used in telecommunications in order to transmit signals
 Toward global information infrastructure:
"Information highways" are destined to link communities and nations. They will necessitate the
contraction of a national and international "information infrastructure" to establish the Internet
and other forms of electronic communications at the disposal of people around the world. Then
make close gap between nations.
 Access and control
Some government that see information technology as vertical as their economic development
strategy are the same time concerned about the socio-political implications of access.
In some countries the government control internet and satellite also , then can not access to some
pages.
For example: Singapore's government.
 Closing the Gap
Telecommunication (internet) very important now a day, because make closing the gap start with
restructuring the telecommunications sectors, this lead to improve the productivity and
encourage investment.
For example: World Bank estimates that investment in telecommunications in the development
world must double to meet the growing demand for telecommunication services.
 Leapfrogging
It is new technology to reach and users through wireless local loops or small satellite terminal
rather than cable.
For example: in South Surra area in Kuwait can access the internet by the satellite, in the same
time have not telephone service.
Digital transmission and switching are increasing reliability and lowering cost as well as making
it possible for subscribers to access the internet.
 New gap
As investment in telecommunication infrastructure increases, the gap between information have
and have not may become based on price and choice rather than technology. Countries that
continue to favour telecommunication monopolies or seek to control access to information may
limit user access even where technology is available.
For example: In most Europe countries access to the internet is much expensive than in North
America.
 Remaining barriers
New technology has eliminated distance for international finance industry, which trade not only
around the world but around the clock. Technology makes everything beyond our borders. Yet in
many parts of the world some people don’t know how to use the technology! These barriers must
be eliminated if distance is truly disappearing.
Question_03:A) ‫مهم‬Define the phenomenon of globalization giving examples.
The increasing connectivity of economies and ways of life across the world, The
Encyclopedia Britannica says that globalization is the "process by which the experience of
everyday life ... is becoming standardized around the world." While some scholars and
observers of globalization stress convergence of patterns of production and consumption
and a resulting homogenization of culture, others stress that globalization has the potential
to take many diverse forms.
Giddens offers a definition of globalisation as an overwhelming cultural phenomenon which
provides both driving force and direction to most of the changes we are observing in the
contemporary world. In other word, he said 'globalization is political, technological, cultural as
well as economic'.
There are two perspectives about the globalization as mentioned below:
The sceptics said the world is same for many years, there are communication, the global
economy is not different the before.
For example: European Union mostly trade among themselves with trading blocks in some
countries such as Asia!
The “radicals” who state that the consequences of globalisation can be felt everywhere. They
see the era of the Nation State as being over.
They cite examples such as increased world trade and the global electronic economy where fast
transfers of money are possible.
Rastogi identifies the main cause of globalisation as the growth in volume of investment, which
is now conducted internationally. This is supported by the development of new technology,
which first makes the capital funds needed for investment easier to transfer across the world. It
then helps financial decision makers calculate profit if the investment is successful and even the
probability of its success or failure. His interpretation of the economy is that it is increasingly
dominated by a growing financial sector.
B) ‫مهم‬Apply SWOT analysis to help analyze the current situation of Abboud Enterprise
SWOT analysis model is a strategic planning tool used to evaluate the Strength, Weakness,
Opportunities, and Threats involved in a project or in a business venture.
If a clear objective has been identified, SWOT analysis can be used to help in the pursuit of that
objective. In this case, SWOT is:
Strength: attributes of the organization that is helpful to achieving the objective.
For example: expanding business is in Dog toys at the pets market which imported at low cost
form China and sells through his wholesaling operation , which increase his business profit .
Weakness: attributes of the organization that is harmful to achieving the objective.
For example: the total staffing distribute in different areas , in general few when compare with
the dimension of his business Sales fell as buyers started to ask about the ethics of Abboud
Enterprises
On the other hand Mr. Jamal is getting old which effect on the productivity.
Opportunities: external conditions that is helpful to achieving the objective.
For example: They re-export to Vietnam, which the profit formed for Business profit. He import
the goods from China which has low cost market will be accepted with different social levels.
Technology development get chance to use the internet sales which increased their market share
in recent year and diverse the way of market.
Threats: external conditions that is harmful to achieving the objective.
For example: in 1998 a rival organization (BowWow corporation) based in USA launched a
range of electronic toys which although different to project Woof.
Strengths and weaknesses are often internal to the organization. Opportunities and threats
often relate to external factors. For this reason the SWOT Analysis is sometimes called InternalExternal Analysis.
‫مهم‬
C) How is business behaviour affected by globalisation? Explain, using materials from
B200 environments, and examples.
Giddens offers a definition of globalisation as an overwhelming cultural phenomenon which
provides both driving force and direction to most of the changes we are observing in the
contemporary world. In other word, he said 'globalization is political, technological, cultural as
well as economic'.
There are two perspectives about the globalization as mentioned below:
The sceptics said the world is same for many years, there are communication, the global
economy is not different the before.
For example: European Union mostly trade among themselves with trading blocks in some
countries such as Asia!
The “radicals” who state that the consequences of globalisation can be felt everywhere. They
see the era of the Nation State as being over.
They cite examples such as increased world trade and the global electronic economy where fast
transfers of money are possible.
Rastogi identifies the main cause of globalisation as the growth in volume of investment, which
is now conducted internationally. This is supported by the development of new technology,
which first makes the capital funds needed for investment easier to transfer across the world. It
then helps financial decision makers calculate profit if the investment is successful and even the
probability of its success or failure. His interpretation of the economy is that it is increasingly
dominated by a growing financial sector.
From his perspective, there are 3 majors forces in financial markets have caused a truly
global market to form:
1. Increase in international capital flows because of staff towards deregulation (free) of
trade and financial market around the world.
2. Explosive advance in technology lead to tremendous (huge) growth in the scale and
complexity of financial market.
3. Financial management innovation has produced number of derivatives and extraordinary
number of innovations
4. Open economics, growth of technology and the innovation in financial markets lead to
build on each other and drive further growth. These trends affecting the financial market
players as following:
1) Savers: who are the providers of funds or credit in the economy. Their primary goal is to
minimize risk-adjusted return while preserving their capital.
