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IBUS 7302: Operating International Business

Semester 2, 2022

QUESTION ONE (10 marks)

a) Using the Gelfand culture model, discuss how we can derive the two different/opposite perspectives of culture around the world. Illustrate with appropriate examples. (5 marks)

b) Discuss the key characteristics of the new culture model that we discussed in the course, including its similarities and differences with the old culture models. (5 marks)

PLEASE TYPE YOUR ANSWER BELOW (max 2 pages / max 600 words):

QUESTION TWO (10 marks)

BHP is an Australian mining company that extracts iron ore from mines in Australia and sells the iron ore to China. BHP’s market price per ton of iron ore for export to China is AUD 1500, and the production cost per ton of iron ore exported to China is AUD 1000. (AUD is Australian dollars). Assume the corporate tax rate in Australia is 50%, and in China the tax rate is 25%.

a) To maximize BHP’s worldwide profits, what should be BHP’s transfer price per ton of iron ore for exporting from Australia to its China subsidiary. What will be the before-tax and after-tax profit per ton of iron ore for BHP in Australia, BHP in China, and BHP worldwide in this scenario? What will be the tax revenue for governments in Australia and China in this scenario (6 marks)

b) What is the implication for the Australian government when MNCs such as BHP maximize their profits through transfer pricing schemes? What should the Australian government do to stop this practice and maximize tax revenue in Australia? (4 marks)

Please note – You must show clear and detailed steps and calculations for all your answers.

Answers without detailed steps and calculations will get zero marks.

PLEASE TYPE YOUR ANSWER BELOW (max 2 pages / max 600 words):

QUESTION THREE (10 marks)

The ABC Construction Company in China built the Beijing Olympics stadium in 2008. The company is planning to submit a proposal to construct the 2032 Olympics stadium in Brisbane, Australia. The Brisbane Olympics committee is interested in a company that can complete all aspects of the stadium so that it can be used for training purposes immediately after construction.

Based on your detailed analysis and evaluation of all foreign market entry mode alternatives for this business specifically, (and not just a general theoretical comparison of various entry modes), recommend and justify the entry mode that the ABC Construction Company should choose (and should not choose) to enter the Australian market. Explain the key characteristics of your proposed mode and how the firm should implement your proposed mode for entering the Australian market.

Please note that simply providing a theoretical discussion of the different entry modes will not get any mark. Each mode must be analyzed and evaluated in the specific context of the firm in this question.

PLEASE TYPE YOUR ANSWER BELOW (max 2 pages / max 600 words):

QUESTION FOUR (10 marks)

Based on the information in the table below, answer the following questions:

a) What is the domestic density and international density for each of the four firms, ONE, TWO, THREE, and FOUR? Based on the international density metric, identify the firm that is most internationalized? Compare and comment on the international characteristic of this firm vis-à- vis the other three firms that have lower international density. (6 marks)

b) Based on the Stages Model discussed in the class, recommend and justify the most appropriate organization structure that best fits the respective international strategy of each of these four firms. Discuss briefly with examples, the key characteristics of the organization structure for each firm. (4 marks)

Please note – You must show clear and detailed steps and calculations for all your answers.

Answers without detailed steps and calculations will get zero marks.

PLEASE TYPE YOUR ANSWER BELOW (max 2 pages / max 600 words):