MBA 3rd Sem International trade procedure and documentation

Q1. What are INCO terms? Explain all INCO terms indicating the responsibility of the buyer and seller at various stages of the export cycle.
Q2. Examine the steps involved in processing of an export order.
Q3. Examine the steps involved in Custom Clearance of Export Cargo.
Q4. Discuss various methods that are used for making payment in International Trade
Q5. What are the features of Export Processing Zones / Special Economic Zones? How are they helpful in promoting export from India?
Q6. What is EPCG scheme? What are the main provisions in the scheme? How has the scheme helped in promoting export from our country?
Q7. Describe various principal and auxiliary documents used in International trade.
Q8. Write short notes on any three of the following.
a) Bill of lading
d) Types of Shipping Bill
e) Role of Clearing and Forwarding Agent

Case Study
Export Incentives
You are an exporter of Gold and Diamond Jewellery in India. Approximately 85% of your product is sold in the domestic market and 15% is being exported. You are not availing any kind of incentive for your exports.
Now you want to upgrade your production facility and also wish to avail the incentives given to the exporter under FTP.
1 Prepare a feasibility report to make your products more competitive in the export market by ava
iling the provisions in the Foreign Trade Policy
1. Special Economic Zones were created to—A Boost manufacturing , Augment exports & Generate employment
2. Under Advance License goods imported cannot be used in the unit of – d
3. Which of the following is not a major function of Export Promotion Council (EPC)? D Provide pre shipment finance
4. The WTO Agreement on agriculture provides for—d
5. According to the Foreign Trade Policy of 2009-2014 Advance Authorizations necessitate exports with a minimum value addition of—A 15%
6. Sale by EOU to SEZ units is treated as—B Deemed Export
7. Which of the following is not a duty exemption / remission scheme? C EPCG
8. Foreign Trade Policy aims to act as an effective instrument of economic growth by giving thrust to – B Employment Generation
9. Special Economic Zones will locate in areas which will be technically treated as – A Foreign Territory for applicability of domestic legislations
10. What does FOB stand for? A free on board
11. Free Alongside Ship (FAS) means – B The seller has to pay for the transport until the goods are being unloaded at the port of destination
12. B The seller pays all the costs and bears the risk until the goods have been delivered on his side of the border.
13. Match the definition with the INCO terms.
“The seller pays the transport costs up to the port of shipment. He bears the risk until the goods have passed the ship’s rail at the port of shipment.” — d FAS

14. Which terms are cheapest for the seller?— B EXW
15. Which of the following statement about EXW is true? A The buyer pays transport costs from the seller’s premises on.
16. Which of the following is a regulatory Document? D GR Form
17. In case of payment through open account, payment is made—B In advance before delivery of goods
19. In case of payment under D/A, goods are delivered—B After payment is made
20. Which of the following document is issued by the Mate Chief Officer of the ship to acknowledge the loading of cargo on the ship? A Mate’s Receipt
21. As per the provisions in the Foreign Trade Policy of India, Minimum size of the SEZ shall not be less than 1000 hectares accept—D SEZ set up by state government
22. Unless other wise specified in a Letter of Credit which is issued subject to UCPDC 500 and also UCPDC 600, documents must be presented for negotiation within —— days from the date of shipment. A 10 days
23. Which of the following is not true regarding an AWB? B It is a document of title to goods.
24. Premier Trading House should have minimum export performance of Rs.________.C 5000 Crs
25. Under Market Development Assistance Government does not provide—C Foreign travel
26. Vitamin –A as a drug can be canalized through–. B ITPO
27. Which of the following is not a type of letter of credit? C Moving Letter of Credit
28. Exports and Imports come under the purview of—B Ministry of Commerce
29. Export Promotion Capital Goods scheme helps in promoting through—D Export of capital goods
30. Objective of DEPB is to—B Neutralize incidence of customs duty on import content of export product
31. Tripur in Tamil Nadu is Town of Export Excellence for—A Hosiery Products
32. Main objective of Served from India Scheme is to promote export of—A Services
33. Objective of VKGUY is to promote exports of—B Minor Forest Produce and their value added variants
34. DGFT helps in promoting export from India by—
35. Pro forma invoice describes—B value of the goods
36. Consular Invoice is—B Prepared as per the format of the customs authority of the importing country
37. An EOU may opt out of the scheme with approval of – A Development Commissioner
38. Market Development Assistance is given to Exporters having annual Export turnover up to Rs.________. 15CR
39. A whole range of activities that can be funded under MAI scheme includes—A Setting up of showroom / warehouse
40. To encourage State Governments to participate in promoting exports financial assistance is administered by Department of Commerce (DoC) to—A Developing infrastructure such as roads connecting production centers with ports,
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MBA 4th Sem Global Business Operation