2) Institutional investors: such as banks funds managers, insurance companies. Their
objective is to maximize risk-adjusted returns companies – their objective is to maximize
risk-adjusted returns for the savers who use their services, based on a state of investment
objective.
3) Users of funds: corporations, governments, and individuals use funds to finance real
investment and current consumption. Their objective is to minimize their cost of capital
within acceptable risk parameter.
4) Broker / Dealer Intermediaries: they are all the go – between transferring funds from
savers to users of funds. The play the role of financial counselor, create new financial
products
Borderless world help growth of financial market and members.
The rate of return will improve for savers because of better risk return relationship, lower
management expenses and reduce transaction costs , People become more educated in financial
market, institutions and funds try to be unique and differentiate them self by tracking specific
industries or provide special financial technique.
Nevertheless, there are some barriers affect borderless world and slow the globalization of
financial market: legal systems, taxes differences, and not all countries have free market!
McGrew putting the advanced Capitalist State in Perspective
The post war period witnessed a massive expansion of state activity in all Western societies.
A ‘state debate’ has emerged delivering some new insights into the ACS = Advanced Capitalist
State
Within this debate, two distinct approaches can be identified of state power and the relationship
between state and civil society: society centered approaches and state centered approaches.
Society centred approach represented by Investors, business owners
Society centred approaches emphasise the responsiveness of governments to interest and lobby
groups and focus on the ability of the most powerful of these groupings (who gain privileged
positions in the State) to shape legislation around their own objectives. This is often referred to
as a PLURALIST approach to Government and is associated with modern liberal and social
reformist thinking.
State centred approach represented by Government
State centred approaches view the state as a separate entity from its constituent society,
which develops power independently of that vested in it by society and builds a “bureaucratic
apparatus” for the purpose of power-wielding. This is known as a UNITARIST approach and
is associated with conservatism and with Marxist adherents to the ideal of the communist
state.
The globalization has two sides of effects on business behaviour:
Positive effect: More business, fast transfer of capitals, open market also outsourcing.
Negative effect: Increase the pollution, money laundering and IPR law.
PART_B
Question_01
A) Explain with examples the following two terms:
-Substitute goods
-complementary goods
Availability of substitute, if there are many close substitutes or alternative
Product available, then the demand is likely to be price elastic. But if there few
Alternative products then demand is likely to be price inelastic.
Ex, the demand for petrol is price inelastic , but the demand for petrol products Is elastic.
Complements are goods that are used in conjunction with other goods.
A fall in price of a good will increase the demand for its complement. The cross-price elasticity
of complement is negative.
B) Explain how the production of both substitute and complementary good at low prices
for Woof Could affect the sales of Woof
The effect on Wood revenue of a change in price depends on the price elasticity of demand for
its product.
When demand is elastic (for example: we can replace the dog toy, decrease in price will lead to
increase in Wood revenue,
When demand is inelastic decrease in price will fall in revenue.
If the price of substitute goods go down the demand for Woof will increase
If the price of Complimentary goods go down the demand for Woof good will increase and this
will give an opportunity for the price will increase
C) Using materials from B200 market and examples explain how foreign direct investment
(FDI) and multinational enterprises (MNEs) affect their host countries.
Multinational corporations do businesses around the world are corporations that operate beyond
the borders of any single country, Corporations that do business across national borders are
sometimes so large that their annual revenues from worldwide operations exceed the value of
goods and services (gross domestic product) of entire nations.
For example, General Motors had revenues of $ 164 billion in 1996.
MNCs are “enterprises which own or control production or service facilities outside the country
in which they are used.” The MNC is an agency of direct, as opposed to portfolio, investment in
foreign countries. It is not always incorporated or private. It can be a cooperative or state-owned
entity.
Almost every large business organization has some direct or indirect involvement with foreign
countries, but only when an enterprise confronts one or more of the problems of designing,
producing, marketing, or financing its products or services within and among foreign nations
does it become truly multinational.
For example, MNC have foreign nationals in top-management positions, the top executives of
Coca-Cola include nationals from Australia, Ireland, Italy, and Austria.
Many of firms of businesses go multinational for many reasons:
For the profit, management would like to manufacture in those countries where it finds the
greatest competitive advantage, would like to buy and sell anywhere in the world to take
advantage of the most favorable price to the company, advantage of labor cost, trade agreements,
and currency fluctuations;
MSN help governments to improve economy through employment, sales and buy profits, tax,
improve technology, improve people skills, social stability, productivity of local market, high
competition in local market.
There are many of problems that an organisation may face when it goes multinational as
mentioned below:
The operating in a new and unfamiliar environment, coordination of the activity of subsidiaries
located in different parts of the world, cross cultural issues.
But in other side there are benefits that MNCs may bring to their host nations, such as:
Increase growth rate of host nation through investment, new technologies or managerial
competencies (like skills and experience will be gained), stimulation of competition inducing
domestic rivals to be more innovative, competitive, promotion of development of supporting
industries or complementary activities, Encourage new business industries, improve management
skills level, and provide products and services that raise the standard of living .
For example, France offered lucrative inducements to get the Mercedes-Benz Swatch mobile
factory to locate in France in 1995.
In the United States, South Carolina brought a BMW plant to Spartanburg partly with
inducements. California, Tennessee, and other states brought Japanese automobile plants to their
areas with various inducements.
There are many of the disadvantages that MNC investment may bring to their host nations for
example:
Challenge to Nation- State rules, They want control of their economies and want to achieve
their economic, political, and social objectives. The power of the MNC can influence each of
these objectives and in so doing may challenge the sovereignty (rule), or the supreme (top)
political power, of the government.
Inequities, import raw materials from home country but not from host country, avoidance of
taxes and giving the best management jobs to MNC home-country citizens.
Interference with Economic Objectives for example The MNCs have the strength to attract
bank loans which otherwise might be available for local businesses, or an MNC may wish to
locate a plant in an area of prosperity when the host country would prefer its location in an
underdeveloped region.
