Please refer to International Business Class 11 Business Studies Important Questions with solutions provided below. These questions and answers have been provided for Class 11 Business Studies based on the latest syllabus and examination guidelines issued by CBSE, NCERT, and KVS. Students should learn these problem solutions as it will help them to gain more marks in examinations. We have provided Important Questions for Class 11 Business Studies for all chapters in your book. These Board exam questions have been designed by expert teachers of Standard 11.
Class 11 Business Studies Important Questions International Business
Very Short Answer Type Questions
Question. By using which mode of entry, does the domestic manufacturer give the right to use its trademark to a manufacturer in a foreign country for a fee?
Answer : Licensing is a contractual arrangement in which one firm grants access to its patents, trade secrets or technology to another firm in a foreign country for a fee called royalty
Question. Write a common point between licensing and franchising?
Answer : A common point between licensing and franchising is to make use of the licensor’s/ franchiser’s copyrights, patents and brand names
Question. State any two necessary documents require in connection with an import transaction
Answer : Commercial invoice, bill of lading/airway bill are documents required in connection with an import transasction
Question. What is IEC number?
Answer : IEC Number is Import Export Code Number which is obtained from the Directorate General Foreign Trade (DGFT) or Regional Import Export Licensing Authority. It is a pre requisite to obtain export license
Question. Identify the mode of entry into an international business when an Indian Company enters into a contract with local manufacturers in foreign countries to get certain components as per its specifications
Answer : Contract Manufacturing is a type of international business where a firm enters into a contract with one or a few local manufacturers in foreign countries to get certain components or goods produced as per its specifications
Question. Who is C&F agent?
Answer : C&F Agent is Clearing and forwarding agent who is engaged in providing services, directly or indirectly, concerned with clearing and forwarding operations in any manner to any other person and includes a consignment agent. The C&F agent surrenders the mates receipt to the shipping company for computation of freight.
Short Answer Type Questions
Question. Differentiate between the contract manufacturing and setting up wholly owned production subsidiary abroad
Answer :
| Basis | Contract Manufacturing | Wholly owned production subsidiary |
| Meaning | Type of international business where a firm enters into a contract with one or a few local manufacturers in foreign countries to get certain components or goods produced as per its specifications | This entry mode of international business is preferred by companies which want to exercise full control over their overseas operations |
| Control | Local manufacturers loses his control over the manufacturing process because goods are produced strictly as per the terms and specifications | Exercise full control over its operations |
| Investment and Risk | No investment, no investment risk | It is not suitable for small and medium size firms which do not have enough funds with them to invest abroad. And has to bear the entire losses resulting from failure of its foreign operations |
Question. What is the objective of WTO? What are its benefits?
Answer : Objectives of WTO are as follows:
• To ensure reduction of tariffs and other trade barriers imposed by different countries;
• To engage in such activities which improve the standards of living, create employment, increase
income and effective demand and facilitate higher production and trade;
• To facilitate the optimal use of the world’s resources for sustainable development
• To promote an integrated, more viable and durable trading system.
Benefits of WTO are as follows:
• Helps promote international peace and facilitates international business.
• All disputes between member nations are settled with mutual consultations.
• Rules make international trade and relations very smooth and predictable.
• Free trade improves the living standard of the people by increasing the income level.
• Free trade provides ample scope of getting varieties of qualitative products.
• Economic growth has been fastened because of free trade.
• The system encourages good government.
• WTO helps fostering growth of developing countries
Question. Give difference between Internal trade and International trade
Answer :
| BASIS | INTERNATIONAL BUSINESS | DOMESTIC BUSINESS |
| NATIONALITY OF BUYERS AND SELLERS | Buyers and sellers come from different | Buyers and countries sellers are from the same country |
| NATIONALITY OF OTHER STAKEHOLDERS | Belong from various countries and hence have wider set of values and aspirations | Belong to one country and hence consistency in their value system and behaviour |
| MOBILITY OF FACTORS OF PRODUCTION | Mobility with various restrictions | Free mobility |
| CUSTOMER HETEROGENEITY ACROSS MARKETS | Difference in taste and preference complicate the task of designing product in international market | Difference in taste and preference doesnot complicate the task of designing product in domestic market |
| DIFFERENCES IN BUSINESS SYSTEMS AND PRACTICES | The differences in business systems and practices are considerably much more among different countries | The differences in business systems and practices are considerably less within a country |
| POLITICAL SYSTEM AND RISKS | Political environment differs from one country to another. Special efforts are needed | Predict the impact of political environment on business operations |
| BUSINESS REGULATIONS AND POLICIES | Business laws, regulations and economic policies differ among different countries | Business laws, regulations and economic policies are more or less uniformly applicable within a country |
| CURRENCY USED IN BUSINESS TRANSACTIONS | The price of one currency expressed in relation to that of another country’s currency, keeps on fluctuating. | No such problem is faced as only home currency is used |
Question. China is a major producer of electronic goods at very low cost as compared to India. Discuss the benefits that India will derive if it enters into a trade agreement with China for electronic goods.