Q1. What is International Business ?
Q2. Write any four disadvantages of globalization
Q3. Discuss about Ecosystem services in UAE ?
Q4. Explain about Ecosystems services provided by EU ?
Q5. Discuss tyhe various reasons for the growth of MNCS ?
Q6. Discuss about Indian Companies operating abroad ?
Q7. Discuss general Cultural Differences between the West and China ?
Q8. Explain nature of Corporate Social Responsibility (CSR) ?

Q1. What is Cultural diversity?
Q2. What is Alliance Operation ?
Q3. discuss various steps in conrtact Negotiation.

1. With the Globalization of Markets, the testes and preferences of consumer’s world-wide are:
2. The main advantage of a differentiation strategy in international markets lies in that:
3. The goals of international marketing are to:
4. Being a global organization means:
5. Which of the following represents a company’s effort to identyfy and categorize groups of customers and countries according to common characteristics
6. Which of the following is an approach to natual resource management that focuses on sustaining ecosystems to meet both ecological and human needs in the future?
7. Ecosystems management promotes shared vision of a desired future by ____________________
8. An ecosystem includes all of the living things_______________________
9. Which of the following are the tropical forests that receive a mean rainfall of 80 for every 400 inches annually?
10. The ecological footprint is an estimate of human pressure on global ecosystems, according to the ______________________________
11. Which of the following is an example of a multinational corporation?
12. Multinational corporations’ ______
13. Which level of analysis considers the relative power of states and the interactions of the states themselves?
14. Which of the following powers become newly expensionist in the 1930s”
15. Which level of analysis considers aggregations of individuals within states that influence state actions in the international arena?
16. What id the most important geographic element at the global level of analysis?
17. American Gianet such as: IBM Gillette, Dow Chemical, Hewlett-Packard and Xerox get the majority of their sales from:
18. Developing countries such as china or India benefit from the patronage of companies that outsource to them in terms of:
19. Cross-culture competence refers to the knowladge, skills, and affact/motivation that enable individuals to adapt effectvely in________________.
20. The cultural impact on management is reflected by___
21. _________ refer to those moral theories which hold that the consequences of one’s conduct are the true basis for any judgment about the morality of that conduct?
22. Meta-ethics is the branch of ethics that sheeks to understand the nature of
23. ________ refers to the principles performs and philosophies that direct the business people in the day to day business choice.
24. Managers and acquisitions are both aspects of strategic management, corporate finance and management dealing with the________
25. M & A can be defined as a type of restructuring in that they result in some entity reorganization with the aim to__________
26. ____________ is the area of corporate finaces, management and strategy dealing with purchases and /or joining with other companies.
27. ___________ happen when a company mergers or takes over another company that offers the same or similar product lines and services to the final consumer?
28. Foreign Direct investment outside India means investments, either under_____
29. international business refers to domestic operations within a foreign countries.
30. International business is business whose activities are carried out across national borders.
31. International business is business denotes the operations of a company outside its home or domestic market many refer to this as business conducted within a foreign country
32. International business exports its goods and services all over the world.
33. International business makes minimum utilization of resources.
34. Ecosystems management promotes shared vision of a desired future by integrating social environmental and economic perspectives to managing geographically defined natural ecological systems
35. Ecosystems promote human well beingthrough the various services the provide
36. An ecosystems includes all of the living things in a given area interacting with each other and also with their non living environments.
37. Desert ecosystems are located in regions that receive an annual rainfall less than 35
38. Economic indicator is a piece of economic data usually of macroeconomic scale, that is used by investors to interpret current or future investment possibilities and judge the overall health of an economy.
39. Multinational corporations have unique and empirical capacity to increase production and distribution.
40. MNCs can provide the requird financial technical technical and other resource to needy countries in exchange for economic gains.
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MBA 3rd Sem International Trade Finance

