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

Short Answer Type Questions

• Once the shipment has been sent, the exporter notifies the importer.
• Necessary documentation from the exporter is sent, including copies of the invoice, the insurance policy, and the letter of credit. These things are necessary for the importer to claim the goods upon arrival and obtain customs clearance.
• These papers are supplied to an importer only once the importer accepts the bill of exchange, according to the instructions sent with them through the exporter’s bank.
• The sum is credited to the exporter’s account once the exporter bank receives the payment via the importer’s bank.
• If the exporter files the required paperwork and signs a letter of indemnification, they may also be paid immediately.
• The exporter must get proof of payment from the bank after receiving payment for exports. It includes the required paperwork attesting that the export shipment has been given to the importer for payment and that the money was received in accordance with exchange control laws.

Q2: Differentiate between international trade and international business.
Ans: International Trade:

• It involves cross-border exchanges of money, products, and services.
• Trade internationally solely refers to the movement of products.
• The word “international trade” is narrow.

International Business:

• It refers to cross-border or international trade between two or more nations in products, technology, services, knowledge, and capital.
• International business is any business deal between two or more nations.
• International trade is a considerably smaller subset of international business.

Q3: Describe the numerous words used in foreign trade.
Ans: The following are some keywords used in export trade:

• Free on Board (FOB): From the port of shipping, the importer is responsible for all expenses and risks of loss or damage.
• Cost and Freight (C&F): According to the terms of this agreement, the exporter must deliver the items to the shipping port. The exporter is responsible for paying the freight fees. After reaching this location, the importer is responsible for the products’ loss or damage. The FOB price + freight costs make up the C&F pricing.
• Cost, Insurance, and Freight (CIF): In a CIF agreement, the exporter is responsible for paying the freight expenses to transport the products to the destination port. It includes costs for insurance against the possibility of the items being lost or damaged during transit.

Q4: What is a letter of credit? Why does an exporter need this document?
Ans: The importer’s bank issues a letter of credit as a promise to honour the payment of export bills to the exporter’s bank up to a specific amount. The exporter must obtain this document since it guarantees that the payment method is covered by security, making it a safe means to settle transactions that are international.

Q5: Discuss any three advantages of international business.
Ans: Benefits of doing business internationally include:

• International trade helps countries build up their foreign exchange reserves, which they may use to buy capital goods, oil, and technology.
• Both exporting and importing nations benefit from international trade.
• It gives nations and manufacturers a platform to market their goods to a global clientele of buyers. The inhabitants of such countries will have more work options as a result.

Q6: Explain the meaning of mate’s receipt.
Ans: Mate’s receipt refers to the document that the ship’s commanding officer issues when cargo is brought on board. It includes information on the ship’s name, the day the package was shipped, the contents’ numbers and descriptions, and the condition of the cargo.

Q7: What is the major reason underlying trade between nations?
Ans: The main drivers of international trade are:

• Natural resource inequalities prevent nations from producing goods at the same standard of excellence and the same price. This is brought about by the uneven distribution of natural resources and variations in production levels between various geographical locations.
• There are a variety of differences in labor productivity and production costs. It differs in each nation due to various social, geographic, and political conditions necessitating trade.
• Advantage of Specialisation: The concept of the geographical division of labor also applies globally. For instance, most labor-rich emerging nations specialize in manufacturing and exporting textiles.
• Price Disparities: Businesses also export and import items due to the different product prices. They export items to other nations where they may sell them for more money and buy cheaper commodities from other nations.

Q8: What benefits do firms derive by entering into international business?

Ans: Companies gain the following advantages from doing business abroad:

• Businesses may make significant profits by selling a product to foreign markets at a lower price than it would cost domestically.
• Better growth possibilities for products whose native markets are saturated.
• A company may produce items to its maximum potential and increase earnings by taking advantage of economies of scale by entering foreign markets.
• Businesses can overcome intense home competition by investigating foreign markets.
• By extending into overseas markets, they may capitalise on long-term growth.

