INTERNATIONAL BUSINESS
MGMT 59000-004
FINAL EXAMINATION
Answer all of the following questions:
1. What were the outcomes of the Bretton Woods agreement? How are currency
values now determined? What influences currency prices?
There were several outcomes from the Bretton Woods agreement of 1944; there was the
establishment of the International Monetary Funds and International Bank for
Reconstruction and Development which was later known as the World Bank Group were
both formed. The goal of these institutions were to establish and foster some sort of policy to
handle commercial and financial relations between member countries.
The agreement also established fixed exchange rates where currencies were connected to the
price of gold, and also pegged to the U.S dollar because the value of the dollar was fixed at
$35 per ounce of gold. So the par value would be the same in this case, regardless of if it were
gold or the dollar that was used. The U.S dollar was very strong during the 40s and 50s right
after World War II, and the U.S also had a huge gold reserves which helped give it a strong
position. So the par value was the basis by which all member countries of the IMF valued
each other’s currencies. This agreement made it easier for currencies to be convertible for
trade and for various business transactions. Also, depending on supply and demand of a
certain currency, it was allowed to vary within one percent of the par value. Eventually,
because of the strength of the U.S dollars, countries bought and sold dollars instead of gold
and this became the benchmark for trading currency. The dollar is still the benchmark till
this present day.
The overall goal of this monetary policy is to successfully create a system for foreign
exchange in terms of a rate, promote economic growth, and to prevent devaluation caused by
competition.
2. Explain the basic features of each typical global strategy.
The goal of Global Strategy to standardize the production and sales of common products to
drive global performance by reducing uniqueness of a single product and its variation. The
idea is to produce products that will appeal to a world market, manufacture them on a global
scale in fewer more efficient plants, and market through fewer but more focused distribution
channels.
Basically, instead of creating products tailors to fit different markets places due to cultural
differences; a product with only one variation that is made efficiently and mass produced for
the global will be a more successful approach. Competition in the market place will be based
on the quality of the product and the value of it to the consumer. An example given in the
book shows that China adopted a China Price. The Chinese encourages manufacturers to
produce and sells products at a significantly lesser price that any other country producing
the same product, especially western countries. This global strategy helps boost sales for the
Chinese products without much concerns about differentiation.
Another global strategy is the notably commodities, such as gasoline, steel, sugar, and so on.
These are basically essential commodities with little to no differences, so customer
perception is based on value and this makes price a key component for competition.
Commodities are not the only markets that take advantage of the global strategy; markets
like the high end producers Neiman Marcus and Tom Ford can standardize their historically
differentiated products. Then manufacture these products on a global scale, and market
them through focused distribution channels. Now although, these might not fit into every
culture or market, the hope is that consumers will forgo what they are accustomed to for a
higher end product at a relatively cheap price. A good example is a gold Rolex watch does
not have to be customized to fit a certain culture or fashion, because the brand has
recognition for excellence.
Cost leadership is another global strategy, and it has a stark implication to value chain
designs. The idea is for multinational enterprises to achieve cost leadership, or at least be as
competitive as the industry’s pacemakers. So in a value chain system, each unit or process
must operate only at locations that superior and maximizes the full efficiency of that system
on a global scale. For example, a cell phone’s processor might be made in a plant in Japan,
while its camera might be made in South Korea, the software developed in the United States,
and it’s assembled in Vietnam. Each value unit or activity can be done in different countries
that create the most efficient outcome and value to the product.
3. Explain the factors which are most important in determining the desirability of
a country for marketing and production opportunities.
There are several factors that are very important in determining the desirability of a country
for marketing and production opportunities and these factors are listed below:
▪ Low Barrier of Entry – This is an important factor when deciding if you would want to
export a product to a certain country or build a plant there. For example, countries that
have low tariffs or strong industry regulations for the product I’m trying to sell or
produce in a country, makes it attractive to do business. The opposite can add to the
bottom line of cost of goods sold, and force the company to increase the price of the
product. High prices might make it hard to compete in that country. So the lower the
barrier, the easier is to make a choice to engage a country.
▪ Low Labor costs – If a country has low labor cost, for companies that need a large labor
force, this will help keep the overall production cost low. This is very attractive to
companies and firms, because another way to increase profits other than increasing sales
is to reduce cost.
▪ Culture/Religion – Culture and religion plays a huge factor in the way a product can be