Answer : Benefits to India if it enters into trade agreement with china are as follows:
1. International business with China will help India to earn foreign exchange which it can later use for meeting its imports of other goods
2. Exporting and flourishing in International trade with China will help in improving growth prospects and created opportunities for employment of people
3. Due to International business with China, people in world community are able to consume and enjoy a higher standard of living
Question. Explain the following documents used in International trade:
(i) Mate’s Receipt.
(ii) Letter of credit
(iii) Certificate of origin
Answer :
(i) Mate’s Receipt: A mate receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board, and contains the information about the name of the vessel, berth, date of shipment, descripton of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship, etc. The port superintendent, on receipt of port dues, hands over the mate’s receipt to the C&F agent.
(ii) Letter of credit: A letter of credit is a guarantee issued by the importer’s bank that it will honour payment up to a certain amount of export bills to the bank of the exporter. To minimise such risks, most exporters demand a letter of credit from the importer.
(iii) Certificate of origin: The certificate of origin acts as a proof that the goods have actually been manufactured in the country from where the export is taking place. This certificate can be obtained from the trade consulate located in the exporter’s country. For availing trade concessions and other benefits, the importer may ask the exporter to send a certificate of origin.
Long Answer Type Questions
Question. In what ways exporting/importing is better than setting up wholly owned subsideries abroad.
Answer : Exporting refers to sending of goods and services from the home country to a foreign country.
Importing is purchase of foreign products and bringing them into one’s home country There are Two ways of exporting and Importing
1. direct exporting/importing, a firm itself approaches the overseas buyers/ suppliers and looks after all the formalities related to exporting/ importing activities including those related to shipment and financing of goods and services
2. Indirect exporting/ importing, on the other hand, is one where the firm’s participation in the export/import operations is minimum, and most of the tasks relating to export/import of the goods are carried out by some middle men
Wholly owned subsidiary is entry mode of international business which is preferred by companies who want to exercise full control over their overseas operations. It can be established in 2 ways:
• Setting up a new firm altogether to start operations in a foreign country
• Acquiring an established firm in the foreign country and using that firm to manufacture and/or promote its products in the host nation
Exporting is better than setting up wholly owned subsidiaries abroad because of the following:
• Exporting is the easiest way of gaining entry into international markets as compared with wholly owned subsidiaries
• Business firms are not required to invest that much time and money in exporting whereas in case of wholly owned subsidiaries, small and medium firms which do not have enough funds with them to invest abroad
• Since exporting/importing does not require much of investment in foreign countries, exposure to foreign investment risks is nil or much lower. In case of wholly owned subsidiaries they are subject to higher political risks and has to bear the entire losses resulting from failure of its foreign operations
Question. What is World Bank? Discuss the various objectives and role of its affiliated agencies
Answer : The International Bank for Reconstruction and Development (IBRD), commonly known as World Bank, was result of the Bretton Woods Conference.
• The main objectives were to aid the task of reconstruction of the war-affected economies of Europe and assist in the development of the underdeveloped nations of the world
• Having achieved success in accomplishing, turned its attention to the development of underdeveloped nations, It realized that by investing more and more in these countries, especially in social sectors like health and education; it could bring about the needed social and economic transformation of the developing countries
• International Development Association (IDA) was formed with objective to provide loans on concessional terms and conditions to those countries whose per capita incomes are below a critical level
• IDA, thus, provides interest-free long-term loans to the poor nations. IBRD also provides loans
but these carry interest charged on commercial basis
• The World Bank is a group of five international organisations responsible for providing finance
to different countries.
Question. What incentives and schemes are provided by government for country export?
Answer :
Foreign Trade Promotion Measures and Schemes
1. Duty drawback scheme
• Duties paid on export goods are, therefore, refunded to exporters on production of proof of exports of these goods to the concerned authorities. Such refunds are called duty draw backs.
