{"id":20531,"date":"2019-10-09T01:00:13","date_gmt":"2019-10-08T19:30:13","guid":{"rendered":"https:\/\/www.cbselabs.com\/?p=20531"},"modified":"2021-09-18T15:16:25","modified_gmt":"2021-09-18T09:46:25","slug":"ncert-solutions-for-class-11-business-studies-international-business-i","status":"publish","type":"post","link":"https:\/\/www.cbselabs.com\/ncert-solutions-for-class-11-business-studies-international-business-i\/","title":{"rendered":"NCERT Solutions For Class 11 Business Studies International Business-I"},"content":{"rendered":"

Free PDF download of NCERT Solutions for Class 11 Business Studies Chapter 11 International Business solved by Expert Teachers as per NCERT (CBSE) Book guidelines. All Chapter wise Questions with Solutions to help you to revise complete Syllabus and Score More marks in your examinations.<\/p>\n

NCERT Solutions For Class 11 Business Studies International Business-I<\/span><\/strong><\/h2>\n

NCERT Solutions <\/a>Class 11 Business Studies<\/a>Business Studies Sample Papers<\/a><\/p>\n

TEXTBOOK QUESTIONS SOLVED<\/strong><\/span><\/h3>\n

I.Multiple Choice Questions<\/span><\/strong>
\nQuestion 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<\/strong>
\n (a) Licensing (b) Contract manufacturing<\/strong>
\n (c) Joint venture (d) None of these<\/strong>
\n Question 2. Outsourcing a part of or entire production and concentrating on marketing operations in international business is known as<\/strong>
\n (a) Licensing (b) Franchising<\/strong>
\n (c) Contract manufacturing (d) Joint venture<\/strong>
\n Question 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<\/strong>
\n (a) Contract manufacturing (b) Franchising<\/strong>
\n (c) Joint ventures (d) Licensing<\/strong>
\n Question 4. Which of the following is not an advantage of exporting?<\/strong>
\n (a) Easier way to enter into international markets<\/strong>
\n (b) Comparatively lower risks<\/strong>
\n (c) Limited presence in foreign markets<\/strong>
\n (d) Less investment requirements<\/strong>
\n Question 5. Which one of the following modes of entry requires higher level of risks?<\/strong>
\n (a) Licensing (b) Franchising<\/strong>
\n (c) Contract manufacturing (d) Joint venture<\/strong>
\n Question 6. Which one of the following modes of entry permits greater degree of control over overseas operations?<\/strong>
\n (a) Licensing\/franchising (b) Wholly owned subsidiary<\/strong>
\n (c) Contract manufacturing (d) Joint venture<\/strong>
\n Question 7. Which one of the following modes of entry brings the firm closer to international markets?<\/strong>
\n (a) Licensing (b) Franchising<\/strong>
\n (c) Contract manufacturing (d) Joint venture<\/strong>
\n Question 8. Which one of the following is not amongst India\u2019s major export items?<\/strong>
\n (a) Textiles and garments (b) Gems and jewellery<\/strong>
\n (c) Oil and petroleum products (d) Basmati rice<\/strong>
\n Question 9. Which one of the following is not amongst India\u2019s major import items?<\/strong>
\n (a) Ayurvedic medicines (b) Oil and petroleum products<\/strong>
\n (c) Pearls and precious stones (d) Machinery<\/strong>
\n Question 10. Which one of the following is not amongst India\u2019s major trading partners?<\/strong>
\n (a) USA (b) UK<\/strong>
\n (c) Germany (d) New Zealand<\/strong>
\n Answer:\u00a0<\/strong>
\n1. (a) 2. (c) 3. (c) 4. (a) 5. (c)
\n6. (b) 7. (c) 8. (d) 9. (6) 10. (d)<\/p>\n

II. Short Answer Type Questions<\/span><\/strong>
\nQuestion 1. Differentiate between international trade and international business.<\/strong>
\n Answer:\u00a0<\/strong>\u00a0Difference between international trade and international business is similar to difference between trade and business.<\/p>\n

