Revision Pack Unit 3: International Business

10 Sample pages. Complete pack contains 42 pages of 3 complete past papers with mark schemes and suggested answers - and 164 Power Point slides

Revision Pack Unit 3: International Business

For Edexcel’s Business Studies and Economics & Business

6BS03 and 6EB03

By Gerald Wood 1st edition, February 2010

Contents

1. CD with 164 slides covering the content of Unit 3:
2. most slides are in a ‘Question, Answer, Comment’ format. There are also 19 charts and tables. The slides are designed to be used in the classroom or put on the school’s intranet.
3. they follow the order of the specification
4. a second set of slides contains just the questions, and is designed to be printed out for homework / personal study if required

1. Three sample papers, following the rough outline of past examinations of this unit. Each paper contains:
2. a set of questions
3. a mark scheme, outlining the general approach expected of the student
4. a set of suggested answers. These are rather longer than most students would have time to produce in an examination setting, and also contain more analysis and detail than students would be expected to know. They will therefore be useful as a source of further study. They inevitably contain some points of view personal to the author and should therefore be seen as an example of how the questions might be tackled. Except in multiple choice questions, there is of course no such thing as a single ‘right’ answer.

Licence

The printed material is sold with a licence to photocopy for the benefit of students within the institution, but not further afield. Equally, the CD may be used by the staff of the centre, copied for the use of other staff at the centre, placed on the centre’s intranet, and printed out for the benefit of students within that centre, but not further afield.

February, 2010

Instructions

Use black ink

Answer all questions in both Section A and Section B

You may use a calculator

Information

Total marks for this paper is 80 (1 mark per minute, plus 10 minutes for reading)

Quality of written communication will be taken into account in questions 4 and 9. You should take particular care on these questions over spelling, punctuation, grammar and clarity of expression

Advice

Read each question carefully

Keep an eye on the time

Try to answer every question

Check your answers if you have time at the end

SECTION A

Answer ALL the questions in this section

Evidence A

Exporting old photocopiers

Shipping costs have never been so low. In part this is due to the container revolution of the last 40 years which has revolutionised the way goods are transported round the globe. Exporting to China is particularly cheap: there are so many goods flooding out of China that the shipping lines have vast numbers of empty containers that have to get back to China for the next load – and they are desperate for something to put in these empties.

Stephen Armistead, for 20 years a photocopier salesman based in Penrith, England, spotted a business opportunity. Photocopier dealers were leasing out their machines to customers for 3 or 4 years and then throwing them away, even though they were still perfectly usable. He now buys them up and sells them on second-hand, with 50 % going to overseas markets such as China, Pakistan, India, Uganda and Ireland. The first export deal for his company Trade Copiers was a container load to the United Arab Emirates for about 100 copiers. He sells to local dealers who will be prepared to handle reasonable volumes.

What about bad debts? Customers pay 25% of the price at the time of the order, and pay the other 75% when the goods are at their docks before collection – so bad debts are almost non-existent. As for the transport costs, Stephen can get a container load from Penrith to China for a lower cost than Penrith to the South of England just 300 miles away.

What about dealing in other languages? Stephen says most companies in the Far East and Middle East speak English, with customers from other EU countries much more likely to need a translator. Stephen, however, makes a point of travelling to meet his customers saying there is nothing like the value of personal contact. Most of the deals are originally set up through the business-to-business website called alibaba.com, where he advertised his wares and waited for enquiries to come in.

With a team of 9 staff, a 20,000 square foot warehouse and a turnover of £1 million, Trade Copiers has come a long way in the 8 years since its foundation. What of the future? Stephen has his eyes set firmly on China’s potential. With its steady growth rate of 9 % pa, there are not nearly enough Chinese second-hand photocopiers from a few years ago to meet current demand.

1. Analyse the potential for second-hand photocopiers forming a profitable global market niche. (6)
2. Analyse how Stephen Armistead might seek to overcome the cultural differences in doing business overseas. (8)

Questions 3 and 4 not included in this Sample ...