Social Disruption (trouble), the introduction of different mores (traditions), habits, behavior,
and ethical values, plus new products, management styles, distribution systems, more money,
and technology, do affect local ways of thinking and doing things. Some locals may applaud
(approve) the changes, while others deplore (‫ )يستنكر‬them.
Environmental Degradation (poverty), Many nations are becoming more concerned about the
impact of MNCs on their environment.
Imperialism, many of the awakening (developing) nations look on foreign managers with fear
and distrust as the embodiment (picture) of an old, nor easily forgotten, exploitative (unfair)
colonialism.
Symbol of annoyance and Antipathy, the LDCs have grievances (‫ )شكوى‬about their position in
the world that have nothing to do with the MNC, but the MNC is a convenient (suitable) visible
target for their anger
Destruction (affect and damage) of local competition, repatriation (send home) of profits and
no investment in the local economy, problems of footloose industry including uncertainty in the
labour market.
Developing countries should encourage MNC investment in their economies, and they
should try to regulate MNC activity, there are broad generalizations that vary, of course, from
country to country. Sometimes the complaints are completely justified; at other times they are
more perceived than real.
So the country and Local Corporation discover the benefit of MSN.
But even in some of the highly industrialized countries there are resentments against foreign
investment and restraints are imposed on foreign firms.
Hong Kong impose few restrictions (limits) on foreign investments. Sweden treats foreign
MNCs as it does its domestic companies. China has many restrictions.
PART_B
Q5
A) Explain with examples the following two terms:
Public goods
- Merit goods
Merit Goods are goods and services where the social benefits exceed the private benefits. And it
are underprovided by the market mechanism, as individuals don't take into account the positive
externalities that arise from consumptions , which will lead to the market equilibrium quantity
being lower than the social optimum.
Public goods have two characters, Non-rivalry that means when I consume a good; it does not
reduce the amount available for others. For example, benefiting from a street light does not
reduce light for others, but eating an apple would. Moreover, Non- excludability: This occurs
when it is not possible to provide a good without it being possible for others to enjoy. For
example, erecting a dam to stop flooding, or providing law and order.
Public goods is one for which the exclusion of others is undesirable and unnecessary,
impractical and difficult, or impossible.
Market Failure ‫يتعلق ب‬
B- Explain how externality can influence a business like abboud enterprises
Externalities are a cost or benefits of a transaction that are incurred or received by other
members of the society but not taken into account by the parties to the transaction.
Externalities can be either positive, when an external benefit is generated. For example, you are
able to educate other people and therefore they benefit as a result· Therefore with positive
externalities the benefit to society is greater than the personal benefit. Therefore Social Benefit >
Private Benefit.
Or negative, when an external cost is imposed upon others. And it can be harmful, for example
when factory and individuals (more production to customers, but the pollution affect neighbors
health).
Governments are generally more concerned with negative externalities such as pollution than
positive ones. The control through direct regulation and tax.
Refereeing to the case study the externality from the manufactures in Vietnam effected the global
environment and but purser to the company in order to regulate there externality and become
environmental friendly
B) ‫مهم‬What role can the state play in situations that are subject to market failure?
C) Market Failure‫يأتي في كل أمتحان‬
Governments have three main economic functions in a market economy as mentioned
below:
1. Governments increase social efficiency by promoting competition, limitation
externalities like pollution, and providing public goods.
2. Governments promote equity by using tax and expenditure programs to redistribute
income toward particular groups.
3. Governments foster macroeconomic stability and growth, reducing unemployment and
inflation while encouraging economic growth-through fiscal policy and monetary
regulation.
Market failures describe the failure of the market economy to achieve an efficient allocation of
resources.
There are several important circumstances under which market fail to allocate resources with
reasonable efficiency:
Public goods are commodities for which the cost of extending the service to an additional person
is zero and which it is impossible to exclude individuals from enjoying, and it has two
characters:
Non-rivalry that means when I consume a good; it does not reduce the amount available for
others. For example, benefiting from a street light does not reduce light for others, but eating an
apple would.
Non- excludability occurs when it is not possible to provide a good without it being possible for
others to enjoy. For example, erecting a dam to stop flooding, or providing law and order.
Externalities are a cost or benefits of a transaction that are incurred or received by other
members of the society but not taken into account by the parties to the transaction.
Externalities can be either positive, when an external benefit is generated. For example, you are
able to educate other people and therefore they benefit as a result· Therefore with positive
externalities the benefit to society is greater than the personal benefit. Therefore Social Benefit >
Private Benefit.
Or negative, when an external cost is imposed upon others. And it can be harmful, for example
when factory and individuals (more production to customers, but the pollution affect neighbors
health).
Governments are generally more concerned with negative externalities such as pollution than
positive ones. The control through direct regulation and tax.
Asymmetric information- ‘lack of relevant information’
Markets work best when everyone is well informed. People can’t make maximizing decision if
they are poorly informed about the things they are buying or selling. The results of error
information and leave consumer to discover can lead to death, for example using for medicine
without mentioned data around it may be cause negative effects on our health.
Government intervention is either to force social values not held by specific individuals.
Missing Market
Important sets of missing market involve risk & future events.
No one know the future price for manufacturing products such as car which rely on many factors
which effect on the cars industry for example the price of petrol and the inflation and other
factors.The future market is missing.
Also, you can insure your house against fire from ordinary causes but you can not insure it
against fires caused by war which causes many fires and crises.
Monopoly & competition , Market Power
There is specific firms control the market. Laws and other instruments that are used to encourage
competition and discourage monopoly, this law used to influence both market structure and firms
individual behaviour. The goal is to control market power provides rationales both for
competition policy and economic regulation. The policies direct control the monopolies,
oligopolies and creation of competitive conditions.
The direct control of oligopolies like in USA the oligopolies industries such as airlines industry
left in private hand but there decisions were regulated by government, appointed bodies that set
prices for example.
Merit goods
They are goods and services where the social benefits exceed the private benefits. Merit goods
are underprovided by the market mechanism, as individuals don’t take into account the positive
externalities that arise from consumption. This will lead to the market equilibrium quantity being
lower than the social optimum.