Q1. What are the implications of Trade Theories on the present day economic scenario in the international trade?
Q2. “It is unfortunate that MNCs have not been able to take full advantage of international trade of theories.” Comment.
Q3. “International Financial Corporation is a redundant Corporation.” Comment
Q4. Anlayse the importance of International Purchasing with respect to India’s Purchase Policy.
Q5. What role does the WTO play with respect to the Indian Economy.?
Q6. How can you start your own export business? Explain in detail
Q7. The responsibilities of the foreign banks in the Export Finance Area have today increased tremendously, as compared to earlier years of 20th century” Comment.
Q8. When are the goods/merchandise sent directly to the importer and when are they sent to the importer’s banks? Explain with examples.

Case Study
International trade is shrinking fast amid the global credit crunch and economic recession, that was triggered by the US sub-prime loan problem. The economic downturn is so significant and extensive that countries across the world now see their trade figures contracting. The effects of these negative developments are now impacting global trade.
The total value of a country’s imports is determined by its economic size. Thus economic contraction results in a decrease in international trade. Meanwhile, a reduction in exports leads to a decrease in domestic demand, hence contributing to an economic downturn.
The vicious cycle of contracting trade leading to further deterioration of the world economy must be stopped. To find a way out, in the short turn we have no choice but to count on the monetary and fiscal policies of the countries involved. Following moves made by the US at the epicenter of the economic turmoil, where the government and monetary authorities had taken steps to facilitate the disposal of bad asserts, ease credit and roll out significant fiscal stimulus programs, the Japanese authorities implemented their own fiscal stimulus and monetary easing measures. These measures, which were implemented in rapid succession at the end of 2008, were justifiable and necessary short-term responses to the crisis.
In addition to issues that require macroeconomic policy measures, additional issues must be addressed through trade policy in order to break the vicious cycle of economic recession and trade contraction.
In the midst of the present economic downturn, calls for the protection of domestic industries and workers have been mounting since 2008 in countries across the world.
Q1. What are the reasons for Economic Downturn of the US and the EU?
Q2. How is export and import related to downturn of the western world?
Q3. a) “Japan is one of the strongest Economy of the world but it still suffered due to Economic Downturn of the US.” Why? Give Reasons. b) Will the Japanese economy recover by its own efforts?

