IBM 416 Lecture Notes - Lecture 11: Foreign Direct Investment, World Trade Organization, Roll Forming

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Case Study - Ferro Industries — Exporting Challenge In A Small Firm
· What was the problem that Garima Sharma faced? (p 1) Yusuf had placed a large order for
roll-forming machines from Ferro in March 2010, but he had been unwilling to pay for the consignment
in advance. In order to minimize financial loss and to avoid offending and losing a significant, regular
client, Garima Sharma had decided to release the machines to Yusuf before receiving payment — but
now she worried that she should not have done so.
· Why Yatendra was excited about the Yusuf’s inquiry? (p 2) because this was one of the first
foreign enquiries received by the company after its expansion. He shared the news with Garima and
asked her to take on the responsibility of organizing the inspection and dealing with this client
throughout his stay in India.
· Why Garima released the shipment to Yusuf in 2010 without payment? (p 2) Armed with a
strong motivation to contribute to her husband’s firm, Garima made the difficult decision to release the
shipment to Yusuf in 2010 without payment, as he was a regular client of the organization; but would
Ferro have to pay for Garima’s generosity in this instance?
· What are the top-two sectors that provide the highest employment in India? (p 2) After
agriculture, the SME sector was the second-largest employer in India.
· What percent of the exports in India is achieved by SMEs? (p 3) 42%
· What are the factors that created a competitive business environment for SME’s in India? (p
3) a. The liberalized investment regime in India in the 1990s encouraged foreign direct investment (FDI)
b. The formation of the World Trade Organization (WTO) in 1995 forced its member-countries
(including India) to lift quantitative and non-quantitative restrictions on imports; and
c. Economic reforms in India since 1991 brought major changes in economic policies. These revised
policies relaxed or removed many government controls on production capacity, imported capital
goods, intermediate inputs and technology. These reforms altered the economic environment of
the country.
· What is Ferro’s approach to international markets? (p 3)The company was aggressively
seeking an international market share by continuously adopting advanced technologies and designs in its
manufacturing facilities.
· What is Ferro’s primary product? (p 3)was the roll-forming machine, which was used by
numerous industries across the country and beyond.
· What is the Ferro’s pricing strategy for overseas clients? (when they make what amount of
payment?) (p 4) Ferro entered into a sales contract with its overseas clients. Since the machinery
required heavy investment, the company typically required 10 per cent of a client’s payment in advance,
35 per cent after dispatching the B/L and the remaining balance at the time of delivery. Pricing for the
domestic market was approximately 15 per cent lower than for the international market.
· When does Ferro offer competitive pricing to its overseas clients? (p 4) - was short of orders,
· What are the pricing strategies of Ferro’s domestic and international competitors? (p 5) - at
costs that were notably lower than those of itscompetitors.
· What percent of China’s GDP come from SMEs? (p 5) - 60%
· What is the major advantage of Chinese SMEs over Indian SMEs? (p 6) - access to low
labour costs, easy access to a workforce of women.
· What are the other advantages of Chinese SMEs over Indian SMEs? ( p 6) - in terms of
labour resources, and had activelydeveloped labour-intensive industries and SMEs with considerable
employment capacities.
How does women employment differ between China and India? (p 6) - unskilled workforce of
women was also easily available to Chinese manufacturers at lower wages.
· What is the major challenge that Chinese SME’s face? (p 6) - inadequate credit system.
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