Q9: Write short notes on Bill of lading, Bill of entry and Shipping advice.
Ans: The following are the explanations:

• Bill of Lading: After receiving the freight, the shipping firm issues a bill of lading, which serves as documentation that the items have been approved for shipment to the designated location. This document is known as an airway bill when products are transported by air.
• Bill of Entry: The importer or his representative must produce the bill of entry to the port authorities. After acquiring the appropriate charges, the port authority issues the release order. A licensed customs clerk or broker creates it, and the customs officials check it for correctness and adherence to the law and tariff.
• Shipping advice: Shipping advice is a business document that is produced by the exporter, who is the letter of credit’s beneficiary, to provide shipping information to the importer, who submitted the letter of credit application.

Q10: Why is it necessary for an export firm to go in for pre-shipment inspection?
Ans: Pre-shipment inspection is essential for the reasons listed below:

• It guarantees that only high-quality products are exported.
• A qualified organisation exports products decided upon by the government.
• In accordance with the Export Quality Control and Inspection Act of 1963, the government has made it necessary to inspect export products and assigned various authorities to do so.
• Before exporting any items, an inspection certificate must be obtained from the Export Inspection Agency.

Q11: Why is it said that licensing is an easier way to expand globally?
Ans: The following are some of the strongest justifications for licencing as a strategy for a business’s global expansion:

• Less expensive: Since the licensor does not have to incur high costs abroad, this method of reaching global markets is more affordable.
• Lower chance of government interference: The local licensee is in charge of running the company in the foreign market. Thus, licensing lessens the possibility of governmental interference in commercial activities.
• Better connections and knowledge: As a native, the licensee is more familiar with the market dynamics in their country than the licensor. This, in turn, helps the licensor’s activities on the market run smoothly and its international growth.

Q12: Why is it necessary to get registered with an export promotion council?
Ans: The exporting enterprises must possess a certificate to be eligible for the incentives offered by the (RCMC). Registering to protect payments from the political and commercial risks posed by other organisations in other nations is necessary.
Additionally, it helps the export firm get financial backing for commercial financing from banks and other financial organizations.

Long Answer Type Questions

Features:

• Along with goods, it also controls services and intellectual property rights.
• It is a rule-based organisation driven by its members.
• The member governments make every choice based on a broad understanding.
• Like the World Bank and the International Monetary Fund, the World Trade Organisation (WTO) is a major international player (IMF).
• Initiator of the World Trade Organisation, India.

Structure:

The Ministerial Conference, the WTO’s highest decision-making body, comprises representatives from all WTO members. It is planned to convene at least every two years and has the power to decide on any matters pertaining to any multilateral trade agreement.

Objectives:

• To ensure that trade restrictions imposed by other nations, such as tariffs, are minimised.
• To take part in activities that raise standards of life, generate jobs,
• Improve effective demand and income, as well as promote greater commerce and production;
• To make it easier to utilise the world’s resources in the most effective way possible for sustainable development.
• To encourage the development of an integrated, viable, and durable trading system.

Functions:

• The creation of a universally recognised code of conduct intends to lower trade barriers, such as tariffs, and eliminate discrimination in global trade relations by enticing its member nations to approach the WTO to address their issues.
• Serving as a body for resolving disputes.
• Ensuring that all guidelines and requirements of the Act are followed.
• Holding meetings to foster better communication and collaboration in formulating global economic policy.

Q2: Discuss the advantages and importance of foreign trade.
Ans: Foreign trade is the only way to specialise in producing those goods for which a country has many resources and facilities available, export the surplus production to other countries, and simultaneously make imports of other goods from another country. This is so because of the unequal distribution of natural resources and skills between different countries.

The products are made available to customers in nations that are not produced through international trade. As a result, it raises people’s standards of living. Foreign commerce is essential for a country’s economic growth. Importing capital goods and rare raw resources is possible. Similar to how surplus goods can be exported to other nations to gain foreign currency.

