Q. 3 Silver Line Manufacturers produce several varieties of automobile components. They have 3 to 5 suppliers who supply materials regularly. Recently, procurement manager of Silver Line discussed in the meeting that they have to look out for new suppliers since they would be expanding their business operations to many places. How do you think Silver Line have to go about this situation? [10 marks]

Answer:

A marketing oriented company always keeps tab on its external environment carefully to analyze opportunities and threats. This external environment influences company’s strategies in two levels i.e. external macro environment and external micro environment. The macro environment involves political and legal, economic and natural, social and cultural and technology environment. The micro environment consists of supply chain, customer and competitor. These factors are uncontrollable by the organization. Even the best company faces threat if one of the external environments is adverse to it. A moderate company will be successful if the external environment favors it.

Q.2 Differentiate between foreign marketing and domestic marketing.

Domestic vs. International marketing

Domestic marketing refers to the practice of marketing within a firm’s home country. Whereas International or foreign marketing is the practice of marketing in a foreign country; the marketing is for the domestic operations of the firm in that country.

Domestic marketing finds the "how" and "why" a product succeeds or fails within the firm’s home country and how the marketing activity affects the outcome. Whereas, foreign marketing deals with these questions and tries to find answers according to the foreign market conditions and it provides a micro view of the market at the firm’s level.

Q.1 Explain the importance of taxation.

For the worldwide operation of firms, taxation plays a vital role. Taxation has become the core of various financing decisions which includes international investment decisions, international working capital decisions, fund raising decisions and the decisions related to dividend and other payments. The tax decision is also relevant in domestic firms also.

Q.3 Distinguish between indemnity and guarantee

Answer:

Indemnity and guarantee are two important ways to safeguard ones interests when entering into a contract. There are many similarities between the two concepts though they differ a lot also.

Distinction between a contract of guarantee and a contract of indemnity:

L.C. Mather in his book ‘Securities Acceptable to the Lending Banker’ has brought out the distinction between indemnity and guarantee by the following illustration. A contract in which A says to B, “If you lend Rs. 1 Lac to C, I will see that your money comes back” is an indemnity. On the other hand undertaking in these words, “If you lend 1 Lac to C and he does not pay you, I will pay” is a guarantee. Thus, in a contract of indemnity, there are only two parties, indemnifier and indemnified. In case of a guarantee, on the other hand, there are three parties, the ‘principal debtor’, the ‘creditor’ and the ‘surety’.

A guarantee is a promise to someone that a third party will meet its obligation to them. “If they do not pay you, I will pay you”. An indemnity is a promise to be responsible for another person’s loss and to agree to compensate them for any loss or damage on mutually agreed terms. For example, one agrees to pay the difference of repairs if they exceed a certain limit.

Other points of difference are:

Indemnity	Guarantee
Comprise only two parties- the indemnifier and the indemnity holder.	There are three parties namely the surety, principal debtor and the creditor.
Liability of the indemnifier is primary.	The liability of the surety is secondary. The surety is liable only if the principal debtor makes a default. The primary liability being that of the principal debtor.
The indemnifier need not necessarily act at the request of the indemnified.	The surety give guarantee only at the request of the principal debtor
The possibility of any loss happening is the only contingency against which the indemnifier undertakes to indemnify.	There is an existing debt or duty’ the performance of which is guarantee by the surety.
The indemnifier cannot proceed against third parties in his own name, unless there is an assignment in his favour.	After discharging the debt, the surety is entitled to proceed against the principal debtor in his own name.