    \n
  1. The scope of international business is much wider than international trade. International trade means exports and imports of goods which is an important component of international business but international business includes much more than this.<\/li>\n
  2. International trade in services like travel and tourism, transportation, communication, banking, warehousing, distribution and advertising is a part of international business.<\/li>\n
  3. International business also includes foreign direct investments, contract manufacturing, and setting up wholly owned subsidiaries etc. which are not included in international trade.<\/li>\n<\/ol>\n

    Question 2. Discuss any three advantages of international business.<\/strong>
    \n Answer:\u00a0<\/strong>\u00a0The following are some of the advantages of foreign trade:<\/p>\n

      \n
    1. Optimum use of resources:<\/strong> Foreign trade helps in the optimum use of natural resources and avoids wastage’s of resources. It ensures the presence of stable price by avoiding wide fluctuations in prices. It tries to equalise the world price.<\/li>\n
    2. Increased standard of living:<\/strong> It ensures more production to meet the demand of the people of different countries. By increased production, it becomes possible to increase income and the standard of living of its people. It also increases the standard of living by increasing more employment opportunities. It enables a country to import those goods which it cannot produce.<\/li>\n
    3. Large scale production:<\/strong> It ensures large production because the production is carried on to meet the demand of its people as well as world market. Large scale production also ensures a great deal of internal economies which reduces the cost of production.<\/li>\n<\/ol>\n

      Question.3. What is the major reason under lying trade between nations?<\/strong>
      \n Answer.<\/strong> The major reason behind international business is that the countries cannot produce equally well or cheaply all the commodities. This is called theory of comparative cost advantage. It is so because resources are unequally distributed in natural resources. Some countries are abundant in one commodity and scarce in others while opposite is true for some other country. It makes a case for international trade and exchanging abundant commodity with scarce commodity by nations. Different nations are endowed with different factors of production which includes land, labour, capital and entrepreneurship. For example, India is a labour abundant country. Therefore, it is advisable for India to produce such commodities which use labour intensive methods and exchange it for those which use capital intensive methods. USA is a capital abundant country. Therefore, nations need to trade. Due to these reasons one country has a comparative advantage in production of particular goods as compared to other countries. Consequently, each country fins it advantageous to produce those selected goods and services that it can produce more effectively at home and importing those goods in which other nations have a comparative cost advantage.<\/p>\n

      Question 4. Discuss as to why nations trade.<\/strong>
      \n Answer:\u00a0<\/strong>\u00a0Nations trade because of following reasons:<\/p>\n

        \n
      1. Unequal distribution of natural resources:<\/strong> Resources are unequally distributed in natural resources. Some countries are abundant in one commodity and scarce in other while opposite is true for some other country. It makes a case for international trade and exchanging abundant commodity with scarce commodity by nations.<\/li>\n
      2. Unequal availability of factors of production:<\/strong> Different nations are endowed with different factors of production which includes land, labour, capital and entrepreneurship. For example, India is a labour abundant country. Therefore, it is advisable for India to produce such commodities which use labour intensive methods and exchange it for those which use capital intensive methods. USA is a capital abundant country. Therefore, nations need to trade.<\/li>\n
      3. Theory of Comparative Cost Advantage:<\/strong> Due to these factors, some countries are in an advantageous position in producing selected goods and services which other countries cannot produce that effectively and efficiently and vice-versa. Consequently, each country finds it advantageous to produce those selected goods and services that it can produce more effectively at home and importing those goods in which other nations have a comparative cost advantage.<\/li>\n
      4. Geographical Specialisation:<\/strong> The international business as it exists today is the result of geographical specialisation. Even within a country each state specialises in those goods for which it is geographically more suitable. Similarly, each nation specialises in those goods in which it is specialised as per availability of resources and exchanges it for other goods and services in foreign market.<\/li>\n
      5. Cost minimization principle of firms:<\/strong> Firms get involved in international business to minimise their costs and maximise their profits.<\/li>\n<\/ol>\n

