Previous Year Short & Long Questions With Answers - International Business | Business Studies (BST) Class 11 - Commerce PDF Download

Short Answer Questions

Q1: What is international business?

Ans: International business is when companies sell and buy things not just in their own country, but also in other countries. This includes moving goods, services, money, and even people between different nations. It helps countries and businesses work together and share what they have.

Q2: Why do countries engage in international business?

Ans: Countries do international business because they cannot produce everything they need on their own. Some countries are better at making certain products. By trading with each other, they can get what they need, save money, and use their resources more efficiently.

Q3: How is international business different from domestic business?

Ans: International business happens between different countries, while domestic business happens within one country. In international business, people from different countries work together, which can make communication harder because of language and cultural differences.

Q4: What is a Bill of Entry?

Ans: The importer or their representative is required to present the bill of entry to the port authorities. After the necessary charges are paid, the port authority issues a release order for the goods. This document is typically prepared by a licensed customs clerk or broker, and it is reviewed by customs officials to ensure its accuracy and compliance with legal and tariff regulations.

Q5: What challenges do companies face when entering international markets?

Ans: Companies face many challenges when going to international markets. These include understanding different laws, languages, and cultures. They also need to manage risks like changes in the political environment and currency exchange rates.

Q6: What is the IMF? What are its objectives?

Ans: The International Monetary Fund (IMF) is an organization that works to ensure a stable international monetary system. Its main aim is to facilitate cross-border financial transactions and regulate exchange rates between currencies in an orderly manner. Objectives of the IMF are:

• To promote the growth of balanced international trade and support high levels of employment by establishing a permanent institution.
• To assist in creating a multilateral payment system for current transactions among member countries, enhancing exchange rate stability and fostering smooth exchange agreements among them.

Q7: What is contract manufacturing?

Ans: Contract manufacturing is when a company makes a deal with a local factory in another country to produce goods for them. This means the foreign company does not need to build its own factory and can use the local factory’s resources to make products.

Q8: What is a letter of credit, and why is it important for an exporter?

Ans: A letter of credit is a document issued by the importer's bank, assuring the exporter's bank that payment for the exported goods will be made up to a specified amount. This document is essential for the exporter as it provides a secure guarantee of payment, ensuring safe and reliable settlement of international transactions.

Q9: What is a joint venture?

Ans: A joint venture is when two or more companies come together to start a new business. They share ownership and responsibilities. This helps them combine their strengths to succeed in a new market.

Q10: Why is it necessary to register with an export promotion council?

Ans: Exporting enterprises need to obtain a certificate from an Export Promotion Council to qualify for the benefits and incentives offered under the Registration Cum Membership Certificate (RCMC). Registration is also crucial to safeguard payments against political and commercial risks that may arise from dealing with foreign organizations. Furthermore, it facilitates access to financial support for trade financing from banks and other financial institutions.

Q11: Differentiate between International Trade and International Business.

Ans: 1. International Trade:

• It focuses on the exchange of goods, services, and money across borders.
• Refers specifically to the movement of products between countries.
• The term is narrower in scope, addressing only trade-related activities.

2. International Business:

• Encompasses all cross-border activities, including trade in goods, services, technology, capital, and knowledge between nations.
• Involves any business transactions between two or more countries.
• It is a broader concept, with international trade forming a smaller subset of it.

Long Answer Questions

Q1: Discuss the significance of international business in today's global economy. What are the key reasons that drive countries and firms to engage in international business?

Ans:

• Global Market Opportunities: One of the primary reasons for engaging in international business is the vast opportunities available in global markets. Countries and firms can reach a wider audience beyond their domestic borders. This expansion allows them to tap into new customer bases, thereby increasing their sales and potential profits. For instance, a company that produces a niche product might find that its domestic market is too small to sustain its growth, but the same product could be in high demand in another country.
• Access to Resources: International business enables firms to access resources that may not be available domestically. Different countries are endowed with various natural resources, labor pools, and technological capabilities. For example, a company might source raw materials from one country while manufacturing products in another where labor costs are lower. This strategic sourcing enhances efficiency and reduces overall production costs.
• Economies of Scale: By operating internationally, firms can achieve economies of scale, which refers to cost advantages gained by increasing production. When companies expand their operations to foreign markets, they often increase their production volume, which can lead to lower costs per unit. This not only boosts profitability but also allows firms to offer competitive pricing in both domestic and international markets.
• Diversification of Markets: Engaging in international business helps firms diversify their markets, which reduces their dependency on a single market. This diversification is crucial, especially in times of economic downturns or market saturation in the domestic environment. By having a presence in multiple countries, firms can mitigate risks associated with fluctuating demand in any one market.
• Innovation and Learning: International business fosters a culture of innovation and learning within firms. By interacting with diverse markets and customers, businesses can gain insights into different preferences and trends. This exposure often leads to the development of new ideas, products, or services tailored to meet the unique needs of various markets, ultimately enhancing their competitiveness.

Q2: Explain the differences between domestic and international business. Why is managing international business considered more complex than domestic operations?

Ans:

• Participants' Nationality: In domestic business, both buyers and sellers operate within the same national framework, which simplifies communication and negotiations. In contrast, international business involves participants from different countries, each with unique languages, cultures, and business practices. This diversity can lead to misunderstandings and complications during transactions.
• Regulatory Environment: Domestic businesses operate under a single set of laws and regulations. However, international businesses must navigate multiple legal systems, which can vary significantly in terms of regulations, tariffs, and trade policies. This complexity requires a thorough understanding of international laws and compliance with regulations in each country of operation.
• Cultural Differences: The cultural context in which a business operates significantly impacts its operations. Domestic businesses typically deal with a homogenous culture, whereas international businesses must adapt to diverse cultural norms, values, and consumer behaviours. For example, marketing strategies that work in one country may not resonate in another due to cultural differences, necessitating tailored approaches.
• Political Risks: Domestic businesses are subject to the political climate of their home country, which, while variable, is often more predictable than the international landscape. International businesses face political risks that can arise from changes in government policies, political instability, or diplomatic relations between countries. Understanding and managing these risks is crucial for successful international operations.
• Currency and Financial Management: In domestic business, transactions are conducted using the local currency, making financial management straightforward. In international business, firms deal with multiple currencies, leading to pricing, payment, and hedging complexities against exchange rate fluctuations. This necessitates sophisticated financial strategies to manage currency risks effectively.