CBSE Class 11 Business Studies - International Business Part B. Learning the important concepts is very important for every student to get better marks in examinations. The concepts should be clear which will help in faster learning. The attached concepts made as per NCERT and CBSE pattern will help the student to understand the chapter and score better marks in the examinations.
Manufacturing and trading beyond the geographical boundaries of a country is known as international business. The development of communication, technology and infrastructure etc make it possible. New modes of communication and development of faster and more efficient means of transportation have brought nations closer to one another as a result of which trade between them can take place. Following are the main reasons behind international business.
1. Unequal distribution of natural resources and differences in the productivity levels of the countries make them incapable of producing every good of their requirement.
2. Labor productivity and production costs differ among nations due to socioeconomic, geographical and political reasons.
3. The availability of different factors of production such as labor, capital and raw materials differ among nations.
Concept of International Business
Major forms of business operations that constitute international business are as follows
1. Merchandise exports and imports. Merchandise exports means sending tangible goods abroad and merchandise imports means bringing tangible goods from abroad.
2. Exports and imports which involve trade in intangible items that can not be seen or touched. It is also called invisible trade.
3. Another way of entering into international business is licensing and franchising country to produce and sell goods under their trademarks patents or copy right in lieu of some fee is called licensing Pepsi and Coca- Cola are produced & sold all over the world by local companies in foreign countries under licensing system. Franchising is similar to licensing, but it is used in connection with the provision of services. McDonald s operates fast food restaurants all over the world through the system of franchising.
4. Foreign investment is another important form of international business. It can be of two types : direct and portfolio investments. Direct investment takes place when a company directly invests in properties such as plant & machinery in foreign countries with a view to undertake production and marketing of goods and services in those countries. It provides the investor a controlling interest in a foreign country. Under portfolio investment, a company makes investment by acquiring shares or providing loans to a foriegn company & earns income by way of dividends or interest on load. In this investor does not get directly involved in production or marketing of goods.
Benefits of International Business
International Business is important to both nations and business firms. It offers them various benefits.
Benefits to Nations :
1. It helps a country to earn foreign exchange which can be used for importing various goods from abroad.
2. It leads to specialization of a nation in the production of those goods which can be produced by it in the most effective and economical manner.
3. It helps a nation in improving its growth prospects and also create opportunities for employment.
4. It make it possible for people to consume goods and services produced in other countries which help in increasing their standard of living.
Benefits to Firms :-
1. It helps in increasing profits of the firms by selling goods in the countries where prices are high.
2. It help firms in using their surplus production capacities and improving the profitability of their operations.
3. It help firms in improving their growth prospects.
4. It acts as one of the ways of achieving growth for firms facing tough market conditions in the domestic market.
5. It improves business vision as it make firms more competitive, and diversified.
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