1. _____________in international trade is a costly process, hence the exporter must take prudent decisions in choosing the method of receiving payments from the foreign buyers
2. As per ______ rules, the exporter has to bring the export proceeds in free foreign exchange only
3. The period of ________cycle in international trade is longer and the degree of risk in financial matters is also higher.
4. In case of economic turbulence or crisis, there may be ____________ restrictions that may prevent the outflow of funds from the importer’s country
5. In a bad phase, a country may impose foreign outflow restrictions in order to _________ its financial and economic system
6. The ___________of the importer is major issue to be checked by the exporters
7. To cover the payments risk due to importer default or insolvency, it is advisable that the exporter gets his transactions covered by the ______.
8. The _____________system is the worldwide framework of legal agreements, institutions, and both formal and informal economic actors that together facilitate international
9. The ________sometimes known as the “Big Board”
10. Japan Exchange Group is an Asian financial services corporation that operates multiple securities exchanges including _______ Exchange and Osaka Securities Exchange
11. _______________is Asia’s second largest stock exchange in terms of market capitalization
12. _____________are the most active players in the foreign exchange market
13. The purpose of a _________ is to permit the trading banks to maintain desired foreign exchange balances.
14. The primary function of a foreign exchange market is the transfer of __________ power from one country to another
15. __________ refers to covering of foreign trade risks, and it provides a mechanism to cover foreign trade risks
16. When a company sells goods or services to a foreign customer and receives foreign currency, it needs to convert the foreign currency into the _________ currency
17. ___________ energy exchange develops, operates and connects secure, liquid and transparent markets for energy and related products.
18. Which famous bank is known as the International Bank for Reconstruction and Development (IBRD)?
19. The ______came into official existence on December 27, 1945; when 29 countries signed its Articles of Agreement (its Charter)
20. What does IDA stand for?
21. __________ encourages private enterprises in developing countries through its affiliate, the International Finance Corporation
22. 1986 was a significant year for the UNECAFE because ________ joined the Bank and India received her first loan of $100 million
23. What does DMC stand for
24. The _______ bank typically funds up to 35 per cent of the total project cost for a greenfield project.
25. ______Bank extends Lines of Credit (LOCs) to overseas financial institutions, regional development banks, sovereign governments and other entities overseas
26. Exim Bank is wholly owned by government of ______
27. To promote hi-tech exports from India, the Exim Bank has a ________ programme to finance research and development (R&D) activities of export-oriented companies
28. The Bank became the first Indian entity to tap the _________ Dollar market and Singapore Dollar market
29. The World Bank has two affiliates which are legally and financially distinct entities, the IDA and the ______.
30. ______lends money to members having trouble meeting financial obligations to other members, but only on the condition that they undertake economic reforms.
31. The ____________ Bank was founded to promote social and economic progress of Asian and the Pacific region
32. International trade is more difficult and risky, however, than domestic trade because of __________
33. _________ notes issued by the importer evidence the credit
34. _________ratings are intended to provide a long-term view of creditworthiness based on fundamental analysis
35. Ratings allow borrowers to access global and domestic markets and attract investment funds, thereby adding ____________ to markets
36. The Government of India established _______ for the purpose of strengthening and boosting export promotion efforts by covering the risk of exporting on credit
37. ECGC offers various policies based on ________perception
38. ECGC helps exporters in financing their trade transactions by offering _________ to commercial banks
39. The very purpose of export credit insurance is to _________exporters from payment risks arising due to both political and commercial uncertainties in various countries.
40. The ______ bank provides competitive finance at various stages of the export cycle
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MBA 3rd Sem International Economics & Policy

Q1. Describe the concepts, nature & scope and considerations of international economics.
Q2. Explain the theories of international trade in detail.
Q3. Define the Heckscher-Ohlin model and Samuelson models of international trade.
Q4. Explain the various terms of trade with an example.
Q5. Describe the Ricardo’s approach and J. S. Mills approach of gains from trade
Q6. What are balance of trade and balance of payment? What are the various difference between the two?
Q7. What is disequilibrium in balance of payment? Explain the various causes of disequilibrium of balance of payments.
Q8. Describe the working of the IMF and World Bank in detail.

Case Study:
JPMorgan Chase lost at least 3.5% as all 27 companies in the S&P 500 Diversified Financial Index declined.
“This gave the politicians everything they need to push for stronger financial reform and it’s going to further shake investor confidence in Wall Street,” said Matthew McCormick, a banking-industry analyst and portfolio manager at Bahl & Gaynor in Cincinnati, which oversees $2.8 billion.
Goldman Sachs spokesman Lucas Van Praag didn’t return a call and an e-mail seeking comment. A call to Richard Klapper, an attorney for Goldman Sachs at Sullivan & Cromwell, wasn’t returned. Tourre, reached by phone in London on Friday, declined to comment. A call to Pamela Chepiga, a lawyer for Tourre at Allen & Overy, wasn’t returned.
Stefan Prelog, a spokesman for New York-based Paulson, said he couldn’t comment. The company oversees $32 billion.
Q1. What was the problem with Goldman Sachs?
Q2. How this problem could have been solved?
Q3. Explain the scam or fraud discussed in the above case study in your own words.