• Some major duty draw backs include refund of excise duties paid on goods meant for exports, refund of customs duties paid on raw materials and machines imported for export production. The latter is also called customs drawback
2. Export manufacturing under bond scheme
• This facility entitles firms to produce goods without payment of excise and other duties.
• The firms desirous of availing such facility have to give an undertaking (i.e., bond) that they are manufacturing goods for export purposes
3. Exemption from payment of sales taxes
• Goods meant for export purposes are not subject to sales tax
• This benefit of exemption from income tax is available only to 100 per cent Export Oriented Units (100 per cent EOUs) and units set up in Export Processing Zones (EPZs)/Special Economic Zones (SEZs) for select years
4. Advance licence scheme
• Exporter is allowed duty free supply of domestic as well as imported inputs required for the manufacture of export goods.
• As such the exporter is not required to pay customs duty on goods imported for use in the manufacture of export goods.
• The advance licences are available to both the types of exporters—those who export on a regular basis and also to those who export on an adhoc basis
5. Export Promotion Capital Goods Scheme (EPCG)
• Allows export firms to import capital goods at negligible or lower rates of customs
duties subject to actual user condition and fulfilment of specified export obligations
• This scheme is especially beneficial to the industrial units interested in modernisation and upgradation of their existing plant and machinery.
6. Scheme of recognising export firms as export house, trading house and superstar trading house
• With an objective to promote established exporters and assist them in marketing their products in international markets, the government grants the status of Export House
• This status is granted to a firm on its achieving a prescribed average export of performance in past select years. Besides attaining a minimum of past average export performance, such export firms have to also fulfill other conditions as laid down in the import-export policy
7. Export of Services
• Objective is to boost the export of services
• These houses are recognized on the basis of the export performance of the service providers.
• They are referred to as Service Export House, International Service Export House, International Star Service Export House
8. Export finance
• Exporters require finance for the manufacture of goods
• Two types of export finances are made available to the exporters by authorised banks.
• They are termed as pre-shipment finance or packaging credit and postshipment finance.
• Under the preshipment finance, finance is provided to an exporter for financing the purchase, processing, manufacturing or packaging of goods for export purpose.
• Under the post-shipment finance scheme, finance is provided to the exporter from the date of extending the credit after the shipment of goods to the export country
9. Export Processing Zones (EPZs)
• Export Processing Zones are industrial estates, which form enclaves from the Domestic Tariff Areas (DTA).
• These are usually situated near seaports or airports.
• They are intended to provide an internationally competitive duty free environment for export production at low cost
• Recently the EPZs have been converted to Special Economic Zones (SEZs) which are more advanced form of export processing zones. These SEZs are free from all rules and regulations governing imports and exports
10. 100 per cent Export Oriented Units (100 per cent EOUs)
• EOUs have been established with a view to generating additional production capacity for exports by providing an appropriate policy framework, flexibility of operations and incentives
• It adopts the same production regime, but offers a wider option in location
Question. Mr. Manchanda is a business man in Gurgoan he manufactures scooters. His son after doing an MBA in USA returns to India and suggests that they should set up a fully owned factory in Bangkok for supplying to customers in South East Area and Middle East. Mr. Manchanda however does not agree to his proposal and wants to set this unit in South India.They are having a debate in this. In your opinion with whom you agree. Give reasons for support of your answer.
Answer : I would agree to set up a wholly owned factory i.e. wholloy owned subsidiary in Bangkok for supplying customers in South East area and Middle East area.
Wholly owned subsidiary is the entry mode of international business is preferred by companies which want to exercise full control over their overseas operations. It can be established in 2 ways:
1. Setting up a new firm altogether to start operations in a foreign country
2. Acquiring an established firm in the foreign country and using that firm to manufacture and/or promote its products in the host nation This helps us to Exercise full control over its operations. And we are not required to disclose technology or trade secrets to others.
International Business benefits firm by the following ways:
1. When the domestic prices are lower, business firms can earn more profits by selling their products in countries where prices are high
2. Making use of surplus production capacities and thereby improving the profitability of operations
3. When Demand in home country gets saturated, the company can think of growth prospects in developing countries
4. When competition in the domestic market is very intense, internationalisation seems to be the only way to achieve significant growth
5. The vision to become international comes from the urge to grow, the need to become more competitive, the need to diversify and to gain strategic advantages of internationalisation
