NCERT Class 11 Business Studies International Business I

INTERNATIONAL BUSINESS - I

11.1 INTRODUCTION

Countries all over the world are undergoing a fundamental shift in the way they produce and market various products and services. The national economies which so far were pursuingthe goal of self-reliance are now becoming increasingly dependent upon others for procuring as well as supplying various kinds of goods and services. Due to increased cross bordertrade and investments, countries are no more isolated. The prime reason behind this radical change is the development of communication, technology, infrastructure etc. Emergence of newer modes of communication and development of faster and more efficient means of transportation have brought nations closer to one another. Countries that were cut-off from one another due to geographical distances and socio-economic differences have now started increasingly interacting with others. World Trade Organisation (WTO) and reforms carried out by the  governments of different countries have also been a major contributory factor to the increased interactions and business relations amongst the nations. We are today living in a world where the obstacles to cross-border movement of goods and persons have substantially come down. The national economies are increasingly becoming borderless and getting integrated into the world economy. Little wonder that the world has today come to be known as a ‘global village’. Business in the present day is no longer restricted to the boundaries of the domestic country. More and more firms are making forays into international business which presents them with numerous opportunities for growth and increased profits. India has been trading with other countries for a long time. But it has of late considerably speeded up its process of integrating with the world economy and increasing its foreigntrade and investments (see Box A: India Embarks on the Path to Globalisation).

11.1.1 Meaning of International Business

Business transaction taking place within the geographical boundaries of a nation is known as domestic or national business. It is also referred to as internal business or home trade. Manufacturing and trade beyond the boundaries of one’s own country is known as international business. International or external business can, therefore, be defined as those business activities that take place across the national frontiers. It involves not only the international movements of goods and services, but also of capital, personnel, technology and intellectual property like patents, trademarks, know-how and copyrights.

EXERCISES

Multiple Choice Questions

1. In which of the following modes of entry, does the domestic manufacturer give the right to use intellectual property such as patent and trademark to a manufacturer in a foreign country for a fee

a. Licensing b. Contract manufacturing

c. Joint venture d. None of these

2. Outsourcing a part of or entire production and concentrating on marketing operations in international business is known as

a. Licensing b. Franchising

c. Contract manufacturing d. Joint venture

3. When two or more firms come together to create a new business entity that is legally separate and distinct from its parents it is known as

a. Contract manufacturing b. Franchising

c. Joint ventures d. Licensing

4. Which of the following is not an advantage of exporting?

a. Easier way to enter into b. Comparatively lower international markets risks

c. Limited presence in d. Less investment foreign markets requirements

5. Which one of the following modes of entry requires higher level of risks?

a. Licensing b. Franchising

c. Contract manufacturing d. Joint venture

6. Which one of the following modes of entry permits greatest degree of control over overseas operations?

a. Licensing/franchising b. Wholly owned subsidiary

c. Contract manufacturing d. Joint venture

7. Which one of the following modes of entry brings the firm closer to international markets?

a. Licensing b. Franchising

c. Contract manufacturing d. Joint venture

8. Which one of the following is not amongst India’s major export items?

a. Textiles and garments b. Gems and jewellery

c. Oil and petroleum products d. Basmati rice

9. Which one of the following is not amongst India’s major import items?

a. Ayurvedic medicines b. Oil and petroleum products

c. Pearls and precious stones d. Machinery

10. Which one of the following is not amongst India’s major trading partners?

a. USA b. UK

c. Germany d. New Zealand

Short Answer Questions

1. Differentiate between international trade and international business.

2. Discuss any three advantages of international business.

3. What is the major reason underlying trade between nations?

4. Discuss as to why nations trade.

5. Enumerate limitations of contract manufacturing.

6. Why is it said that licensing is an easier way to expand globally?

7. Differentiate between contract manufacturing and setting up wholly owned production subsidiary abroad.

8. Distinguish between licensing and franchising.

9. List major items of India’s exports.

10. What are the major items that are exported from India?

11. List the major countries with whom India trades.

Long Answer Questions

1. What is international business? How is it different from domestic business?

2. “International business is more than international trade”. Comment.

3. What benefits do firms derive by entering into international business?

4. In what ways is exporting a better way of entering into international markets than setting up wholly owned subsidiaries abroad.

5. Discuss briefly the factors that govern the choice of mode of entry into international business.

6. Discuss the major trends in India’s foreign trade. Also list the major products that India trades with other countries.

7. What is invisible trade? Discuss salient aspects of India’s trade in services.

Please refer to attached file for NCERT Class 11 Business Studies International Business - I