‫مهم‬
why do some Governments consider information technology as critically important ‫م‬
1c
in their economic development strategy? Explain using materials from B200
(12 marks)
environments, and examples.
Chapter (23)
The idea that we are moving toward an information society took root in the USA in the 1960's in
the context of rising prosperity, the automation of the workplace, an age of economic plenty and
on assumption that the demise of repetitive, unsatisfying work was imminent".
Daniel Bell wrote above the "Coming of Post-Industrial society" in 1973 identified three stages
of economic progress:
1) The pre-industrial (dominated by Agriculture)
2) The Industrial (dominated by Manufacturing)
3) The Post-industrial (dominated by the Service Sector)
Bell's analysis of the shift to the service sector includes:
1) the kind of work which people do
2) changes in the occupational structure (the decline of blue and rise of white color
workers)
3) A focus on who controls the new key resources (entrepreneurs give way to
knowledge elites).
QUESTION TWO
TABLE OF INFRASTRUCTRURE INDICATORS
Country
Vehicles
(per 1000
people)
1999
Paved roads
(% of total
roads)
1999
Internet hosts
(per 1000
people)
2000
0.04
19.3
0.8
105.0
23.2
11.9
0.02
0.3
3.0
0.5
1.5
Mobile
Phone use
(per 1000
people)
2001
3
425
46
167
445
No data
9
164
124
293
113
Per capita
GDP at
current
$US
(2000)
1,759
12.294
1,554
1,729
18,056
3,810
6,453
1,162
8,226
28,132
9,107
GDP
In current
Billion
$US
(2000)
53.5
8.0
99.4
8.5
35.8
16.5
34.1
33.3
19.8
16.5
188.7
Algeria
Bahrain
Egypt
Jordan
Kuwait
Lebanon
Libya
Morocco
Oman
Qatar
Saudi
Arabia
Syria
UAE
Yemen
53
312
30
68
408
336
241
52
142
369
157
69
78
78
100
81
85
57
56
30
90
30
30
103
34
23
100
12
0.001
92.1
0.1
12
616
2
1,105
24,275
524
17.9
70.5
9.2
(5 marks)
Describe the information given in this table.
This is general question
These are infrastructure indicators for the years (1999, 2000&2001)
Vehicles (per 1000 people) 1999: the rate of people who own cars in 1999.
) in 1999.‫الطرق المرصوفة‬Paved roads (% of total roads) 1999: the rate of paved roads (
Internet hosts (per 1000 people) 2000: the rate of internet users in 2000.
Mobile Phone use (per 1000 people) 2001: the rate of mobile phone users in 2001.
Per capita GDP at current $US (2000): is measured by: GDP/ the total number of the citizens=
‫معدل دخل الفرد‬per capital
Gross Domestic Product (GDP) in current Billion $US (2000): GDP is a measure of the size
of an economy, the money value of all goods and services produced in a year measured by
billions $US.
ABC is the case company in which this question came from
Explain how this information could be used by ABC Enterprises when looking to set
2b
up a Regional Office in UAE, Oman or Yemen in 2002. What other information
(8 marks)
would they need?
- These information's could be used by ABC Enterprises when looking to set up a Regional
Office in UAE, Oman or Yemen in 2002 to help them to know some information's about
infrastructure indicators in years 1999, 2000, and 2001 like economic factors (GDP, they have
the highest per capital income which is 24,275 $US, and cars owners.…etc) and these
information's could be used to know some thing about the technological factors like mobile
phone users and internet hosts.
- The best country to set the Regional Office is UAE because the economic growth is higher
than the others and they have the highest per capital income which is 24,275 $US. Also, these
information's would help them in technological factors like mobile phone users and internet
hosts.
- Other information's would they need are political factors like legislation, regulations,
policies, likely developments , social factors like Demographic, values, lifestyle, age structure of
population, class and income-structure of local population and economic factors like number of
competitors, exchange rate and currency stability.
‫مهم‬
Using materials from B200 environments and examples, discuss the view that
individual states’ governments have little influence over the activities of multi(12 marks)
national corporations operating in their countries.
This question related to markets' book chapter (10)
2c
QUESTION THREE
‫مهم‬
How is business behaviour affected by globalisation? Explain, using materials from B200
(12 marks)
environments, and examples.
globalisation‫أجابة أخرى عن العولمة‬
Chapters (1&8)
First globalization is he internationalizations of markets and corporations, has changed the way
modern corporations do business. For example, Nike is manufacturing its athletic shoes in many
Asian countries.
Globalization should be seen in 4 terms:
1) Political
2) Technological
3) Cultural
4) Economic
For Giddens, he takes the view that seeing the phenomenon of globalisation solely in economic
terms is a mistake. He sees it as a complex set of processes with push and pulls effects. There are
more driving forces at play than just economic ones.
1- Giddens feels that everything is the world is changing as a result of a phenomenon he calls
"Globalization".
2- Giddens recognizes that people have different views about globalization.
A- The "skeptics" view the world as subject to a historical cycle of events. Globalization is
just talk.
B- The "radicals" argue that globalization is real. Giddens agrees with radicals who see
globalization as a process providing a consistent pattern to some changes happening in the
economic, political, cultural and technological fields.
3- Many business – large and small – are concerned with the phenomenon of globalization.
For Rastogi, he identifies the main cause of globalisation as the growth in volume of investment
which is now conducted internationally. This is supported by the development of new technology
which first makes the capital funds needed for investment easier to transfer across the world. It
then helps financial decision makers calculate profit if the investment is successful and even the
probability of its success or failure. His interpretation of the economy is that it is increasingly
dominated by a growing financial sector.
Three major forces which have caused a truly global market:
Deregulation of trade and financial market, around the world, resulting in increased 1)
international capital flows.
Computing and communication technology have provided the platform for tremendous 2)
growth in the scale and complexity of financial market, thereby meeting the need for
international flows.
Financial management innovations have produced an unprecedented number of innovations. 3)
QUESTION FOUR
The journey of natural capitalism involves four major shifts in business practices.
List these four shifts, with a brief description of each.