SECTION B

Answer ALL the questions in this section

Evidence A

Google ‘may pull out of China’ – 13th January 2010

Early in January, Google China was subjected to a sophisticated cyber attack aimed at accessing the email accounts of known human rights activists. It suspected that the Chinese government was behind the attack. In response, Google said it may pull out of China altogether. It is the Number 2 search engine in China with 30% of the market behind the local company Baidu holding 63%. While Baidu is a Chinese company, it is funded in part by investments from American venture capitalists.

When Google went into China in 2006, it reluctantly agreed to censor itself so that politically sensitive results (such as campaigns over Tibetan independence) did not appear in its search results. It appears that this latest attack on its integrity was the final straw. Google said that it would not stay in China unless it could negotiate a deal with the Chinese government that enabled it to offer censorship-free search results.

This approach is quite different to the normal business approach to China. The assumption normally is that the Chinese market is too large a prize to let slip. Companies accept difficult commercial decisions, government interference and censorship because of the pot of gold dangled in front of their noses. In Google’s case the pot of gold from advertising revenue has been estimated at $600 million from China coming through in 2010. As the president of the US-China Chamber of Commerce has said, “As long as you aren’t involved in politics, the media or pornography, the [Chinese] government will leave you alone”.

Others have wondered why Google has taken so long to adopt this ethical stance. As Evgeny Morozov of Georgetown University said, “They knew pretty well what they were getting into. Now it seems they are playing the innocence card ... It’s like they thought they were dealing with the government of Switzerland and suddenly realised it was China”.

Interestingly enough, many Chinese citizens supported Google’s stance, leaving bouquets of flowers outside Google’s Chinese HQ with messages such as “Thank you Google”, while others bowed in a traditional mark of respect.

Evidence B

Business opportunity for Baidu and for Bing – 8th February 2010

The prospect of Google pulling out of China is great news for Baidu, its main search rival in China, and also for Bing (the search engine owned by Microsoft) which is struggling to gain a foothold in the Chinese market. Microsoft itself is not interested in challenging the Chinese government. As its CEO, Steve Ballmer has said, "We have done business in China for more than 20 years and we intend to stay engaged, which means our business must respect the laws of China. That's true for every company doing business in countries around the world: we are all subject to local laws."

The stakes are high: in 2009 China had the largest number of Internet users in the world and the second-largest number of searches conducted. However, it is not at all clear that if Google pull out it will be Bing that is the main beneficiary. Users tend to stick with the search engine that they know and Baidu has a far bigger profile in China than Bing. Baidu originally attracted viewers by offering free MP3 files, whether it was legally entitled to do so or not. Then Google gained customers by offering search results that were (on political grounds) less censored than Baidu’s. Bing will face a tricky path: the less censorship the more the Chinese people like you – but the less their government likes you. As China is not a democracy, there is no simple mechanism whereby these competing views may converge.

Evidence C

Google advertises for more staff in China – 24th February 2010

Harold Wilson famously said that a week was a long time in politics. And a month is a long time in business. While Google is still ‘negotiating’ with the Chinese government it appears (depending on your point of view) to have come to an accommodation with the Chinese government - or to have waved the white flag of surrender. The first hint came a fortnight ago when Sergey Brin, one of the founders of Google, said he was optimistic that Google would not have to pull out of China over hacking and censorship disputes.

He saw the August 2008 Olympics in Beijing as a turning point – for the worse. Up until then, the rules on censorship had been progressively relaxed, but “there’s been a lot more blocking going on since then”. He also made an interesting claim about Google’s original intentions in going into China, “Throughout all of the discussions on entering China our focus has been on what’s best for the Chinese people. It’s not about our revenue or profit”.

The uncertainty created by Google’s original announcement in January that it was considering pulling out of China has been effectively ended by its advertising for 30 new staff at its Beijing HQ – for software engineers, sales staff and managers. Commented Qu Xiaodong, a technology consultant, “Google may have seen Baidu’s success in the wake of its withdrawal statement and decided that if it was going to stay in China, it needed to be more aggressive and win back the market share it had lost”.

