Worksheet Solutions: International Business | Business Studies (BST) Class 11 - Commerce PDF Download

Multiple Choice Questions (MCQs)

Q1: What is the primary reason for international business?

A) National self-sufficiency

B) Unequal distribution of resources

C) Simplified trade regulations

D) Decreased competition

Ans: B) Unequal distribution of resources

International business exists primarily because resources such as land, labor, capital, and raw materials are not evenly distributed across countries. Some nations have abundant natural resources, while others specialize in technology, skilled labor, or manufacturing. To meet their needs and maximize economic benefits, countries engage in trade and international business.

Q2: Which organization is primarily involved in easing global trade?

A) World Health Organization

B) World Trade Organization

C) International Monetary Fund

D) World Bank

Ans: B) World Trade Organization

The World Trade Organization (WTO) is the primary global body that regulates and facilitates international trade. It establishes rules for trade between nations, helps resolve trade disputes, and ensures smooth, predictable, and free trade across borders.

• The World Health Organization (WHO) deals with global health issues.

• The International Monetary Fund (IMF) focuses on financial stability and monetary cooperation.

• The World Bank provides financial and technical assistance for economic development.

Q3: What is a key characteristic of international business compared to domestic business?

A) Simpler regulations

B) Same currency used

C) Diverse stakeholders

D) Uniform customer preferences

Ans: C) Diverse stakeholders

International business operates across multiple countries, involving different governments, legal systems, cultures, currencies, and economic conditions. This leads to a wide variety of stakeholders, including international customers, suppliers, governments, and regulatory bodies.

Q4: Which mode of entry involves minimizing foreign investment risks?

A) Wholly Owned Subsidiaries

B) Licensing

C) Joint Ventures

D) Contract Manufacturing

Ans: B) Licensing

Licensing is a mode of entry where a company allows a foreign firm to use its intellectual property (brand, patents, technology) in exchange for a fee or royalty. This minimizes foreign investment risks as the licensor does not need to invest heavily in the foreign market.

Q5: What is the primary document required for customs clearance in export?

A) Bill of Lading

B) Import Order

C) Certificate of Origin

D) Export Invoice

Ans: A) Bill of Lading

A Bill of Lading (B/L) is a crucial document in export, serving as:

• A receipt for shipped goods

• A contract between exporter and shipping company

• A document of title, allowing the buyer to claim goods upon arrival

Fill in the Blanks

Q1: The principle of producing what each country does best is known as ___________.

Ans: geographical specialization

Q2: International business includes trade in goods, services, and ___________.

Ans: capital

Q3: The document that guarantees payment in international trade is called a ___________.

Ans: Letter of Credit

Q4: A ___________ is a partnership between two or more firms to share resources and risks.

Ans: Joint Venture

Q5: Exporting involves sending goods from a ___________ country to a foreign country.

Ans: home

True or False

Q1: International business only involves the movement of goods and services.

Ans: False

Q2: A wholly owned subsidiary allows the parent company full control over operations.

Ans: True

Q3: Domestic business operates under the laws of multiple countries.

Ans: False

Q4: Licensing involves granting rights to use patents in exchange for a royalty.

Ans: True

Q5: The main benefit of international business is reduced competition.

Ans: False

Short Answer Questions

Q1: What is international business?
Ans: International business is when companies do business across different countries. This includes selling and buying goods, services and even sharing technology. It is larger than just trading as it also involves working with people and money from other countries.

Q2: Why do countries engage in international business?
Ans: Countries engage in international business because they cannot produce everything they need. Different countries are better at making certain things because of their resources and skills. By trading, they can get what they need at lower costs and improve their economy.

Q3: What are some differences between domestic and international business?
Ans: Domestic business happens within one country, while international business crosses borders. In international business, companies face different rules, languages, and cultures, making it more complex than domestic business.

Q4: What is exporting?
Ans: Exporting is when a country sends its goods or services to another country. It helps businesses reach more customers and can lead to higher sales. For example, if a toy company in the USA sells toys to a store in Japan, that is exporting.

Q5: What is a joint venture?
Ans: A joint venture is when two or more companies from different countries work together to start a new business. They share the costs, risks, and profits. This helps them combine their strengths and knowledge to succeed in a foreign market.