(5 marks)
Chapter (26)
4a
1- A dramatic increase in the productivity of the natural resources:
In the first stage of company's journey toward natural capitalism, it might be done through
redirecting the wastes of energy, water, materials and other resources through its production
systems, and other operations:
Implementing whole system design: Whole system thinking has helped many companies a)
dramatically reduce such forms of waste as defect rate and inventory. Whole system can
help managers find small changes that lead to big savings that are cheap and free.
Adapting innovative technologies: The automobile industry for instance is due for a drastic b)
technological change.
2- A shift to biologically inspired production models:
This can be implemented through using a closed-loop manufacturing to create new products and
processes that can be totally prevent waste. This plus more efficient production processes
could cut companies' long term materials requirements by more than 90% in most sectors.
Closed loops production systems are designed to eliminate any material that incur disposable
costs.
3- The move to a solutions-based model:
The shift to a service business model promises benefits not just for participating businesses but
to the entire economy as well. Adoption of the service model will reduce the volatility in
turnover of capital goods that lies at the heart of the business cycle.
4- The reinvestment in Natural Capital:
Reinvest in restoring, sustaining, and expanding the most important form of capital – their own
natural habitat and biological resource base.
Natural capitalism try to join together ecological with economic goal in order to avoid the huge
waste of natural resources and to build a new and prosperous world that benefits from a
healthy climate.
Which of these shifts could be adopted by ABC Enterprises if they are to be seen as
(8 marks)
environmentally friendly? Explain why.
A shift to biologically inspired production models:
This can be implemented through using a closed-loop manufacturing to create new products
and processes that can be totally prevent waste. This plus more efficient production
processes could cut companies' long term materials requirements by more than 90% in
most sectors.
Closed loops production systems are designed to eliminate any material that incur
disposable costs.
4b
‫مهم‬IMPORTANT QUESTION FIVE
Define Hofstede’s cultural dimensions, giving examples within each dimension to aid
(5 marks)
your definition.
Chapter (15)
Rating
High
Low
Power – distance
Distant
Close
Uncertainty –avoidance
Risk –avoiders
Risk-takers
Individualism
Individualists
Collectivists
Masculinity – femininity Masculine
Feminine
a) The power-distance dimension:
The power distance dimension deals with the way superiors exercise power. In
high power-distance cultures like Japan and China the boss "should try to look as
powerful as possible".
Inequality is accepted by the people. They consider powerful people as superiors
and refrain from expressing disagreements. In low power-distance cultures such
as Sweden or Denmark inequalities are minimized. Superiors and subordinates
behave with open mind and trust each other, practice team work and "consider
each other to be colleagues… and interdependent".
b) The uncertainty-avoidance dimension:
This dimension analyze the attitudes of people toward risk i.e. their tolerance to
accept a certain degree of risk. The proportion of people who are risk averse is
greater in developing countries like Tunisia and Portugal than in developed
countries like Switzerland and Britain. High uncertainty-avoidance means that
"people feel threatened by uncertain situations" and that they are subject to stress
and anxiety in risky circumstances or projects.
People in Tunisia and Portugal prefer to balance risk-avoidance by hard work,
career stability and strict obedience to rules. On the contrary, for people in
countries of weak uncertainty-avoidance, risk is more easily accepted, people are
more pragmatic and more open to change.
c) The individualism-collectivism dimension:
In an individualist culture the entrepreneurship spirit is strong based on individual
initiative and performance. A citizen of the US or of Britain "has the right to a
private life and opinion". In a collectivist culture the group, the family or the clan
prevail and not the individual.
In Pakistan or Peru the accent is on being part of any type of organization, the
emphasis is on willing to participate in a close social framework.
5a:
d) The masculinity-femininity dimension:
In "masculine" cultures money, material standards and performance are important
criteria of success and of strength in countries such as Australia and Italy.
In "feminine" cultures the quality of life, people and the environment are
priorities. These factors are predominant in the Netherlands and Sweden, for
example.
In "masculine" cultures men take decision and dominate and women are expected
to be caring and nurturing.
In "feminine" cultures the society is based on equality between the sexes.
ABC is the case company in which this question came from
With regard to ABC Enterprises, which of Hofstede’s cultural dimensions might
(8 marks)
apply? Explain why.
5b
All Hofstede’s cultural dimensions might be applied by ABC Enterprises because it is MNC and
it can use all the dimensions as per the branch location in the world.
Using materials from B200 environments and examples, discuss the differences
5c
between the systems approach and the “machine age” approach.
(12 marks)
Chapter (22)
Systems thinking reverse the Three-stage order of Machine-age thinking which are:
1) Decomposition of that which is to be explained
2) Explanation of the behavior or preparation of the parts taken separately
3) Aggregating these explanations into an explanation of the whole.
In analyzed (machine age) thinking the thing to be explained is treated as a whole to be taken
apart
For example: University –college – department – class – student – and subject matter.
In the Systems approach there are also three steps:
1) Identify a containing whole (system) of which the thing to be explained is a part.
2) Explain the behavior or properties of the containing whole.
3) Then explain the behavior or properties of the thing to be explained in terms of its role(s) or
function(s) within its containing whole.
In synthesized (systems) thinking the thing to be explained is treated as a part of whole system.
For example: subject matter – student- class – department- college – and university.
Extra questions
Define the transformation model, what are the components of it? Giving examples
(5 marks)
within each component?
Transformation Model: is a model shows the system as a set of process that transform a
range of inputs into a range of outputs.
For example: universities which transform students to graduated people.
Resources
Materials
Energy
People
Technology
Information
Expertise
Capital
Transformation process
6a
Goods
&
Services
How can you use the Transformation Model to understand the business model of
6b:
(8 marks)
ABC Enterprises?
We can use transformation model to understand the business model of ABC Enterprises by:
Inputs: (factories, labours, R&D, H.Q., regional offices, electrical components …etc).
Transforming processes (production, selling toys, research…etc).
Outputs: project X toy, salaries, pollution as what happened in Laos, profits…etc).
What are the two approaches that define the relation in power between State
and Society and how do they differ?