The following is a discussion of the benefits of foreign trade:

• Resource efficiency: Trade with other countries promotes specialisation and the international division of labour. It lessens resource waste brought on by the creation of unprofitable things. Additionally, the resources are effectively employed.
• Quality of Living: By delivering commodities and services that cannot be produced economically in a single country, international commerce enables people living in various nations to increase their standard of living.
• International Relations: Trade with other nations makes them dependent on one another. A country with an excess of a product can sell it to a nation with a shortage, while a nation in need of a product can import it from another nation. This fosters peace and friendly relations amongst all nations.
• Price Stabilisation: By regulating supply and demand, international commerce helps to keep commodity prices stable around the globe. Without international commerce, this would not have been feasible.
• Employment: Export-oriented sectors benefit from increased employment prospects thanks to international commerce.
• Large-scale economies: Foreign commerce makes it easier for a nation to specialise in manufacturing particular items. This will make it easier to continue producing various goods for both domestic and international markets. Numerous economies of large-scale production will result from this. Additionally, the resources will be used more effectively.
• Growth of Economy: Underdeveloped and emerging nations may make use of their underutilised natural resources by importing machinery, equipment, and technological know-how from developed nations.

Q3: “International business is more than international trade”. Comment.
Ans: Due to the following, the scope of international business is substantially broader than that of international trade:

• Service Exports and Imports: These include transportation, communication, warehousing, distribution, and advertising, as well as banking, tourism, and invisible commerce. Trade-in intangible products is involved in service exports and imports.
• Exports and Imports of Goods: The terms “merchandise export and import” refer to the export and import of physical products. Trading in goods, which exclusively includes commerce in physical commodities and excludes trade in services, is another name for exporting and importing merchandise.
• Foreign investments: Investments made overseas in hopes of receiving a financial return are known as foreign investments. There are two sorts of foreign investments, namely: Foreign Direct Investment (FDI) is the term used when a company actively invests in assets like factories and machines in other nations to manufacture and sell goods and services there. Portfolio Investment made by one firm into another by purchasing shares or granting loans, with the latter receiving revenue through dividends or interest on loans, is known as a portfolio investment.
• Franchising and licensing: One company (the licensor) enters into a legal agreement with another company (the licensee) to offer access to its patents, copyrights, trademarks, or technology in exchange for a sum of money known as a royalty. Licensing and franchising go hand in hand. It is a phrase used in relation to the rendering of services.

As a result, these factors have greatly expanded the potential for international business, which now encompasses such activities as foreign exchange offers, international travel and tourism, transportation, communication, banking, warehousing, distribution, and advertising.
Businesses have been investing more often in overseas countries. Therefore, we may conclude that the word “international business” is far more extensive than the term “international trade.”

Q4: What is the IMF? Discuss its various objectives and functions.
Ans: The primary objective of the IMF, which includes facilitating cross-border transfers and regulating exchange rates between national currencies, is the development of an orderly international monetary system.

Objectives of IMF are:

• Creating a permanent institution makes it easier for balanced international trade to grow and promote and maintain a high level of employment.
• Assist in the development of a multilateral system of payments for current exchanges between participants to improve exchange stability and maintain streamlined exchange agreements between participants.

Functions of IMF are:

• Serving as a short-term credit organisation.
• Supplying tools for the systematic modification of exchange rates serving as a short-term lending organisation.
• Provision of facilities required to guarantee that exchange rates are updated in a timely and systematic manner
• Serving as a holding place for the money of all members.
• Serving as a lending institution for current and foreign exchange transactions determining and changing the value of a nation’s currency.
• Provide the tools for international negotiations.

