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Unformatted text preview: MlDTERM EXAM BBA/IBBA PROGRAM MGMT 1010 D.S. BARROWS Please answer all of the questions for the following two case Studies from The Economist Magazine. Question One. Please answer all of the questions from the case study “ls globalisation killing India's cotton farmers”? 1. What is the key issue, or issues, in this case? (5 points) 2. Briefly describe the two Porter models of international competitiveness. (15 points) 3. Use one of these models to analyze the issues in this case. (10 points) 4. What is the solution proposed by The Economist magazine? (5 points) 5. Use one of the Porter competitiveness models to describe how India could implement the recommendations from The Economist magazine. (15 points) Question Two. Please answer all of the questions from the case study “A plan to curb a venerable monopoly”? 1. What is the key issue, or issues, in this case? (5 points) 2. Define: (15 points) A. Absolute advantage B. Comparative advantage C. Competitive advantage 3. Which of these models (absolute, comparative or competitive advantage) best describes this case? (15 points) 4. Why would the United States and Europe be concerned about the Canadian Wheat Board? (10 points) 5. Why does The Economist magazine believe that the Canadian government will have less difficulty in implementing changes to the Wheat Board than previous Liberal governments? (5 points) Copyright 2007 The Economist Newspaper Ltd. All rights reserved.) ls globalisation killing India‘s cotton farmers? FtAW cotton from the fields outside Wardha rolls slowly into town, roped to the back of bullock carts. The animals' horns are painted as brightly as the trucks that rattle past them. Their cargo is off-loaded in the forecourt of a ginning plant, where it collects in steep white mounds that look much like the snowscape of a fancy Swiss ski-resort. Only one in 12 of India's farmers has ever heard of the World Trade Organisation (WTO). The mostly illiterate cotton farmers of Vidarbha--the north-eastern corner of Maharashtra, where Wardha is located--surely count among the other 11. But even the most exalted of trade officials has heard of them. In the past 18 months more than 1,200 farmers in this, the cotton bowl of Irmtiavatakemneimwnmtesmescapedemsmey- lenders. These men have become the most poignant example of India's "agrarian crisis". This was widely blamed for the previous government's defeat in the 2004 election and overshadows India's timorous position in the Doha round of global trade talks, where it heads a group of more than 40 poor countries that want to shelter their farmers from foreign competition. Last year Oxfam, a charity, published a study arguing that the farmers' plight was worsened by their "i discriminate and forced integration" into an "unfair global system“. The Vidarbha suicides have many causes, most of them homegrown, says M.S. Swaminathan, the father of India's green revolution. The farmers borrowed money at punitive rates, so they could sink wells and buy costly» "biotech" cotton-seeds. But diesel for the pumps leapt in price, and the seeds proved ill—suited to small plots, fed mostly by rain. it the crops fail, "a man loses hope," Mr Swaminathan says. "He has the moneylender waiting at the door every day and taunting him." None of this is globalisation's fault. But-farmers have also been hurt by the low world price of their crop, which has fallen by more than a third since 1994. Last season the state government out the guaranteed price it paid for cotton from about 2,000 rupees ($56) per 100kg to 1750. Prices are low partly because cotton is so heavily subsidised by rich countries, principally America. The Doha round aims to cut these handouts "ambitiously" and "expeditiously". If they were out completely, it might add about 13% to world prices, according to one recent estimate by two World Bank economists. But the Doha round is unlikely to be so slick. A more likely scenario, in which cotton subsidies are cut by a third (and export subsidies eliminated), would add less than 5% to the price. In the meantime, India's government could impose a " ountervailing" tariff on dumped cotton. But cheap fibres please its textile industry, which is keen to take advantage of the end in 2005 of the old global quota regime. India's cotton tariff is just 10%, much lower than its tariffs on other commodities such as sugar. And exporters of yarn and cloth don't even pay that. Cheap cotton keeps the textile mills humming: were subsidies to be removed, India would lose out overall by the eguivalent of about $84mz according to the World Bank economists. / \‘i In the abstract, the answer to the farmers' distress seems easy: move from growing cotton to weaving it in i factories. But India's onerous labour laws inhibit industrial employment, and the lack of a safety net leaves 2 1’ farmers clinging to their marginal patches of land. 7 There is a deep historical irony in all this. India's long-fibre cotton was introduced by the British in the 19th century to feed the Lancashire cotton mills. Their cheap cloth put India's own weavers out of business: artisans were "thrown back on the soil". Today India's textile—makers are enjoying a renaissance. lf only more of its farmers could escape the soil. Copyright The Economist Newspaper Ltd. All rights reserved.) A plan to curb a venerable monopoly "WHY should I sell the Canadian farmers‘ wheat?" asked Pierre Trudeau, a Liberal prime minister, in 1968. By daring to question the existence of the Canadian Wheat Board he helped relegate his party to perennial fringe status in the prairie provinces, where the board has a legal monopoly over wheat and barley sales. Successive governments gingerly left the board alone. But Stephen Harper's Conservative minority government has no such inhibitions. It plans to remove the board's monopoly, thus possibly spelling the end of a venerable Canadian institution--and one of the world's biggest grain exporters. The board, a government body, dates from the Depression, when farmers were going broke. It is responsible for quality control, sales and marketing. lt fixes a guaranteed price, with the government covering its occasional losses. Its supporters, often smaller farmers distant from the American border, say that the board has turned Canadian wheat into a global brand that commands a premium price because of its uniform high quality. Its detractors among farmers say that they could beat the board's price by selling directly, and that decentralised sales would encourage local food industries. it is a sore point on the prairies that much of the flour on the country's supermarket shelves is milled in Ontario. Mr Harper believes in smaller government. He is honouring a campaign commitment to allow farmers in the three prairie provinces--Alberta, Manitoba and Saskatchewan--to sell their wheat freely. To that end, the government replaced three of the board‘s directors and, in December, its president. The opposition Liberals and the premiers of Saskatchewan and Manitoba (but not Alberta), want to keep the board. Chuck Strahl, the agriculture minister, has agreed to ballot farmers on the issue. But barley growers, thought to be more in favour of freeing markets than wheat farmers, will vote first. The outcome of the votes is uncertain. Mr Strahl insists that the board can survive--albeit in diminished form—-a transition to free markets, which he envisages by the summer of 2008. Environmentalists claim that a C$345m ($300m) biofuels programme, announced last month, is a subsidy designed to sway the vote. The debate over the board has rumbled on for years. But this time change may at last happen. The Conservatives, whose heartland is in the west, won 48 of the 56 prairie seats at the most recent election. Their bet is that the farmers, however disgruntled, will not desert them for their opponents, who are seen as representing eastern Canada. With wheat prices high, some farmers see instant profits from the end of monopoly. International pressure against the board is mounting, too. American farmers have long complained that the monopoly involves subsidy. The European Union agrees. John Howard, Australia's conservative prime minister (who is seen as a role model by some Canadian conservatives), last month stripped his country's wheat board of its monopoly following a bribery scandal. Though some prairie farmers stand to lose from free markets, Canadian consumers stand to gain from cheaper flour. Unlike Trudeau, Mr Harper has little to fear from taking on the board. ...
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This note was uploaded on 09/25/2010 for the course MGMT MGMT 1010 taught by Professor Davebarrows during the Winter '08 term at York University.

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