(5 marks)
7a:
Chapter (18)
Putting the advances capitalist state (ACS) in perspective
State in Perspective by McGrew
Society centred approach:
Society centred approaches emphasise the responsiveness of governments to interest and
lobby groups and focus on the ability of the most powerful od these groupings (who gain
privileged positions in the State) to shape legislation around their own objectives. This is
often referred to as a PLURALIST approach to Government and is associated with
modern liberal and social reformist thinking.
State centred approach
State centred approaches view the state as a separate entity from its constituent society,
which develops power independently of that vested in it by society and builds a
“bureaucratic apparatus” for the purpose of power-wielding. This is known as a
UNITARIST approach and is associated with conservatism and with Marxist adherents to
the ideal of the communist state.
Which is more beneficial?
At first glance, a society centred approach might appear more beneficial as it implies that the
government is more open to lobbying – however it may also mean that certain business interests are
according “privileged” group status.
State centred approaches leave less room for lobbying on changes of policy, but may encourage
businesses to forge direct relationships with the political party in government. This can lead to
longer term stability.
What is beneficial really depends on the type of firm – as different types of business environment
suit different types of firm. For example, an entrepreneurial firm may suit a loosely regulated fast
changing environment, a firm involved in long term projects may prefer a climate with close ties to
government.
ABC is the case company in which this question came from
In which of these two approaches will ABC enterprise is likely to perform better and
(8 marks)
why? Explain.
7b:
State centred approach because it is a firm involved in long term projects and this kind of firms
prefers a climate with close ties to government.
‫مهم‬
Using materials from B200 environments and examples, explain the differences
between government-business relations in Japan and Korea?
(12 marks)
8c
Chapter (19)
GOVERNMENT BUSINESS RELATIONS IN JAPAN
The three major players:
a) Bureaucracy
The Ministry of International Trade and Industry, created in 1949 is the most
dynamic and efficient government body operating in different areas such as:
1- The conception of Japan's "industrial policy-making process",
2- The country's strategies for development,
3- The implementation of the structuring of industry
4- And the "coordination of Japan's foreign trade and commercial
ties".
The Ministry of Finance (MOF) is also a major player in developing Japan by
using budgetary process, low credit cost and tax incentives.
b) Business
Institutions like the Japan Chamber of Commerce and Industry KEIDANREN
influence government considerably with a well-known example being the merger
of the Democratic Party and the Liberal party to create the LDP (Liberal
Democratic Party) in 1955.
The KEIRETSUS (the large industrial groups) are diversified in different
industrial activities and constitute approximately one-third of the total economy.
Then, the subcontractors and parts suppliers represent the bulk of the
manufacturing companies in Japan, with usually less than a hundred employees
c) The LDP
The LDP guaranteed close and durable government-industry collaboration for the
development of the Japanese economy. This political party is made up of several
factions. It elects a president for two years who access automatically to the post
of prime Minister "due to the LDP's majority in the Diet".
The LDP plays a major role in bringing bureaucracy and business together and in
maintaining a close relationship between the party and the two other members
of the triangle. Bureaucratic who retire move into the LDP and into corporations
in the Private sector.
This triangular relationships between the LDP, bureaucrats and private sector are
"characterized by interdependence" the practice of this relationship is not always
easy because each member has it own special interests and because corruption is
widespread, each side trying to benefit most.
Industrial policy instruments
The objective of industry in Japan changed after the war from "government industrial guidance
model" to "private sector industrial guidance model" encouraging the organization to invest,
innovate, produce and encouraged rationalization of output to boost the efficiency of production.
GOVERNMENT BUSINESS RELATIONS IN SOUTH KOREA
Government Domination
The Korean government was always very active interfering in the economy and in business
activities in the private sector. The government controlled commercial banks, monetary policy
and credit. It also regulated prices and wages until the beginning of the 1980s and influenced
entry or exit of private companies to and from a certain number of sectors in the economy.
The Korean government encouraged the development of export-oriented companies and granted
them substantial advantages like favorable tax treatment.
The law of Monopoly Regulation and Fair Trade limited corruption and monopolistic particles.
The government favoritism was criticized in the mid- 1980s and its heavy intervention in the
economy was also curbed due to public protest.
Government and the birth of CHAEBOLS
The Korean government used incentives and privileges to help CHAEBOLS develop and
prosper.
A number of measures were adopted to increase CHAEBOLS' wealth and influence such as:
1) The sale of "enemy property" (i.e. the Japanese industrial companies left behind
in 1945) which helped several CHAEBOLS starts and expands their activities
considerably.
2) The control of commercial banks credit
3) Cheap bank loans
4) Subsidized bank credit
5) Tax incentives and favorable tariff policy
6) Wage control
7) Control of labor unions.
8) Funding from government's development fund.
Excessive indebtness with reasonable interest rates lowered the cost of capital but increased
financial risk and the probability of bankruptcy of corporations. These advantages were added to
the ones the corporations already benefited substantially from OTHER forms of government and
financial help.
The debt-equity ratio was very high and reached an amazing 14:1 for the Hanjin CHAEBOL
(average: 5.1:1)
The Role of CHAEBOLS
The CHAEBOLS helped significantly to implement the industrial development policies and
strategies of the Korean government. The CHAEBOLS were created by leaders exceptionally
gifted, with broad vision and great will to achieve the objective of rapid growth and great wealth.
This latter objective obliged the CHAEBOLS to enter into new kind of businesses and to search
continuously for new opportunities into new products and new markets in order to maintain high
growth rates.
CHAEBOLS used to have monopolistic behavior but had also positive aspects on the overall
economy because:
1) they were risk-takers daring to invest in vast risky projects,
2) they were "much less bureaucratic, more flexible and dynamic than large state
enterprises"
3) they competed successfully with multinationals
4) And they introduced rapidly and successfully new technology into the industrial
sector.
Answer TWO of the four QUESTIONS (answer all parts of each question)
QUESTION ONE
Use diagrams to define the following terms:
1a
Movement along the demand curve
(5 marks)
Shift along the demand curve
Chapter (3)
A shift in demand curve: a shift in the entire demand curve-brought about by a shift in a non price factor.