Q5: Describe the different WTO agreements.
Ans: The WTO accords include regulations governing trade in products, services, and intellectual property, in contrast to the GATT, which exclusively included laws governing trade in things. In order to prevent conflicts between states, the WTO Agreements mandate that governments create regulations and procedures and make them explicit. The following major WTO accords are discussed:

• The former General Agreement on Tariffs and Trade (GATT), which underwent a significant revision in 1994 as a part of the Uruguay Round of talks, is very much a component of the WTO accords. Along with the overarching principles of trade liberalization, the GATT also contains a number of individual agreements developed to address particular non-tariff barriers. The database on GATT 1994 Major Agreements is a list of some of the GATT’s agreements.
• The Agreement on Textile and Apparel (ATC) was formed within the WTO to gradually eliminate the limitations that wealthy countries had placed on exporting textiles and clothing from developing nations. Under the Multi-Fibre Arrangement (MFA), which was a significant break from the GATT’s fundamental tenet of free trade in commodities, the industrialised nations were implementing different quota limits.
• In accordance with the ATC, the industrialised nations committed to gradually removing quota limits over the course of 10 years, beginning in 1995. ATC is regarded as a significant accomplishment of the WTO. The ATC is responsible for the nearly quota-free global textile and apparel trade that has existed since January 1st 2005. This has dramatically helped developing nations increase their exports of textiles and apparel.

AoA: This agreement promotes fair and unrestricted commerce in agricultural products. Although the original GATT regulations were relevant to trade in agriculture, they had certain flaws, including an exception for member nations to apply non-tariff measures to defend the interests of the farmers in their own country, such as customs taxes, import quotas, and subsidies. Agriculture trade was severely skewed, mainly due to the usage of subsidies by certain affluent nations.

• AoA is a big step in the direction of fair and well-organised commerce in agricultural goods. The industrialised nations have agreed to reduce the customs fees on their imports and the subsidies for agricultural exports. The developing nations have been excluded from making comparable reciprocal promises because of their greater reliance on agriculture.
• General Agreement on Trade in Services or GATS: Although services are intangible and cannot be toughened like commodities, agreements are nonetheless applicable to them just like they are to products or commerce. Due to the fact that GATS includes services in the scope of the multilateral rules and standards, it is recognised as a significant accomplishment of the Uruguay Round. The fundamental regulations regulating “trade in goods” have been expanded to include trade in services as a result of GATS.

The following are the three main GATS provisions that control the trade in services:

• All members are obliged to reduce barriers to the trade-in services gradually. However, emerging nations now have more latitude in choosing the timeline for their liberalisation and the services they choose to liberalise throughout that time.
• According to GATS, the “Most Favoured Nations” (MFN) requirement governs trade in services and forbids nations from making distinctions between foreign suppliers and services.
• Each member state is required to quickly publish all applicable laws and rules relating to services, including those from any international agreements the member has signed regarding trade and services.

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement was negotiated by the World Trade Organisation (WTO) between 1986 and 1994. The laws governing intellectual property rights were initially addressed and established as a component of the multilateral trade system during the Uruguay Round of GATT talks. Information of commercial worth, such as concepts, inventions, artistic expression, and others, is referred to as intellectual property.

In relation to seven intellectual properties, including copyrights and related rights, geographical indications, trademarks, industrial designs, layout designs of integrated circuits, patents, and undisclosed information, the agreement specifies the minimum standards of protection that the parties must adopt (trade secrets).

Q6: Identify various organisations that have been set up in the country by the government for promoting the country’s foreign trade.
Ans: The various organisations include:

Department of Commerce:

• Foreign trade and its related concerns are within the purview of this department. It creates an international trade policy.
• It also establishes the general direction of the nation’s import and export policy.

Export promotion council:

• They are non-profit organisations to foster and expand the nation’s exports of particular goods that are registered under the Societies Registration Act also known as the Companies Act.
• There are now 21 EPCs operating.

Commodity boards:

• These boards serve as an addition to Export Promotion Councils (EPCs) and carry out the same duties as EPCs in terms of advancing the production of conventional commodities and their exports.

Export inspection council:

• The Government of India formed the Export Quality Control and Inspection Council in accordance with Section 3 of the Export Quality Control and Inspection Act 1963 to promote the export industry’s responsible growth via quality control and pre-shipment inspection.