        Question 5. Enumerate limitations of contract manufacturing.<\/strong>
        \n Answer:\u00a0<\/strong>\u00a0Major limitations of contract manufacturing are discussed below:<\/p>\n

          \n
        1. Non adherence to quality standards:<\/strong> Local firms may not adhere to quality
          \nstandards or product design. It may cause serious quality problems for international firm. .<\/li>\n
        2. No control on production by local producer: <\/strong>Local producer has no control on manufacturing as goods are manufactured strictly as per the terms and specifications by international firm.<\/li>\n
        3. Zero control over sales:<\/strong> Local producer can\u2019t sell the output to customers directly. He needs to sell to the international firm at a pre-determined price. It reduces profits of local firm.<\/li>\n<\/ol>\n

          Question 6. Why is it said that licensing is an easier way to expand globally?<\/strong>
          \n Answer:\u00a0<\/strong>\u00a0It is said that licensing is an easier way to expand globally because of its advantages over other modes of international business.<\/p>\n

            \n
          1. Less Expensive:<\/strong> Under the licensing, it is the licensee who sets up the business unit. Therefore, licensor has to invest no money. Therefore, it is considered as a cheaper way of entering*into international business.<\/li>\n
          2. Zero Risk of Loss:<\/strong> Licensor need not take pain of risk of profits and loss. He is paid a pre-determined fees called royalty by the licensee. As long as licensor continues to produce under the license, licensor keeps on getting his fees irrespective of whether licensee is making profits or incurring losses.<\/li>\n
          3. Less risk of government intervention or takeovers:<\/strong> A local person handles the business in foreign country. Therefore, there are lesser chances of government intervention or takeovers.<\/li>\n
          4. Better knowledge of local needs:<\/strong> Since licensee is the local person, he has better understanding of local needs, marketing strategies and business environment.<\/li>\n
          5. Safety of Intellectual Property Rights:<\/strong> As per the terms of the licensing, only licensee can make use of licensor\u2019s copyrights, patents and brand names in foreign countries. Therefore, there is lesser risk of these intellectual property rights being missed by other local firms.<\/li>\n<\/ol>\n

            Question 7. Differentiate between contract manufacturing and setting up wholly owned production subsidiary abroad.<\/strong>
            \n Answer:\u00a0<\/strong>\u00a0The difference between contract manufacturing and wholly-owned subsidiary is discussed below:
            \n\"NCERT<\/p>\n

            Question 8. Distinguish between licensing and franchising.<\/strong>
            \n Answer:\u00a0<\/strong>
            \n\"NCERT<\/p>\n

            \"NCERT<\/p>\n

            Question 9. List major items of India\u2019s import.<\/strong>
            \n Answer:\u00a0<\/strong>\u00a0India\u2019s major items of imports include crude oil and petroleum products, capital goods, electronic goods, pearls, precious and semi-precious stones, gold, silver and chemicals.<\/p>\n

            Question 10. What are the major items that are exported from India?<\/strong>
            \n Answer:<\/strong>\u00a0India\u2019s major items of exports include textiles, garments, gems and jewellery, engineering products and chemicals, agriculture and allied products.<\/p>\n

            Question 11. List the major countries with whom India trades.<\/strong>
            \n Answer:\u00a0<\/strong>\u00a0India\u2019s major trading partners are USA, UK, Germany, Japan, Belgium, Hong Kong, UAE, China, Switzerland, Singapore and Malaysia.<\/p>\n