Movement along the demand curve: a change in quantity demanded- -brought about by a change in price of that
good.
Demand: what buyers are willing and able to purchase.
The Law of demand: the quantity demanded is inversely related to the price other things constant. This relation
could be represented by the demand curve (downward slop) see the figure down. Ceteris Paribus: other things
constant (Income, Substitutes, complement, Taste, Future expectation regarding income and preference)
Veblen Goods: when prices goes up demand increase. Luxury goods
Geffen Goods: when a price goes down demand goes down. Inferior goods in poor countries
(Please look at the table 3.4, page 71)
Q: Quantity Demanded
P: Price
P
P1
P2
D1
D
0
Q1
Q2
Q
Demand curve and Demand Curve shift
List some factors that could cause the demand curve for Project X from ABC
(8 marks)
Enterprises to shift.
1b
Shift Factors of Demand: anything – except price changes of that good – that affects demand (and
many things do) is a shift factor.
1- Increase the price of (substitute) goods.
2- (Complementary) goods price increase or decrease.
3- Increase the number of consumer and buyers.
4- Tastes and preferences.
5- Population size (12-17 years population).
Using materials from B200 markets and examples, explain how foreign direct
1c
investment (FDI) and multi national enterprises (MNEs) affect their host countries.
(12 marks)
Chapter (10)
THE ADVANTAGES OF MNC FOR THE HOST STATE
Naturally, MNC managers and their defenders respond that many of the criticisms of their
behavior are only partially true at best and outright false at worst. Despite their alleged
shortcomings, they say, MNCs significantly help host governments achieve their national aims.
The most frequently expressed claims of how MNCs benefit host nations, in no particular order
of priority, are as follows:
1. Provide employment
2. Technology transfers.
3. Train managers.
4. Provide products and services that raise the standard of living.
5. Introduce and develop new technical skills.
6. Introduce new managerial and organizational techniques.
7. Provide greater access to international markets.
8. Raise the gross national product.
9. Increase productivity.
10. Help to build foreign exchange reserves.
11. Serve as point of contact between host-country businesspeople and politicians in home country.
12. Encourage the development and spin-off new industries.
13. Assume investment risk that might not otherwise be undertaken. Mobilize for productive purposes
capital that might otherwise go for less productive uses.
MNC managers have their own litany of complaints. For example, MNCs dislike restrictions on
what they produce, how they produce it, the pricing of products, product distribution, and
repatriation of profits.
INDUCEMENTS VERSUS COMPLAINTS OF HOST COUNTRIES
MNCs have received mixed receptions around the world. They are often looked upon by local
populations as organizations “you love to hate.” On the one hand countries offer substantial
inducements to MNCs to locate in their countries and, on the other hand, the MNCs arouse
severe criticism.
Inducements (Motivations)
Inducements offered to MNCs to locate in a host country include tax holidays, lower taxes,
exemption from import duties, construction of infrastructure, low-interest loans, cheap labor,
relaxation of environmental restrictions, and so on. Inducements are offered not alone by the less
developed countries (LDC) but by highly industrialized countries, such as the United States. For
example, France offered lucrative inducements to get the Mercedes-Benz Swatchmobile factory
to locate in France in 1995. Great Britain offered large inducements to woo an electronic
company to build a plant there. In the United States, South Carolina brought a BMW plant to
Spartanburg partly with inducements. California, Tennesee, and other states brought Japanese
automobile plants to their areas with various inducements. This phenomenon is not new. It has
been going on for years. Several years ago Pennsylvania, for instance, agreed to spend millions
of dollars on highways, sewage systems, and other infrastructure if Volkswagen would build a
plant there.
DISADVANTAGES TO THE HOST COUNTRY
(Complaints of Host Countries)
Host countries have a long list of complaints about foreign MNCs that operate within their
borders. The following are the most frequently voices in the less developed countries (LDC).
Challenge to Nation- State Sovereignty. They want control of their economies and want to
achieve their economic, political, and social objectives. The power of the MNC can influence
each of these objectives and in so doing may challenge the sovereignty, or the supreme political
power, of the government. A country may be obliged to give up some power and independence
in exchange for the wealth an MNC may bring.
Inequities: One of the most enduring and persistent complaints about alleged inequities by
LDCs is that prices of raw materials extracted from their countries are falling, while prices of
imported manufactured goods from industrialized countries are rising. This, they say, creates a
growing inequity. Other perceived inequities include avoidance of taxes and giving the best
management jobs to MNC home-country citizens.
Interference with Economic Objectives: Interference can occur in many ways. For example, an
MNC may wish to locate a plant in an area of prosperity when the host country would prefer its
location in an underdeveloped region. MNC demands for local support can add to host-country
expenditures for infrastructure. Since MNCs typically do their research and development at
home, host countries become technologically dependent on the MNCs for innovation and
invention. The MNCs have the strength to attract bank loans which otherwise might be available
for local businesses.
Social Disruption: The introduction of different mores, habits, behavior, and ethical values, plus
new products, management styles, distribution systems, more money, and technology, do affect
local ways of thinking and doing things. The introduction of blue jeans, movies, Western
attitudes toward women, work habits, or automobiles shifts cultures toward Western values.
Some locals may applaud the changes, while others deplore them.
w the ED
Environmental Degradation: Many nations are becoming more concerned about the impact of
MNCs on their environment.
Imperialism: Many of the awakening nations look on foreign managers with fear and distrust as
the embodiment of an old, nor easily forgotten, exploitative colonialism. Many LDCs feel
relegated to the role of supplying raw materials and cheap labor because they are denied the
technology to develop into industrialized nations.
Symbol of Frustration and Antipathy: The LDCs have grievances about their position in the
world that have nothing to do with the MNC, but the MNC is a convenient visible target for their
anger. Many of the LDCs are governed by some form of dictatorship that is antagonistic to the
free market mechanism governing decision making of the MNCs.