Indian trade promotion council:

• It was incorporated on January 1st, 1992, in accordance with the Companies Act of 1956 by the Ministry of Commerce, Government of India.
• The headquarters of Indian Trade Promotion Organisations are in New Delhi.
• It supports the sector by planning trade shows and exhibits both inside and beyond the nation.
• It is a company that offers regular and prompt services.

Indian institute of foreign trade:

• It conducts research in fields of international business, offers training in international trade, and analyses and disseminates data on global investments and commerce.
• With the primary goal of professionalising the nation’s administration of its international commerce, it is an independent organisation founded by the Government of India and incorporated under the Societies Registration Act.

Indian institute of packaging:

• The Indian Institute of Packaging was created as a national institute in 1966 by the Ministry of Commerce, the Government of India, and the Indian Packaging Industry and Allied Interests.
• The company’s leading laboratory and headquarters are both in Mumbai.
• The three additional regional laboratories are located in Chennai, Delhi, and Kolkata.
• It is a teaching and research facility with an emphasis on testing and packaging.
• It provides an adequate infrastructure to fulfil the various demands of the package manufacturing and user sectors.
• This institute offers training, instruction, and consulting services with reference to package creation.

State trading organisations:

• The creation of State Trading Organizations was required since the available trade routes were insufficient for promoting exports and diversifying trade with nations other than European nations.
• The STCs, which were established in 1956, have as their primary objective the promotion of export commerce among diverse trading partners worldwide.

Q7: What are the possible reasons to have international trade?
Ans: Reasons for doing international business include:

• Natural resource inequalities prevent nations from producing goods at the same standard of excellence and the same price. This is brought about by the uneven distribution of natural resources and variations in production levels between various geographical locations.
• There are a variety of differences in labour productivity and production costs. It differs in every nation due to various social, geographic, and political circumstances.
• Advantage of Specialisation: The concept of the geographical division of labour also applies globally. For instance, most labour-rich emerging nations specialise in manufacturing and exporting textiles.
• Price Disparities: Businesses also export and import items due to the different product prices. They export items to other nations where they may sell them for more money and buy cheaper commodities from other nations.

Q8: Discuss the formalities involved in getting an export licence.
Ans: To obtain an export licence, you must:

• Opening up a bank account with any bank that the Reserve Bank of India has authorised.
• obtaining an Import Export Code (IEC) from a Regional Import Export Licensing Authority or the Directorate General of Foreign Trade (DGFT);
• Establishing a profile with the appropriate export promotion council.
• One should register with the Export Credit and Guarantee Corporation to protect themselves from non-payment threats (ECGC).
• A business must provide the Director-General for Foreign Trade with an exporter/importer profile, a certificate from the banker, a bank receipt for the required fee, two copies of photographs attested by the banker, information regarding non-resident interests, and a declaration regarding the application to obtain an IEC number (DGFT).
• All exporters are required by law to register with the appropriate export promotion council.
• You must register with the ECGC to protect foreign payments against political and economic intervention.

Q9: In what ways is exporting a better way of entering international markets than setting up wholly owned subsidiaries abroad?
Ans: Exporting: Exporting is the act of moving products and services from one nation to another. Wholly Owned Subsidiary: Businesses who wish to have complete control over their operations abroad establish a wholly owned subsidiary there.

Benefits of exporting over wholly owned subsidiaries abroad:

• Easy entry: Compared to wholly owned subsidiaries, exporting is the fastest option to enter foreign markets.
• Investment: While wholly owned subsidiaries are not appropriate for small and medium-sized businesses because they lack the resources to make international investments, business enterprises are not obliged to devote as much time and money to exporting.
• Risk: Since exporting and importing do not need significant amounts of foreign investment, the risk associated with such investments is minimal or non-existent. Wholly owned subsidiaries have higher political risks and oversee paying for any losses brought on by failed overseas operations.
• Interference from the government: Exporting is less risky politically than wholly owned subsidiaries.
• Profit/Loss Risk: Unlike exporting and importing, wholly owned subsidiaries require a 100% equity investment, increasing the risk.
• Complexity: When compared to exporting and importing, wholly owned subsidiaries have a higher level of complexity.