1. International monetary system refers to the rules and procedures by which different national currencies are exchanged for each other in –
2. A topic that encompasses a wide range of issues—reserve currencies, exchange rates, capital flows, and the global financial safety net, to name a few, is the
3. The IMF came into existence in December 1945, and it announced its readiness to commence exchange transactions in –
4. The main purposes for which the IMF was set up were to provide exchange stability, temporary assistance to countries falling short of foreign exchange and international sponsoring of measure for curing the fundamental causes of disequilibrium in –
5. The functions of the International Monetary Fund include all of the following except
6. Under the international monetary system as it actually operated between 1947 and 1971, the emergence of seemingly-chronic deficits and surpluses in various countries’ balance of payments position (i.e. deficits and surpluses which did not seem to get eliminated) was called
7. In its lending to member countries, the International Monetary Fund (IMF):
8. In the current exchange rate arrangements of IMF members:
9. Under the Bretton Woods system set up at the end of WWII, exchange rates were –
10. The post-Bretton-Woods international monetary system is generally thought to have been characterized by all except one of the following features. Which one does not seem to have been a characteristic of the system?
11. Under the Bretton-Woods agreement
12. In the current international monetary system, all countries
13. An attribute that doesn’t contribute to Porters Diamond model is –
14. The theory states that, lack of resources often helps countries to become competitive, is the
15. Theory of Mercantilism propagates
16. Credits transferable by original beneficiary in favor of secondary beneficiary are known as
17. When the exporter, expects the importer, to make the payment immediately upon the draft being presented to him is called
18. The basic objective of export Promotion Council is to promote and develop the Exports of the
19. General Agreement on Trade in Services will not be applicable to
20. As a part of WTO guidelines, Agreement on Agriculture (AOA) doesn’t consider-
21. Paul Krugman is credited with the
22. Which of the following observations about a tariff is not true? A tariff:
23. Which of the following is not recorded as a debit item in the U.S. balance-of-payments accounts?
24. Which of the following is true with respect to the infant industry argument for protection?
25. The nationally optimal tariff hopes to take advantage of the idea that
26. The “optimal tariff” can be imposed because
27. The “capital account” in balance of payments data includes
28. An international cartel that maximizes its profits is optimal for
29. The characteristics of quotas and tariffs are described correctly by which of the following:
30. The best and probably rarest way to allocate import licenses is –
31. “When a country exports a commodity produced with intensive use of its abundant factor, that factor’s returns will rise.” This statement is
32. “Countries export commodities produced through the intensive use of factors which they possess in abundance. Labor abundant countries export labor-intensive commodities and import capital-intensive commodities.” This statement is-
33. In the Heckscher Ohlin model, international trade is based mostly on a difference in
34. Intra-industry trade (IIT) is
35. According to modern (“alternative”) trade theory
36. Ricardo explained the law of comparative advantage on the basis of
37. It refers to the balance of difference between the value of total imports and export of visible material goods and it is the
38. “Balance of payments of a country is a record of all economic transactions over a period with the rest of the world.” Defined by
39. Receipts and payments are recorded on the basis of the
40. The balance of payments account of a country is constructed on the principle of double-entry
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Amity MBA 4th Sem ASODL International Business Environment

Amity MBA Assignment A
Q1. The world’s poorest countries are at a competitive disadvantage in every sector of their economies. They have little to export, no capital; their land is of poor quality; often have too many people against available work opportunities; and are poorly educated. Free trade is not in interest of these countries. Discuss.
Q2. How do you think the successful conclusion of the multilateral agreement to liberalize regulations governing FDI will benefit the world economy?
Q3. Discuss the Competitive Advantage Theory of International Trade. How this theory is different from other theories.
Q4. On what basis countries as classified as low income, middle income and high income countries? Do you think economic status of a country will influence its global business?
Q5. Explain different types of Economic Systems. What are the major challenges faced by the command economies while transiting to a market economy?
Q6. Explain the achievement of EU in integrating its member countries. How is formation of EU beneficial for India?
Q7. How is WTO different from GATT? What are the main issues in the Doha Development Agenda and what are its implications for the developing countries?
Q8. Write short notes on any three of the following:-
a) Tariff
b) Subsidies and Countervailing Duties
c) Quotas
d) Voluntary Export Restraint
e) Local Content Requirement.

Amity MBA Assignment B
Please read the case study given below and answer questions given at the end.

The Daewoo Group and the Asian Financial Crisis

In 1999, the Daewoo Group, Korea’s second largest chaebol, or family owned business conglomerate, collapsed under $57 billion in debt and was forced to split into independent companies. The Asian Financial crisis and its aftermath finally took its toll on the expansion-minded Daewoo and forced both Daewoo and the Korean government to decide how to dissolve the chaebol .