Google’s move opens the way for it to sell other products in China as well, including its Nexus One mobile phone.

1. Assess the conflict Google faces between the pursuit of profit and its ethical beliefs on freedom of information. (8)

Questions 6 to 8 not included in this Sample ...

1. Evaluate the impact of China’s growing economic power on the way multinationals in China do business. (15, includes assessment for Quality of Written Communication)

Unit 3Sample Paper 1 Mark scheme

Questions 3 and 4 not included in this Sample ...

Questions 6 to 8 not included in this Sample ...

Unit 3 – Sample paper 1 Suggested answers

SECTION A: 4 questions, 35 marks

You are advised to spend no more than 40 minutes on Section A – so you have roughly one mark per minute.

1. Analyse the potential for second-hand photocopiers forming a profitable global market niche. (6)

Photocopiers are an essential tool of modern business. Originally designed to copy sheets of paper, they are now merging with printers such that the copier / printer can produce hard copies either from another piece of paper or from an electronic file. Despite the enormous growth in computing as a business tool, there is no sign yet of paper being phased out – though this development may yet come to pass.

Meanwhile, millions of photocopiers are in use in Britain alone. Large ones are often leased, so that the company that makes them is also responsible for keeping them in good repair. After they are past their best, they become difficult to lease out and are often scrapped. However, as Armistead has found out, there is plenty of demand for second-hand copiers. Just as second hand cars have a market among the less well-off, so the same appears to be true of photocopiers. Given the very low costs involved in international shipping, there is every reason to believe that these products form a profitable and expanding global niche market. However, as the cost of the equipment comes down over time, we may reach a point where there is no more of a global market for second-hand photocopiers than there is for second-hand shoes.

1. Analyse how Stephen Armistead might seek to overcome the cultural differences in doing business overseas. (8)

Business is a universal language, so it would be unwise to exaggerate the cultural differences of doing business in different countries. Particularly as globalisation proceeds apace, people all over the world get more used to dealing with each other. And with his background in sales, Stephen will already be familiar with the basic requirements of selling yourself as well as the product, building trust and delivering on what you promise. Furthermore, English is the international language of business and we read in the Evidence that Stephen has found this acceptable pretty much worldwide with the exception of some EU countries.

Nonetheless, Stephen has been careful to visit his customers even though it could be argued that this is not strictly necessary. In his words, “there is nothing like the value of personal contact” – and perhaps other orders will come at the time that he visits. Given that he is selling to dealers, he is actually talking to people with a similar background to himself. Personal contact is often the best way to understand each other and smooth over any difficulties.

With respect to selling on credit, Stephen has overcome potential differences by simply refusing to do it. By insisting that goods are paid for in advance of delivery, he avoids the whole issue of credit control, while the fact that 75% of the price does not have to be paid until the goods arrive at their port of destination gives the buyers confidence that they will not be left without their products.

Stephen will also be helped by the relative simplicity of his business proposition – selling second-hand photocopiers by the container-load. There is a limit to the level of understanding required of the others’ business model.

In conclusion, Stephen comes from a sales background, is middle-aged, and is dealing with others in a similar line of work. A good dose of common sense and extensive business experience will overcome most cultural differences.

Questions 3 and 4 not included in this Sample ...

SECTION B: 5 questions, 45 marks

You are advised to spend about 50 minutes on Section B – so you have one mark per minute plus 5 minutes reading time.

1. Assess the conflict Google faces between the pursuit of profit and its ethical beliefs on freedom of information. (8)

There is no doubt that the profitable thing for Google to do is to stay in China, and if this means self-censoring its search results at the behest of the Chinese government then that is the price it has to pay. However, the company is committed to the free exchange and dissemination of information so there is an argument for saying that it should not agree to provide a service in China on terms that it considers fundamentally unethical – indeed, its own Board seems to have reached this view in January.