Buss 441: International Business Question Paper
Buss 441: International Business
Course:International Business
Institution: Kenya Methodist University question papers
Exam Year:2008
KENYA METHODIST UNIVERSITY
END OF FIRST TRIMESTER 2008 EXAMINATION
FACULTY : BUSINESS AND MANAGEMENT STUDIES
DEPARTMENT : BUSINESS ADMINISTRATION
COURSE CODE : BUSS 441
COURSE TITLE : INTERNATIONAL BUSINESS
TIME : 3 HOURS
INSTRUCTIONS
• Answer Question One and Any Other Three Questions
Question 1 (COMPULSORY)
GlaxoSmithKline came into being in 2000 as a result of the merger between GlaxoWellcome and SmithKline Beecham, making the company the second largest pharmaceutical company in the world. On the local front, the history of this company spans way back to the two legacy companies. Starting with GlaxoWellcome, the company was first established as Glaxo Allenbury (E.A) Ltd incorporated in 1963. In 1966 a factory was commissioned at Dakar road whereas in 1967 the Wellcome factory was commissioned at Kabete. In 1975 there was a name change to Glaxo (E.A) Ltd. In 1995 Glaxo and Wellcome merged to form GlaxoWellcome. The Wellcome factory was sold in 1996 while in 1997 the Glaxo factory was refurbished to accommodate the Wellcome products.
On the other hand SmithKline Beecham was registered as Beecham of Kenya Limited on February 24, 1974 as a marketing office to take care of Beecham products then produced by Mitchell Cotts under license. In 1980, Beecham of Kenya Limited withdrew license from Mitchell Cotts and started production at Funzi Road, Industrial Area.
In 1989, there was an International merger between Beecham Research International and SmithKline & French making up SmithKline Beecham Consumer Brands registered in 1990 here in Kenya. Another change of name was effected on 3rd November 1993 to SmithKline Beecham Consumer Healthcare (SBCH).
In 1994, SmithKline Beecham acquired Sterling Health, a move that made SBCH the Number 3 Over the Counter Company worldwide and one of the world’s largest Healthcare companies. The acquisition also strengthened the company’s geographical presence, especially throughout its International region and boosted two key product areas, analgesics and antacids. It brought together three separate entities onto a common site on Likoni Road. These were SmithKline Beecham Consumer Healthcare, Sterling Health and SmithKline Beecham Pharmaceuticals, a non trading marketing office situated at Yaya Centre which was responsible for marketing and distribution of SmithKline Beecham’s pharmaceutical products. Sterling Health had been in Kenya for over forty years before it was acquired by SB and ranked amongst the top healthcare companies in the country. Year 2000 saw the merger of GlaxoWellcome and SmithKline Beecham forming GlaxoSmithKline (GSK), this was registered as a legal entity in Kenya in the year 2002.
The company has extended its geographical presence into Ethiopia, Eritrea, Djibouti, Rwanda and Sudan. This is in addition to older markets in Kenya, Uganda, Tanzania, Mauritius, Seychelles and Madagascar with established offices in Tanzania, Uganda and Mauritius.
The manufacturing facilities and support offices has high caliber, well motivated and performance driven staff
The eight-acre Likoni road site is situated within Nairobi’s Industrial Area. The site houses the manufacturing, administration and marketing offices with a work force of over 198 permanent, 60 Contract and 30 temporary employees. There are 29 other staff in the export markets who report to East Africa. GSK prides in an annual turnover of over Ksh. 2.9 billion.
GSK principal activities include Production of Consume Healthcare products, Sales and Marketing of both locally manufactured and imported pharmaceutical products sourced from other GSK locations. GSK range of products includes antibiotics, respiratory medicines, vaccines, anti-retrovirals, over the counter medicines, nutritional and oral care products.
GSK mission is “to improve the quality of human life by enabling people to do more, feel better and live longer” a mission everyone at GSK finds easy to identify with.
Requiered:
a) A part from the strategies mentioned in the above case , explain any other four strategies for international markets entry (8 marks)
b) Distinguish between merger and acquisition (2 marks)
c) Identify six risks associated with the international business strategies discussed in the above case.
(6 marks)
d) Briefly explain what you understand by a non trading marketing office (1 mark)
e) Explain some four benefits of the GSK merger with respect to Kenya (8 marks)
Question 2
Japan Canada
Televisions Cheese Televisions Cheese
120 0 80 0
90 15 60 12
60 30 40 24
30 45 20 36
0 60 0 48
Units of production are given in thousands of units
a) Which country has absolute advantage in producing televisions? Which country has comparative advantage in producing cheese? (5 marks)
b) If the current world price ratio between cheese and televisions is 5:2, which product should Japan specialize in producing? (4 marks)
c) Is there any conceivable reason why the Japanese would continue to produce cheese and Canadians televisions despite comparative disadvantage? List at least three for each. (6 marks)
Question 3
a) Globalization may be defined as a strategy which can only be effective when certain conditions are present. Define the conditions which support global strategy. (7 marks)
b) Provide at least four examples, from your own experience, of ways which industry globalization drivers may be applied to exploit the ‘integrated competitive moves strategy levers’ (8 marks)
Question 4
Exchange risk results from possible changes in the value of one currency relative to another. The change could be either in the positive or negative direction.
Required:
Explain strategies for minimizing or eliminating exchange rate risk which do not involve third parties. (15 marks)
Question 5
Terms of payment reflect the extent to which the seller requires a guarantee of payment before he loses control of the goods. The more trustworthy the importer , the less will the exporter need to have payment guaranteed before he loses control of the goods. List and explain THREE terms of payment available to an importer (15 marks)
Question 6
Citing existing examples, highlight the merits and demerits of regional trade agreements. (15 marks)
Question 7
Briefly distinguish between the following sets of terms:
a. Absolute advantage and comparative advantage (3 marks)
b. Multidomestic strategy and global strategy (3 marks)
c. Political risk and business risk (3 marks)
d. Nationalization and expropriation (2 marks)
e. Monetary policy and fiscal policy (2 marks)
f. Balance of payments and balance of trade (2 marks)
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