            III. Long Answer Type Questions<\/strong><\/span>
            \n Question 1. What is international business? How is it different from domestic business?<\/strong>
            \n Answer:\u00a0<\/strong>\u00a0International business refers to business which is carried on in two or more nations. It means carrying on business activities beyond national boundaries. These activities normally include the transaction of economic resources such as goods, capital, services (comprising technology, skilled labour, and transportation, etc.), and international production. It refers to that business activity that takes place beyond the geographical limits of a country. Production may either involve production of physical goods or provision of services like banking, finance, insurance, construction, trading, and so on. Thus, international business includes not only international trade of goods and services but also foreign investment, especially foreign direct investment.
            \nDifferences between International Business and Domestic Business are summarised below:
            \n\"NCERT<\/p>\n

            \"NCERT<\/p>\n

            Question 2. \u201cInternational business is more than international trade\u201d. Comment.<\/strong>
            \n Answer:\u00a0<\/strong>\u00a0It is rightly said that international business is more than international trade. The scope of international business is much wider than international trade. International trade means exports and imports of goods which is an important component of international business but international business includes much more than this. International trade in services like travel and tourism, transportation, communication, banking, warehousing, distribution and advertising is a part of international business. International business also includes foreign direct investments, contract manufacturing, and setting up wholly owned subsidiaries etc. which are not included in international trade. It is clear from the diagram given below:
            \n\"NCERT<\/p>\n

            Question 3. What benefits do firms derive by entering into international business?<\/strong>
            \n Answer:\u00a0<\/strong>\u00a0The trade between two or more nations is termed as foreign trade or international trade. It involves exchange of goods and services between the trades of two countries. Foreign trade consists of import trade, export trade and entrepot trade. In the early stages of human civilization, production was confined as per consumption. Human wants were limited. Nowadays, human wants are increasing and as such no man was considered to be self-dependent. Like this no country can live in isolation and claimed the status to be self-sufficient. Because of this reason countries have trade relationships with each other. The primary objective of foreign trade is to increase foreign trade and increase the standard of living of its people. There is an increasing demand for foreign trade because of the following reasons:<\/p>\n

              \n
            1. The natural resources are unevenly distributed.<\/li>\n
            2. The presence of specialisation and division of labour.<\/li>\n
            3. Different countries have difference in economic growth rate.<\/li>\n
            4. The presence of the theory of comparative cost.
              \nThe following are some of the advantages of foreign trade:<\/li>\n<\/ol>\n
                \n
              1. Optimum use of Resources:<\/strong> Foreign trade helps in the optimum use of natural resources and avoids wastages of resources.<\/li>\n
              2. Stable Price:<\/strong> It ensures the presence of stable price by avoiding wide fluctuations in prices. It tries to equalise the world price.<\/li>\n
              3. Availability of all types of goods:<\/strong> It enables a country to import those goods which it cannot produce.<\/li>\n
              4. Increased Standard of living:<\/strong> It ensures more production to meet the demand of the people of different countries. By increased production, it becomes possible to increase income and the standard of living of its people. It also increases the standard of living by increasing more employment opportunities.<\/li>\n
              5. Large Scale production:<\/strong> It ensures large production because the production is carried on to meet the demand of its people as well as world market. Large scale production also ensures a great deal of internal economies which reduces the cost of production.<\/li>\n<\/ol>\n

                Question 4. In what ways is exporting a better way of entering into international markets than setting up wholly owned subsidiaries abroad.<\/strong>
                \n Answer:\u00a0<\/strong>\u00a0Exporting is a better way of entering into international markets than setting up wholly owned subsidiaries abroad in following ways:<\/p>\n

                  \n
                1. Easiest Way:<\/strong> It is easy to enter international markets through exports as compared to wholly owned subsidiaries.<\/li>\n
                2. Less Involving:<\/strong> It is less involving as compared to establishing a wholly owned subsidiary because firms need not invest that much time and money.<\/li>\n
                3. Zero risk of Foreign Investment:<\/strong> Exporting does not require much of investment in foreign countries. Therefore, foreign investments risks are low as compared to when a firm starts its wholly owned subsidiary in foreign country.<\/li>\n
                4. Less Costly:<\/strong> In a wholly owned subsidiary, 100% equity investment is to be made by foreign company. Therefore, small and medium size producers can\u2019t think of this mode of entering into international business.<\/li>\n
                5. Risk of Profit and Loss:<\/strong> In wholly owned subsidiary, 100% equity capital is contributed by foreign company alone. Therefore, it alone has to bear the risk of losses.<\/li>\n
                6. Government Intervention:<\/strong> Some countries are averse to setting up of 100% wholly owned subsidiaries by foreign companies. This form of business operations is subject to high degree of political risks.<\/li>\n<\/ol>\n

