Unit 4: International business environment
Business Environment notes · PTU syllabus (BBA 202-18)
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Unit summary
Business today is global. This unit covers multinational corporations and their benefits and problems, mergers and acquisitions, the WTO and its consequences for India, the IMF, and regional groupings.
After this unit you can
- Explain the benefits and problems of MNCs
- Explain the reasons, trends, advantages and disadvantages of mergers and acquisitions
- Explain the functions of the WTO and its impact on India
- Describe the IMF and major regional groupings
PTU syllabus topics
- Multinational corporations — benefits and problems
- mergers and acquisitions (reasons, trends, advantages and disadvantages)
- WTO and its consequences for India
- IMF
- regional groupings
Capital
Bring foreign investment
Profits may flow back abroad
Technology
Transfer of know-how
Dependence on foreign technology
Jobs
Employment and skills
Local firms may be crowded out
Policy
Exports and competition
Influence over government policy
Topic 1
Multinational corporations (MNCs)
An MNC is a company with operations in many countries, managed from a home-country headquarters (Unilever, Samsung, Coca-Cola, Tata).
Capital
Bring foreign investment
Profits sent back home
Technology
Transfer of technology and skills
Dependence on foreign technology
Employment
Create jobs
May crowd out local firms
Trade
Boost exports
Influence over government policy
Topic 2
Mergers and acquisitions
- A merger is the combination of two companies into one; an acquisition is one company buying control of another.
- Types: horizontal (same industry), vertical (supply chain), conglomerate (unrelated) and concentric (related).
- Reasons: growth, economies of scale, synergy, market share, entry into new markets, tax benefits and acquiring technology or talent.
- Disadvantages: integration and culture clashes, job losses, overpayment and reduced competition.
Example
Tata Steel's acquisition of Corus (2007) gave it a European presence; Walmart's acquisition of Flipkart (2018) gave it a large share of Indian e-commerce.
Topic 3
The WTO and India
The World Trade Organization (1995) replaced GATT. It sets rules for international trade, settles trade disputes and works to reduce trade barriers.
GATT
Trade in goods
GATS
Trade in services
TRIPS
Intellectual property rights
TRIMs
Trade-related investment measures
Agreement on Agriculture
Subsidies and market access
Consequences for India: lower tariffs and wider market access, stronger patent laws (product patents from 2005), competition for domestic industry, and debates over agricultural subsidies and food security.
Topic 4
The IMF and regional groupings
International Monetary Fund (IMF, 1945): promotes international monetary cooperation and exchange-rate stability, provides short-term loans to countries with balance-of-payments problems, and offers policy advice and surveillance. India borrowed from the IMF during the 1991 crisis.
| Regional grouping | Members / purpose |
|---|---|
| EU | European Union — single market and common currency (euro) for many members |
| ASEAN | Ten South-East Asian nations — trade and cooperation |
| SAARC | South Asian nations including India — regional cooperation |
| BRICS | Brazil, Russia, India, China, South Africa and new members — emerging-economy cooperation |
| USMCA | USA, Mexico, Canada trade agreement |
Key terms
- MNC
- A company operating in several countries
- Merger
- Combining two companies into one
- Acquisition
- Buying control of another company
- WTO
- International body governing world trade
- IMF
- International body promoting monetary stability
Quick revision
- MNCs bring capital and technology but may repatriate profits.
- M&A types: horizontal, vertical, conglomerate, concentric.
- WTO (1995): GATT, GATS, TRIPS, TRIMs.
- IMF lends for balance-of-payments problems.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Define an MNC.
- Q2.Differentiate between a merger and an acquisition.
- Q3.What is TRIPS?
- Q4.State two functions of the IMF.
- Q5.Name four regional trade groupings.
Long-answer questions
- Q1.Discuss the benefits and problems of MNCs for India.
- Q2.Explain the reasons, types, advantages and disadvantages of mergers and acquisitions.
- Q3.Explain the functions of the WTO and its consequences for India.
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