Kim Woo-Choong started Daewoo in 1967 as a small textile company with only five employees and $10,000 as capital. In just 30 years, Mr Kim had grown Daewoo into a diversified company with 250,000 employees worldwide as well as over 30 domestic companies and 300 overseas subsidiaries that generated sales of more than $100 billion annually. However, some estimates that Daewoo and its subcontractors employed 2.5 million people in Korea. Although Daewoo started in textiles, it quickly moved into other fields, first heavy and chemicals industries in the 1970, and then technology intensive industries in the 1980s. By the end of 1999, Daewoo was organized into six major divisions:
• Trading Division
• Heavy Industry and Shipbuilding
• Construction and Hotel
• Motor Vehicle Division’
• Electronics and Telecommunications
• Finance and Services

However, Daewoo was struggling with its $50 billion debt which was 40 percent greater than in 1998, equaling 13 percent of Korea’s entire GDP. A good share of that total $10 billion was owed to overseas creditors. Its debt-to-equity ratio (total debt divided by share-holders equity) in 1999 was 5 to 1, which was higher than the 4 to 1 average of other large cheabol, but it was significantly higher than the U.S average, which usually is around 1 to 1 but which rarely climbs above 2 to 1. Of course, there is no way of knowing the true picture of Daewoo’s financial information because of the climate of secrecy in Korean companies. In addition it is possible that Daewoo’s estimated debt might be greatly underestimated because no one knows whether or not the $50 billion figure included debt of foreign subsidiaries.

How did Daewoo get into such a terrible position, and how much did the nature of the Korean economy and the Asian Financial crisis affect Daewoo?

Korean Economy
The impact of the Asian financial crisis on Korea was partly a result of the economic system of state intervention adopted by Korea in the mid-1950s. Modeled after the Japanese economic system, the Korean authoritarian government targeted export growth as the key for the country’s future. Initially, the government adopted a strategy of import substitution, and that later gave way to a strategy of “export or die”. Significant incentives were given to exporters, such as access to low cost money (often borrowed abroad in dollars and loaned to companies at below market interest rates in Korean won), lower corporate income taxes, tariff exemptions, tax holidays for domestic suppliers of export firms, reduced rates on public utilities, and monopoly rights for new export markets. Clearly, the government wanted Korean companies to export

The chaebol, of which the four largest were Hyundai, Daewoo, Samsung and the L G group, become the dominant business institutions during the rise in the Korean economy. They were among the largest companies in the world and were very diversified, as can be seen by the Daewoo’s investment and business choices. They were held together by ownership, management and family ties. In particular, family ties played a key role in controlling the chaebol. Until the 1980s, the bank in Korea provided most of the funding to the chaebol, and were owned and controlled by the government. Because of the importance of the exporting the chaebol were all tied to general trading companies. The chaebol received lots of support from the government, and they were very loyal to the government, giving rise to the charges of corruption.

Most chaebol were initially involved in the light industry, such as textile production, but the government realized that companies first shift to heavy industry and then to technology industries. Daewoo transitioned to heavy industry in 1976 when the Korean government asked President Kim to acquire an ailing industrial firm rather than let the firm go out of business and create unemployment.

Asian Financial Crisis and Its impact on Korea
The country continued to liberalize, and democracy finally came into being in 1988 with the introduction of a new constitution and the election of Kim Young-Sam, the first democratic president in Korea’s history. The economy also continued to grow at 5 to 8 percent annually during early to mid-1990s, led primarily by exports and the World Bank predicted that Korea would have the seventh largest economy in the world by 2020. However, the Asian financial crisis brought that growth to halt. After the Thai’ bhat’ was devalued on July 2, 1997, the Korean’ won ‘soon followed, and the Korean stock market crashed as well. By the end of 1997, the South Korean ‘won’ was 46.2 percent lower than its pre devaluation rate. At the time the crisis hit, Korea’s external debt was estimated to be $110 billion to $150 billion, 60 percent of it maturing in less than one year. In addition, Korea had another $368 billion of domestic debt.

Korea’s banks had been a tool to state industrial policy, with the government ordering banks to make loans to certain companies even if they were not healthy. Banks borrowed money in dollars and lent it to the firms in’ won’, shifting the burden of foreign exchange from the firms to the banks. Hanbo steel and Kia Motors went bankrupt leaving some banks with huge losses. The Korean ‘won’ fell in the fall of 1997 causing the government to raise interest rate to support the ‘won’ and resulting in more problem loans. Bad loans at the nine largest financial institutions in Korea ranged from 94 percent to 376 percent of the banks capital, making the banks technically insolvent.