                  Question 5. Discuss briefly the factors that govern the choice of mode of entry into international business.<\/strong>
                  \n Answer:\u00a0<\/strong>\u00a0Following factors govern the choice of mode of entry into international business,<\/p>\n

                    \n
                  1. Ease of entry:<\/strong> First and foremost factor that determines the choice of mode of entry into international business is ease of entry. A businessman wants to adopt such mode of entry into international business which is easy and less formalities requiring. Exporting, importing, licensing and franchising are better ways from this perspective.<\/li>\n
                  2. Cost:<\/strong> Second determining factor is cost involved. For example, very less cost is involved in exporting, importing, licensing, franchising and contract manufacturing as compared to joint ventures and setting wholly owned subsidiaries.<\/li>\n
                  3. Control over production:<\/strong> If the foreign company or producer wants full control over production activities in local country, he will prefer franchising, wholly owned subsidiary or joint venture with majority share holding. If it is not so important, he will prefer exporting, importing, contract manufacturing licensing etc.<\/li>\n
                  4. Sharing of Technology:<\/strong> If the company has no problem in sharing of technology then it may choose joint venture or franchising. But if it does not want to share its technology and trade secrets, it will prefer wholly owned subsidiary or exporting,<\/li>\n
                  5. Risk Involved:<\/strong> If a firm is ready to take risk, it may choose wholly owned subsidiary or joint ventures but if it is willing to minimize its loss then it should choose exporting, licensing, franchising or contract manufacturing.<\/li>\n<\/ol>\n

                    Question 6. Discuss the major trends in India\u2019s foreign trade. Also list the major products that India trades with other countries.<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0India is 10th largest economy in the world. It is the second fastest growing economy, next only to China. But India\u2019s performance in international business is not very good. India\u2019s share in world trade in 2003 was just 0.8%. In absolute terms, there has been significant increase in imports as well as exports. Total exports have increased from 606 crores in 1950-51 to Rs. 2, 93,367 crores in 2003-04 while imports have increased from 608 crores in 1950-51 to 3, 59,108 crores in 2003-04. Exports increased 480 times while imports increased 590 times indicating that there is adverse balance of trade. India\u2019s major trading partners are USA, UK, Germany, Japan, Belgium, Hong Kong, UAE, China, Switzerland, Singapore and Malaysia.
                    \nIndia\u2019s major items of exports include: Textiles, garments, gems and jewellery, engineering products and chemicals, agriculture and allied products.
                    \nIndia\u2019s major items of imports include: Crude oil and petroleum products, capital goods, electronic goods, pearls, precious and semi precious stones, gold, silver and chemicals.
                    \nBefore 1991, promotion of import substitution and discouraging of exports was government strategy. Imports consisted of machinery, equipment and intermediates in production, petroleum and petroleum-products. After green revolution, imports of fertilizer too increased.
                    \nBefore 1991, India\u2019s exports consisted of agricultural products like tea, raw cotton with the diversifying industrial structure, promoted by import substitution, exports of manufactures were growing. During 1986-91, external trade formed only 13.40 % of the GDP. During the 1990-2000, this share is rising continuously.
                    \nIndia\u2019s foreign trade has grown to exports of $250 billion and imports of $380 billion in 2010-11. The ratio of exports plus imports to GDP has grown from 13.40 % during 1985-90 to almost three times that, being 37.7 % in 2010-11. On adding services it becomes from 22.9 % in the 1990s to 49.0 % in 2010-11.
                    \nLeading role has been played by \u2018invisibles\u2019 which includes both services, mainly software services, export of which has grown to $59 billion in 2010-11. It has decreased the current account deficit from $130 billion to $44. This deficit was compensated by capital account surplus of $59 billion in that year.
                    \nBut it is only because of IT services and we are still lacking in manufacturing exports which can generate a large volume of employment. We have not done as well as China and Malaysia have done.<\/p>\n

