Chapter international-business: International Business Long Questions | business studies Class 11 CBSE

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Chapter international-business: International Business Long Questions | business studies Class 11 CBSE | ByteNotes.in

Long Answer

Medium difficulty • Structured explanation

Medium

Question 1

Long Form

Analyse the key differences between domestic business and international business. Why is international business considered more complex?

In domestic business, both buyers and sellers belong to the same country, share the same language and business practices, and operate under a single legal framework; in international business, parties come from different countries with diverse cultures, legal systems, and business norms.
Mobility of factors of production like labour and capital is relatively higher within a country than across national borders due to legal restrictions, cultural barriers, and economic differences, adding operational complexity to international business.
International markets are heterogeneous — customers differ in tastes, preferences, customs, and buying behaviours across countries — whereas domestic markets tend to be comparatively more homogeneous.
International business involves multiple currencies with fluctuating exchange rates, exposing firms to foreign exchange risks that are absent in domestic business transactions conducted in a single currency.
Each country has its own political environment, tariff and taxation policies, import quotas, subsidies, and business regulations, requiring international firms to navigate multiple, sometimes conflicting, regulatory frameworks simultaneously.

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Long Answer

Hard difficulty • Structured explanation

Hard

Question 2

Long Form

Compare exporting and wholly owned subsidiaries as modes of entry into international markets, highlighting the conditions under which each is most suitable.

Exporting requires minimal foreign investment and is the simplest entry mode, whereas a wholly owned subsidiary requires 100 percent equity investment in a foreign company, making it capital-intensive and suitable only for large firms.
Export firms operate primarily from the home country, providing limited market proximity to foreign customers; wholly owned subsidiaries are located in the host country, enabling closer interaction with customers and better understanding of local market needs.
Exporting exposes firms to transport costs, custom duties, and import restrictions, while wholly owned subsidiaries eliminate these barriers by producing locally in the target market.
Exporting is suitable when a firm is new to international business, when foreign investment risks are high, or when import restrictions are absent; wholly owned subsidiaries are preferred when full operational control is required and the firm has adequate financial resources.
Wholly owned subsidiaries allow the parent firm to protect its technology and trade secrets without any external sharing, while exporting does not expose these secrets but also provides less control over how the product reaches foreign consumers.

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Long Answer

Medium difficulty • Structured explanation

Medium

Question 3

Long Form

Explain the benefits of international business to nations. How do developing countries like India gain from participation in international trade?

International business enables nations to earn foreign exchange, which can be used to import essential capital goods, technology, petroleum products, fertilisers, and pharmaceuticals that are not domestically available.
Nations benefit from more efficient use of resources through specialisation — each country produces what it is most efficient at and trades for what others produce more efficiently, generating a larger overall pool of goods.
Countries, especially developing ones, improve growth prospects and employment by accessing larger foreign markets; nations like Singapore, South Korea, and China transformed their economies through an 'export and flourish' strategy.
Access to internationally traded goods raises the standard of living of citizens, as they can consume products from other countries that would otherwise not be available domestically.
For India specifically, international business has supported economic growth by attracting FDI, earning foreign exchange through service exports including IT and tourism, and enabling Indian firms to acquire global scale and competitiveness.

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Long Answer

Hard difficulty • Structured explanation

Hard

Question 4

Long Form

Critically evaluate joint ventures as a mode of entry into international markets, discussing both the advantages and limitations with relevant examples.

Joint ventures reduce the financial burden on the international firm since the local partner also contributes equity capital, making global expansion financially more feasible than a wholly owned subsidiary.
They enable execution of large-scale projects requiring significant capital outlay and manpower that a single firm might not be able to undertake independently.
The foreign firm gains from the local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business practices, reducing the risk of costly strategic errors.
Joint ventures allow sharing of costs and risks with a local partner, particularly when entering costly or politically risky foreign markets, providing a safety net for the international investor.
However, joint ventures carry the risk of technology and trade secrets being disclosed to the local partner, who may later use this knowledge to compete against the international firm; dual ownership can also lead to conflicts over management control between investing partners.

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Long Answer

Hard difficulty • Structured explanation

Hard

Question 5

Long Form

Describe the steps involved in a typical export transaction from the receipt of trade enquiry to obtaining customs clearance.

The export process begins with the receipt of a trade enquiry from a prospective buyer, to which the exporter responds with a proforma invoice detailing price, quality, delivery terms, and payment conditions.
Upon receiving the buyer's order (indent), the exporter assesses the importer's creditworthiness and typically demands a letter of credit to ensure payment security, then obtains the necessary export licence and IEC number from DGFT.
The exporter then secures pre-shipment finance from the bank to procure raw materials, process goods, and arrange transportation, followed by production or procurement of goods as per the importer's specifications.
Where applicable, the goods undergo compulsory pre-shipment inspection by the Export Inspection Agency under the Export Quality Control and Inspection Act, 1963, and the exporter also applies for excise clearance and, if needed, a certificate of origin.
After reserving shipping space with the shipping company, the goods are packed and forwarded to the port, insured against sea perils, and then submitted for customs clearance via the shipping bill along with supporting documents such as the export contract, letter of credit, commercial invoice, and certificate of inspection.

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Long Answer

Hard difficulty • Structured explanation

Hard

Question 6

Long Form

Explain licensing and franchising as modes of international business. How do they differ from each other and from joint ventures?

