International Business Q. Define international
business.
Ans. The international movement
of goods, services, capital, personnel, technology and intellectual property in
different countries is called international business.
Q. What is a joint
venture?
Ans. A joint venture means
any form of association that is jointly owned by two or more independent firms.
Q. What is the need for
international business?
Ans. Due to unequal
distribution of natural resources among countries, they cannot produce equally
and cheaply all that they need.
Q. Briefly state the
scope of international business.
Ans. The scope of
international business is quite wide. It includes not only merchandise exports,
but also trade in services, licensing and franchising as well as foreign
investments.
Q. What are the
limitations of exporting and importing?
Ans. The limitations of
exporting and importing are as follows:
i.
Involves huge cost of packaging, insurance and transportation;
ii.
Custom clearance of goods is cumbersome;
iii.
The government policy of some countries may not be favorable to
export and import.
Q. What is the major
difference between international trade and international business?
Ans. International trade
refers to the exchange of goods and services between two or more countries.
However, international business involves international movement of goods,
services, capital, personnel, technology and intellectual property like patents,
trademarks, etc. across different nations.
Q. What are the features
of international business?
Ans. The important features
of international business are as follows:
i.
Facilitates import and export of goods.
ii.
Involvement of two or more countries.
iii.
Dealing in foreign currency.
iv.
Subject to restrictions as per the policies of a country.
v.
Due to the distance involved, it is a lengthy procedure.
Q. How is international
business beneficial for firms?
Ans. International business
is beneficial for firms in the following ways:
i. Prospects
of higher profits
ii. Increased
capacity utilisation
iii. Prospects
for growth
iv. Facing
less competition in domestic market by exporting.
v. Improved
business vision.
Q. State the factors
responsible for the choice of mode of entry into international business.
Ans. Following are the factors
responsible for the choice of mode of entry into international business:
i.
Government policies: The government policy of both countries
entering into international business affects the mode of entry. It is important
to note whether the country has an open economy or a closed one. In a closed
economy, joint ventures and wholly owned subsidiaries are ruled out.
ii.
Resources: To manage overseas operations, availability of
resources is an important factor.
iii.
Competitiveness: A firm may have competitive advantage in the form
of low costs, product quality, technological superiority, marketing strength,
etc.
Q. What are the products
that India exports to other countries?
Ans The products that India
exports to other countries are:
1.
Primary Products: Agricultural and allied, Ores and Minerals
2. Manufactured
goods :Textiles including garments, Gems and jewellery, Engineering goods
Chemicals and related products
Leather and manufactures
3.
Petroleum, crude and related products
4.
Others
Q. Differentiate between
domestic business and international business.
Ans.
DIFFERENCE
|
DOMESTIC
BUSINESS
|
INTERNATIONAL
BUSINESS
|
NATIONALITY
|
Employees, suppliers, middleman, shareholders and partners are
usually citizens of the same country.
|
Employees, suppliers, middleman, shareholders and partners are
from different nations.
|
MOBILITY
|
Mobility of factors of production is more within a country.
|
Mobility of factors of production is relatively less.
|
RISKS
|
It is subject to political system and risks of a single country.
|
It is subject to political system and risks of different
countries.
|
BUSINESS POLICIES
|
Business practices, taxation system and policies of a single
country are applicable.
|
Business practices, taxation system and policies vary
considerably across countries.
|
Q. Explain the different
modes of entering into international business.
Ans. The different modes by
which a business enterprise can enter into international business are as follows:
i. Exporting and Importing:
Export means producing goods in one’s own country and selling them to another
country whereas import involves bringing goods into the home country from
abroad.
ii. Contract Manufacturing or
Outsourcing: In this mode, a company may enter into a contract with another
company in a foreign country to manufacture goods or components as per former’s
specifications. It is also called outsourcing. Many international companies get
the products or components produced in developing countries under contract
manufacturing.
iii. Licensing and Franchising:
Licensing is a process by which a firm transfers its intangible property such
as expertise, know-how, blueprints, technology and manufacturing design to a
firm located abroad. It is also known as technical collaboration. On the other
hand, where a firm allows another firm in a foreign market to use its technical
know-how and trade mark, it is known as franchising. Under this arrangement,
the franchiser grants the franchisee, the use of a trademark or other assets
that are essential. The franchiser charges a fee for the same from the
franchisee.
iv. Joint Ventures:
A joint venture is an arrangement between two or more partners sharing in a new
project or venture through participation in its equity capital.
v. Wholly-Owned Subsidiaries:
The companies with long term and substantial interest in the foreign market,
when acquire full control over the foreign company by making 100% investment in
its equity capital are called wholly- owned subsidiaries.
|