QUESTION TWO
Using sentences and the equation, define the concepts of:
Income elasticity of demand
Price elasticity of demand
Cross elasticity of demand(5 marks)
2a
Chapter (4)

Income elasticity of demand (EI) = %
o
QD
/ %
I
(Q1-Q2)/(Q1+Q2)/2 / (I1-I2)/(I1+I2)/2

EI>1 income is elastic (luxury), low income elastic (necessities)

If income elasticity of demand is negative (inferior products) so there is inverse relationship between
income and demand (public transport)

Price elasticity of demand (ED) = %
QD
/ %
PD

e of product y
same thing for Chancellor of the Exchequer in order to set taxes.

Cross Elasticity of demand = %
o
Dx
/ %
Py
(D1-D2)/(D1+D2)/2 / (P1-P2)/(P1+P2)/2


If the value is positive so the two products (X,Y) are substitutes otherwise they are complements
If Mango Corporation (the main competitor to ABC Enterprises) starts to produce a
new substitute product for Project X at a lower price, how will this affect ABC
(8 marks)
Enterprises? Explain.
The total income of ABC Enterprises will fall down.
2b
Because Mango Corporation is substitute to X Project
Schumpeter argued that large corporations have the competitive edge in
2c
introducing innovations. Discuss, using materials from B200 markets and examples.
(12 marks)
Chapter (6)
Competitive Markets and Innovation

Innovation in new products and new process (computer)

The process of creative destruction

Innovation: new products using new process of production

Joseph Schumpter set up a model of competitive markets characterized by competition over new products
and new process of production.

Schumpter stated that firms are forced to innovate in order to stay in the race. And this view of
competitive markets as a dynamic process of continuous change. The key to these processes is the
introduction of innovations, new products and new processes like motor car.

In the process of competition over innovation, firms innovate or go bust this is the process of creative
destruction.

1-Innovation often depends on advances in technological knowledge so this means that costs are reduced
because advances in technological knowledge enable new production process to be used. This process
called dynamic efficiency. So large firms are important because they have the fund and R&D.
QUESTION THREE
What are the six reasons for market failure described in the markets reader? Use
(5 marks)
examples to illustrate your answer.
3a:
Chapter (7)
1. If there are resources that can be used by everyone but belong to no one- common
property resources.(wildlife)
2. If there are goods whose consumption cannot be restricted to those who are willing to
pay for them. Public goods.(police)
3. If people not party to some market bargain are none the less significantly affected by
it – externalities.(pollution)
4. If one party to a market transaction has fuller knowledge of its consequences than is
available to other party – asymmetric information.(discovering by trying things)
5. Where needed markets do not exist (insurance against war)
6. Where substantial monopoly power exist. (One company control on good or service
e.g. Electricity Company).
Which of these reasons might affect ABC Enterprises, and how might they solve it?
(8 marks)
3b:
Where needed markets do not exist
They solve it by searching for new markets.
‫مهم‬
What are the similarities and differences between the US model of capitalism and
3c:
the Japanese model of capitalism? Answer using B200 markets materials and examples.
(12 marks)
Chapter (12)
The U.S Model:
1- American capitalism is commonly regarded as individualistic and libertarian of all.
2- Its financial system is highly market based, the returns it requires are very high, therefore
it is important that US corporations can hire and fire their workforce freely to produce the
profits their shareholders demand.
3- Unions are weak.
4- Employment regulation is minimal and the turnover of workers is high.
5- There is a little spending on social welfare and levels of corporate and personal taxation
are low.
6- There is tough anti-monopoly legislation, and the typical firm is owned by stock-holders.
Japanese model of Capitalism:
1- Concentrate is on people in order to build a strong relationship.
2- 'Peopolism' model is taking the people into consideration
3- The most dynamic – Japan, the East Asian tigers and Chinese. Although there are variants
within this wider culture, there is enough common general to attempt a descriptive synthesis
under a common label. Here the attempt to capture the gains from co-operation in a
competitive environment has been taken to its much extreme.
4- East Asian and particularly Japanese capitalist structures emphasis trust, continuity,
reputation and cooperation in economic relationship. Competition is ferocious but cooperation is extensive.
As a result human relations and the necessity of nurturing them are centre stage; the
dominant factor of production is labor, so that one Japanese analyst has been moved to call
the system 'peoplism'.
QUESTION FOUR
(5 marks) Draw a simple circular flow of income diagram.
Chapter (5)
4a
H
Wages
L
A
B
O
R
G
&
S
Consumer
spending
F
Outline how ABC Enterprises has stimulated investment in developing countries.
(8 marks)
4b
In 2006 ABC is still a well-regarded multi-national corporation, but like many multi-nationals it faces the many
challenges of the global environment. The organization is seeing reduction in its existing key markets and is being
forced to seek out new ones. Social responsibility is becoming increasingly important, and the organization is
making increased investment in areas which were previously low cost areas. There are many challenges to face in
the future, and the Directors hope that with their strong focus upon research and development, they will continue to
succeed through a strategy of concentrating upon their strengths of innovation, marketing, and strong distribution
chains, and by continuing to outsource other areas of the value chain.
From your study of B200 materials and examples, explain the methods governments
(12 marks)
use to protect their industries.
Chapter (8)
The case of protectionism:
Two kinds:
1)The national objectives other than total income:
a)Non-economic advantages of diversification
b)Risk of specialization.
4c:
c)National defense.
d)Protection of specific group.
2)Increase one countries national income
a)To alter the terms of trade.
b)To protect against unfair actions by foreign firms and government.
c)To protect infant industries.
d)To encourage learning by doing.
e)To create or to exploit a strategic trade advantage.
There are two main types of protection policies. Both cause the price of the imported goods to
rise and its quality to fall.
1)Policies that directly raise price: Raise prices of imported goods by tariff (import duty
affect foreign and domestic products and consumers).
2)Policies those directly lower quantities:
a)Non-tariff barrier: any implicit and explicit restriction on trade that does not involve
tariff (quality standards).
b)Import quota: importing country sets the maximum of the quantity of some product that
maybe imported each year.
c)Voluntary export restriction (VER): is an agreement by an exporting country to limit the
amount of a good that it sells to importing country.