Licensing is a contractual arrangement where a licensor grants a foreign licensee the right to use its patents, technology, or trade secrets in return for a royalty fee, typically used in connection with production and marketing of goods.
Franchising is similar to licensing but applied to service businesses, where the franchiser grants the franchisee the right to operate using its brand, technology, and business format under stricter rules and regulations than in licensing.
In joint ventures, two or more firms jointly invest equity and share ownership, management, and risk, whereas in licensing and franchising, the licensor/franchiser makes virtually no foreign investment and bears no losses, only earning royalty income.
Licensing and franchising expose the licensor/franchiser to risks of technology leakage and creation of future competitors, whereas in joint ventures the risk is more about management conflicts and sharing of trade secrets with the local partner.
Examples of franchising include McDonald's, Pizza Hut, and Wal-Mart operating globally through franchisees, while licensing is exemplified by Pepsi and Coca Cola being produced and sold by local bottlers in different countries under licence.

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Long Answer

Hard difficulty • Structured explanation

Hard

Question 7

Long Form

Describe the steps involved in a typical import transaction in India, from trade enquiry to customs clearance and release of goods.

The import process begins with a trade enquiry sent by the importer to potential exporters, who respond with a proforma invoice; the importer then evaluates the terms and proceeds to check whether an import licence is required under EXIM policy.
The importer registers with DGFT to obtain an IEC number, and if licensing is required, obtains the import licence; the importer must also approach an RBI-authorised bank to obtain foreign exchange sanction as all payments to foreign suppliers must be made in foreign currency.
After obtaining the licence and foreign exchange, the importer places the import order (indent) with the exporter and, if required, arranges a letter of credit through its bank, making advance financial arrangements to avoid demurrages on uncleared cargo.
After the exporter ships the goods and dispatches shipment advice, the importer retires the import documents from the bank by paying (sight draft) or accepting (usance draft) the bill of exchange, thereby obtaining title documents.
On arrival of the ship, the importer obtains the delivery order from the shipping company, pays dock dues and obtains the port trust dues receipt, fills in the bill of entry for customs duty assessment, pays the duty, and finally receives the release order from port authorities to take possession of the goods.

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Long Answer

Medium difficulty • Structured explanation

Medium

Question 8

Long Form

Explain the scope of international business. How is it broader than just international trade?

International business encompasses merchandise exports and imports — trade in tangible goods — which is what most people traditionally associate with international trade.
It also includes service exports and imports, or invisible trade, such as tourism, banking, insurance, transportation, communication, and professional services, which now account for a significant share of world trade.
Licensing and franchising — where firms permit foreign parties to use their patents, trademarks, or service formats in exchange for royalties — represent non-trade forms of international business that generate cross-border income without physical movement of goods.
Foreign direct investment, where a company invests in plant and machinery in a foreign country to undertake production and marketing, and portfolio investment through acquisition of shares or bonds abroad, are key components of international business beyond trade.
The combination of these forms — trade, services, licensing, and foreign investments — demonstrates that international business is a much broader concept than international trade and involves production, marketing, and financial operations conducted across national borders.

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Long Answer

Medium difficulty • Structured explanation

Medium

Question 9

Long Form

Analyse the advantages and limitations of contract manufacturing as a mode of entry into international markets.

Contract manufacturing allows international firms to produce goods on a large scale using existing production facilities in foreign countries without making direct investment in setting up plants, reducing capital requirements significantly.
Since there is no or little direct investment in foreign countries, the international firm avoids foreign investment risk and the associated political and commercial risks that accompany owning assets in another country.
International firms benefit from lower production costs by getting products manufactured in countries with lower material and labour costs, improving their global price competitiveness.
Local producers in the host country gain a guaranteed market for their output and better utilisation of idle production capacities; for example, Godrej manufactures Dettol soap for Reckitt & Colman under contract, utilising its excess soap manufacturing capacity.
However, local firms may not adhere to quality standards, causing product quality problems; local producers lose control over the manufacturing process and cannot sell contracted output freely, often resulting in lower profits if open market prices exceed the contracted price.

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Long Answer

Medium difficulty • Structured explanation

Medium

Question 10

Long Form

Explain the importance of international business to business firms. How does it act as a driver of growth and competitiveness?

International business offers prospects for higher profits when domestic prices are lower than global prices, enabling firms to earn greater revenues by selling in foreign markets where demand and pricing are more favourable.
Firms with surplus production capacities can utilise these by securing export orders, achieving economies of scale that lower per unit production costs and improve overall profitability.
When demand for a firm's products gets saturated in the domestic market, international expansion provides new growth avenues — a key motivation behind many multinational corporations from developed nations entering fast-growing developing country markets.
Intensely competitive domestic markets drive many firms to seek international markets as a way to achieve growth that is no longer feasible at home, allowing them to diversify revenue sources and reduce dependence on a single market.
International business improves firms' overall business vision — the strategic intent to become globally competitive, diversify operations, and gain the advantages of internationalisation such as global brand recognition, economies of scale, and access to the best global resources and technologies.

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Chapter international-business: International Business | Long Questions

Analyse the key differences between domestic business and international business. Why is international business considered more complex?

Compare exporting and wholly owned subsidiaries as modes of entry into international markets, highlighting the conditions under which each is most suitable.

Explain the benefits of international business to nations. How do developing countries like India gain from participation in international trade?

Critically evaluate joint ventures as a mode of entry into international markets, discussing both the advantages and limitations with relevant examples.

Describe the steps involved in a typical export transaction from the receipt of trade enquiry to obtaining customs clearance.

Explain licensing and franchising as modes of international business. How do they differ from each other and from joint ventures?

Describe the steps involved in a typical import transaction in India, from trade enquiry to customs clearance and release of goods.

Explain the scope of international business. How is it broader than just international trade?

Analyse the advantages and limitations of contract manufacturing as a mode of entry into international markets.

Explain the importance of international business to business firms. How does it act as a driver of growth and competitiveness?

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