The chaebol were also much overextended. The top five chaebol were in average of 140 businesses, ranging from semi-conductor manufacture to shipbuilding to auto manufacturing. This was happening during a time when most companies in the industrial world were selling off unrelated businesses and focusing on their core competencies. Twenty five of the top 30 chaebol had debt-to-equity ratio of over 5 to 1, as noted earlier. Compare this to Toyota Motor of Japan, which had a debt-to-equity ratio in 1998 of 0.7 to 1.

During this crisis, Korea began to negotiate with the IMF for help. The IMF agreed to help, but only if Korea raised interest rates to support its currency, reduce its budget deficits, reformed its banks, restructured its chaebol, improved financial disclosure, devalued the currency (to stimulate export even more), promoted exports, and restrict imports. In return for a pledge to introduce the reforms, the IMF released funds to Korea to help it pay off its foreign debt and to keep its bank from going bankrupt. This in turn brought in more money from foreign banks that were encouraged by Korea’s pledge to reform.

One of the IMF’s key areas was banking reform. The IMF encouraged Korea to open up its banking sector to foreign investment, hoping that an infusion of foreign banking expertise might help the Korean banks to make better loans. Of course, foreign banks had made a sizable number of bad loans in Asia as well. In addition, the IMF encouraged the Korean government to pass good bankruptcy laws to allow bad companies, including banks to fail. However, IMF hoped that Korean banking institutions would merge, forming fewer but stronger banks. In addition, the IMF encouraged banking reforms in order to cut the links between bankers and politics, tighten supervision and regulation of the banking industry, and improve accounting disclosure.

Impact of the crisis on Daewoo
While the financial crisis was going on, Daewoo’s President Kim ignored the warning signs and continued to expand. In 1998, a year when the Daewoo Group lost money, it added 14 new firms to its existing 275 subsidiaries. While Samsung and LG were cutting back Daewoo added 40 percent more debt.

Finally Korean President Kim Dae Jung had enough. He ordered the banks to stop lending to chaebol until they come up with and began to execute a plan to sell off businesses and to focus on their core competencies. But that didn’t stop Daewoo. TO get access to more money to feed its growth, Daewoo issued corporate bonds. Which were purchased by Investment Trust Companies (ITCs), finance companies associated with chaebol. The ITCs purchased nearly $20 billion in corporate bonds.

In early 1999, Daewoo announced a plan to sell off some of its business to comply with government restructuring requirements before the government took more drastic action, such as nationalization. However, the plans limped along until July 1999. At that point, with Korea still in deep recession, Daewoo announced that it would go bankrupt unless its Korean creditors backed it off. It basically could not even its service its interest payments of $500 million a month, let alone it’s principal. The government immediately stepped in and froze Daewoo’s loans until November 1999. This shock rippled through Korea, because nobody thought a chaebol would ever be allowed to collapse. That had never happened before, and the close ties between government and business were such that is was never expected to happen. The shock of Daewoo’s announcement negatively affected the corporate bond market, and the ITCs came under pressure because of their huge exposure to Daewoo. Negotiations in Korea involved 60 banks, some owned by the government, others in the private sector. On September 16, 1999, Daewoo asked its foreign creditors for a moratorium on interest payments until March 2000, so the instability spread to the international markets.

Daewoo’s Future
By the end of 1999, Daewoo’s President Kim was left with few options to solve Daewoo’s problems. One possibility was to dismantle Daewoo and let it have only auto related businesses. All of the other businesses would be sold off to domestic or foreign investors, and the name would be changed to something other than Daewoo. Another option for President Kim was to sell some of Daewoo’s auto assets. Ford, DaimlerChrysler and General Motors showed interest, but selling Daewoo Motor, the second largest automaker in Korea, would be a big blow to the country.

