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

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

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Question 1

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What is meant by international business?

International business refers to all business activities that take place across national frontiers, involving the movement of goods, services, capital, personnel, and technology.
It is broader than international trade as it includes not only import-export of goods and services but also foreign investments and overseas production.
Examples include merchandise trade, service trade, licensing, franchising, joint ventures, and wholly owned subsidiaries operating across borders.

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Question 2

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Distinguish between merchandise exports and service exports.

Merchandise exports refer to sending tangible goods — those that can be seen and touched — to a foreign country, and are also known as trade in goods.
Service exports, also called invisible trade, involve trade in intangible services such as tourism, transportation, banking, insurance, and communication across borders.
While merchandise trade is visible and can be physically measured and tracked at customs, service trade is intangible and not subject to the same physical customs procedures.

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Question 3

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What is the fundamental reason why countries engage in international business?

Countries engage in international business because of the unequal distribution of natural resources and differences in productivity levels among nations.
Each country is better positioned to produce certain goods and services efficiently due to variations in availability of labour, capital, and raw materials.
Countries find it advantageous to specialise in what they produce most efficiently at home and trade with others for the rest, a principle known as territorial division of labour.

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Question 4

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How do political risks differ in domestic and international business?

In domestic business, a firm operates within a known and single political environment, making it easier to understand and predict the impact of government policies on operations.
In international business, political environments differ widely across countries, requiring firms to monitor political changes continuously and manage diverse political risks in each target market.
A key political risk specific to international business is the tendency of foreign governments to favour locally produced goods and services over imports, creating barriers for international firms.

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Question 5

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What is a proforma invoice and what information does it contain?

A proforma invoice is a document sent by the exporter to the prospective importer in response to a trade enquiry, serving as a preliminary quotation.
It contains information about the price at which the exporter is willing to sell, along with details of quality, grade, size, weight, mode of delivery, type of packing, and payment terms.
It is not a final invoice but functions as an offer document that helps the importer decide whether to place an order with the exporter.

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Question 6

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What is a letter of credit and why is it important in export transactions?

A letter of credit is a guarantee issued by the importer's bank to the exporter's bank that it will honour payment up to a specified amount for export bills drawn by the exporter.
It is considered the most appropriate and secure method of payment in international transactions as it eliminates the exporter's risk of non-payment by the importer.
Exporters typically demand a letter of credit before proceeding with production and shipment to ensure that payment will be received after delivery of goods.

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Question 7

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Distinguish between a bill of lading and an airway bill.

A bill of lading is a document issued by the shipping company acknowledging receipt of goods on board a sea vessel and undertaking to carry them to the destination port.
An airway bill is a similar document issued by an airline, acknowledging receipt of goods on board an aircraft and undertaking to carry them to the destination.
Both documents serve as evidence of shipment and documents of title to goods, but a bill of lading is used for sea freight while an airway bill is used for air freight.

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Question 8

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What is contract manufacturing? Give two examples of its forms.

Contract manufacturing refers to an arrangement where an international firm contracts one or more local manufacturers in foreign countries to produce goods or components as per its specifications, also known as outsourcing.
One form is production of components, such as automobile parts or shoe uppers, to be used later in final products assembled elsewhere by the international firm.
Another form is complete manufacture of finished products, such as garments or footwear, which are then sold under the international firm's brand name in various countries.

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Question 9

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What is meant by 'invisible trade' in the context of international business?

Invisible trade refers to the export and import of intangible services across borders, as opposed to tangible goods that can be seen and physically measured.
Services such as tourism and travel, banking and insurance, transportation, communication, education, and professional consultancy are examples of invisible trade.
It is called 'invisible' because these services cannot be physically examined at customs checkpoints, unlike merchandise goods, making it harder to measure and regulate.

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Question 10

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Distinguish between direct and portfolio foreign investment.

Foreign direct investment (FDI) involves a company investing directly in physical assets like plant and machinery in a foreign country with the intention of undertaking production and marketing, giving the investor a controlling interest.
Portfolio investment involves investing in shares, bonds, or providing loans to a foreign company without getting directly involved in its production or marketing operations, earning returns through dividends or interest.
FDI involves active management and operational control, whereas portfolio investment is a passive financial stake that does not confer operational control over the investee company.

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Question 11

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What is the IEC number and how is it obtained?

The Import Export Code (IEC) number is a mandatory identification number that every exporter and importer in India must obtain before engaging in international trade transactions.
It is obtained from the Directorate General of Foreign Trade (DGFT) or the Regional Import Export Licensing Authority by submitting an application along with required documents such as exporter/importer profile, bank certificate, photographs, and details of non-resident interest.
The IEC number must be mentioned in all export and import documents and is a prerequisite for availing various government incentives and export promotion benefits.

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Question 12

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What is a shipping bill and what is its significance in export procedure?

A shipping bill is the main document on the basis of which the customs office grants permission for export of goods from India.
It contains particulars of the goods being exported, the name of the vessel, the port at which goods are to be discharged, the country of final destination, and the exporter's name and address.
Five copies of the shipping bill along with supporting documents such as the export contract, letter of credit, commercial invoice, certificate of origin, and marine insurance policy must be submitted to the Customs Appraiser at the Customs House.

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Question 13

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What is a mate's receipt and what role does it play in export transactions?

A mate's receipt is a receipt issued by the commanding officer (mate or captain) of the ship after the cargo is loaded on board, acknowledging the receipt of the goods.
It contains information about the name of the vessel, berth, date of shipment, description of packages, marks and numbers, and condition of the cargo at the time of loading.
The C&F agent surrenders the mate's receipt to the shipping company for computation of freight, in exchange for which the shipping company issues the bill of lading.

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Chapter sections

Chapter international-business: International Business | Short Questions

What is meant by international business?

Distinguish between merchandise exports and service exports.

What is the fundamental reason why countries engage in international business?

How do political risks differ in domestic and international business?

What is a proforma invoice and what information does it contain?

What is a letter of credit and why is it important in export transactions?

Distinguish between a bill of lading and an airway bill.

What is contract manufacturing? Give two examples of its forms.

What is meant by 'invisible trade' in the context of international business?

Distinguish between direct and portfolio foreign investment.

What is the IEC number and how is it obtained?

What is a shipping bill and what is its significance in export procedure?

What is a mate's receipt and what role does it play in export transactions?

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