Long Answer Questions

Q1: Explain the meaning of international business and how it differs from domestic business.
Ans: International business refers to all economic activities that cross national borders. This includes the exchange of goods, services, capital, personnel, technology, and intellectual property. In contrast, domestic business involves transactions that occur within a single country's borders. Here are some key differences:

• Scope of Activities: International business encompasses a broader range of activities than domestic business. It includes not only trade in goods and services but also investments and the movement of people and technology across borders.
• Market Dynamics: Companies in international business must navigate diverse market dynamics, including cultural, legal, and economic differences, which are less complex in domestic markets where conditions are more uniform.
• Stakeholder Diversity: In international business, stakeholders come from various countries, leading to diverse expectations and practices. This contrasts with domestic business, where stakeholders typically share similar cultural backgrounds.
• Regulatory Environment: International businesses face multiple regulatory environments, which complicates compliance. Domestic businesses operate under a single legal framework, making it easier to manage regulations.
• Risk Factors: International businesses encounter unique risks, such as political instability and foreign exchange fluctuations, which are generally absent in domestic operations.

Q2: Discuss the reasons behind the growth of international business.
Ans: The growth of international business is driven by several factors that enable countries and companies to engage in trade across borders. Here are five key reasons:

• Resource Availability: Countries have varying access to natural resources and production capabilities. This uneven distribution leads nations to specialize in producing certain goods more efficiently, thus encouraging trade.
• Technological Advancements: Innovations in technology, such as communication and transportation, have made it easier for businesses to operate internationally. These advancements reduce costs and improve connectivity, facilitating trade.
• Consumer Demand: As consumers become more globalized, there is an increasing demand for diverse products. International business allows companies to meet these demands by sourcing goods from various countries.
• Market Expansion Opportunities: Companies seek to enter international markets to overcome stagnation in their domestic markets. By expanding globally, they can tap into new customer bases and enhance growth prospects.
• Competitive Advantage: Engaging in international business allows firms to achieve economies of scale by producing at a larger capacity and accessing cheaper resources, thus enhancing their competitive edge.

Q3: Compare and contrast the various modes of entry into international business.
Ans: There are several modes of entry into international business, each with unique advantages and limitations. Here are five primary modes:

• Exporting: This involves selling goods produced in one country to buyers in another. It requires less investment and risk compared to other methods but may face challenges like transportation costs and tariffs.
• Licensing: In this mode, a company allows a foreign entity to produce and sell its products in exchange for royalties. This approach minimizes investment and risk but may lead to loss of control over product quality.
• Franchising: Similar to licensing, franchising involves granting rights to operate a business using a company's brand and systems. It provides a structured model but requires adherence to strict operational guidelines.
• Joint Ventures: This mode involves collaboration between two or more firms to create a new entity. While it allows the sharing of resources and risks, it can also lead to conflicts over control and management.
• Wholly Owned Subsidiaries: Companies can establish full control over foreign operations by investing completely in a new or existing business abroad. This approach allows for maximum control but requires significant investment and carries higher risks.

Q4: What are the major documents needed in export transactions, and why are they important?
Ans: Export transactions require several important documents to ensure compliance and facilitate the shipment of goods. Here are five key documents:

• Export Invoice: This document details the goods being exported, including quantity, value, and payment terms. It serves as a formal request for payment from the importer.
• Packing List: This list outlines the contents of each package, specifying the goods and their shipping format. It is crucial for customs clearance and helps prevent delivery disputes.
• Bill of Lading: This official receipt from the shipping company acknowledges that the goods have been loaded for transport. It acts as proof of ownership and is essential for claiming the goods upon arrival.
• Certificate of Origin: This document certifies the country where the goods were manufactured. It is necessary for customs purposes and can help the importer claim tariff benefits.
• Marine Insurance Policy: This policy protects against losses or damages during shipping. It is important to ensure that financial risks associated with transportation are mitigated.

Q5: Analyze the benefits of international business for both countries and firms.
Ans: International business offers significant advantages to countries and firms alike. Here are five key benefits:

• Earning Foreign Exchange: Countries engaged in international trade can earn foreign currency, which is vital for importing goods that are not produced domestically, such as technology and capital goods.
• Efficient Resource Utilization: By specializing in what they produce best, countries can maximize their production efficiency, leading to increased overall economic output and trade benefits.
• Job Creation and Economic Growth: International business can stimulate job creation in developing economies. Countries that adopt export-oriented strategies, like South Korea, have seen significant economic growth.
• Higher Profit Potential for Firms: Companies that expand internationally often find higher profit margins by accessing new markets where they can sell their products at premium prices.
• Increased Competitive Advantage: Firms can leverage international exposure to enhance their business strategies, gain insights into global trends, and achieve economies of scale, all contributing to their long-term success.