As the Korean economy began to recover in 1999, some felt that the chaebol should weather the storm and not allow themselves to be broken up. However, President Kim Dae Jung had mandated that the chaebol get their debt-to-equity ratios from 5 to 1 to 2 to1 by the end of 1999, and that goal seemed impossible unless there was a huge infusion of equity capital or either a write off of debt through debt restructuring with the banks or selling off of debt-laden business to others. Under immense pressure caused by the debt and by accusations of fraud and embezzlement, President Kim Woo-Choong abandoned his company and fled the country. The government separated the Daewoo subsidiaries and worked with creditors to convert the debt into equity, to set up subsidiaries on debt workout programs and to look for buyers.

After a year of negotiations, General Motors purchased a portion of the $1.2 billion Daewoo Motors in April 2002for $400 million. It agreed to keep only three manufacturing plants- two in Korea and one in Vietnam- leaving creditors scrambling to sell its other plants in Eastern Europe, Asia and the Middle East. By mid-2202, the Korean economy was showing promising signs of recovery and reform. In 2001, the economy grew by 3 percent and was expected to grow by 5 to 6 percent in 2002. The government has done away with debt-based management of the large chaebol and is working to dissolve the large conglomerates to better compete internationally. Of the top 30 chaebol that existed prior to the economic crisis only 14 remain.

The improving economy helped General Motors make its decision to purchase Daewoo Motor, but GM is faced with new decision: How to market Daewoo cars and reduce the $830 million of Daewoo debt. Should GM continue selling Daewoo cars in the United States and Europe and compete with its own brands? Without increasing its debt, will it be able to restore 37% share of the market in Korea?

Please give your answer in at least 25 words and press save and continue button.

Q1. What are the key mistakes Kim Woo-Choong made in formulating and implementing Daewoo’s strategy and how did the economic crisis in Korea and in rest of Asia affect that strategy?
Q2. How would you describe Korea’s economic system before its economy was affected by the Asian Financial crisis? What was the role of IMF in reforming the economic system in Korea?

Amity MBA Assignment C
1. Ricardian Model Assumptions
2. Which of the following is not a form of Non Tariff Barrier?
3. For a US trader a direct quote will be—
4. Which of the following is an example of depreciation of Indian Rupee?
5. A currency is said to be at a premium when—
6. Which of the following statement describes the Heckscher-Ohlin Theory?
7. “If US is capital rich and innovation increases the productivity of capital, then labor intensive industries in US will get hurt” is–
8. Which of the following is not part of Current Account transactions of a country?
9. In an economy which out of the following is not the reasons for internal debt i.e. excess of government expenses over revenue are—
10. Which of the following is not an underlying principle of GATT?
11. Which of the following is not an objective of NAFTA?
12. Which of the following is not a type of regional economic integration?
13. EU is an example of which type of regional economic integration?
14. Which of the following is an example of regional trade agreement among Asian Countries?
15. Which of the following is not founder member country of ASEAN?
16. GATT was formed in which year and by how many countries?
17. Which of the following is not an example of Quantitative Restriction on trade?
18. India is an example of which type of Economic System—
19. In a command economy or centrally planned economy–
20. Which of the following economic indicator is used to rank countries in terms of their individual wealth by World Bank?
21. Dumping which is a type of non tariff barriers means—
22. Which of the following pair is wrongly matched?
23. According to Porter, which of the following factors will not help in determining the Global Competitive Advantage of the company
24. Observation that “US exports were less capital intensive the US imports” which is the contradiction to the HO model is known as—
25. In which type of trade agreement no duties are charged on imports from member countries?
26. GATT stands for—
27. Which of the following was not an achievement of the Uruguay Round of negotiations?
28. Which of the following countries is not a member of ASEAN?
29. Glasnost and Perestroika were introduced by which Soviet Leader?
30. Which of the following country was first to disintegrate from Soviet Republic?
31. Which if the following country was not the member of the European Coal and Steel Community (ECSC)?
32. Neo-mercantilist theory is different from the Mercantilist theory as neo-mercantilist theory proposes that—
33. WTO was formed during which round of negotiations?
34. Which of the following is an example of cross exchange rate?
35. How inflation and Exchange rate are related to each other?
36. External Debt is measured as—
37. What does transition to market economy means?
38. Which of the following countries is not a member of MERCOSUR?
39. What is a convertible currency?
40. Currency Speculation is done to–

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