                    Question 7. What is invisible trade? Discuss salient aspects of India\u2019s trade in services.<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0Trade in services is called invisible trade. Since services are invisible, export and import of services has been named as invisible trade. In absolute terms, there has been significant increase in India\u2019s foreign trade in services. Export and import of foreign travel, transportation and insurance has largely increased during last four decades. There has been a change in composition of services exports. Software and other miscellaneous services have emerged as the main categories of India\u2019s export of services. Share of travel and transportation has declined to 29.6% in 2003-04 from 64.3% in 1995-96 while the share of software exports has increased from 10.2% in 1995-96 to 49% in 2003-04.
                    \n\"NCERT
                    \nThe composition of India\u2019s external trade has been changing. During 1950s and 60s exports were mainly of primary goods. Over time, the role of engineering goods has been increasing. Overall manufactured goods constitute 66 % of total exports, of which engineering goods are 27%. Textiles and textile products, garments and leather products make around 10 % of India\u2019s exports.
                    \nIn nutshell, we can say that the role of the external or internationally traded goods sector has been growing steadily in Indian economy. At present imports and exports together account for upto 49 % of India\u2019s GDP which was 18% in 1990s. In India there is greater share of exports of services which are IT software services, called IT- enabled services (ITES). It contributed more than 20% of India\u2019s export earnings. India accounts for about 45% of the world\u2019s BPO services. The major Indian IT companies, TCS, Infosys and Wipro, initiated and perfected the Global Services Delivery (GSD) model. It is because India has a vast pool of software engineers and an even bigger pool of English-knowing staff. With growing competition in the market for such services, Indian companies have moved from BPO to Knowledge Process Outsourcing (KPO), which involves providing services for R and D and to high-end consulting.<\/p>\n

                    MORE QUESTIONS SOLVED<\/span><\/strong><\/h3>\n

                    I. Very\u00a0Short Answer Type Questions<\/strong><\/span>
                    \n Question 1. Out of international trade and international business which one is wider in scope?<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0International business<\/p>\n

                    Question 2. What is the basic reason behind international trade?<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0Comparative cost advantage in production of some goods.<\/p>\n

                    Question 3. Give one point of difference between licensing and franchising.<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0Licensing is used for goods and franchising is used for services.<\/p>\n

                    Question 4. When a middleman is involved in handling export procedure, then it is called by what name?<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0Indirect exporting<\/p>\n

                    Question 5. Licensee or franchisee pays a fee to licensor or franchisor. What is it called?<\/strong>
                    \n Answer: <\/strong>\u00a0Royalty.<\/p>\n

                    Question.6. Reebok orders for footballs to local manufacturers of Ludhiana and then sells it all over the world. It is an example of what?<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0Contract manufacturing.<\/p>\n

                    Question 7. Name the country whose share is largest in India\u2019s exports and imports.<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0USA<\/p>\n

                    Question 8. What is the share of India\u2019s exports in world exports?<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a00.8%<\/p>\n

                    Question 9. Which service has got dominating share in foreign trade in services?<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0Software and Miscellaneous<\/p>\n

                    Question 10. India is_largest economy in the world.<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a010th<\/p>\n

                    II. Short Answer Type Questions<\/strong><\/span>
                    \n Question 1. Define international business.<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0According to Roger Beneett, \u201cInternational business involves commercial activities that cross national frontiers.\u201d
                    \nIn the words of John D Daniels and Lee H Radebough, \u201cInternational business is all about business transactions\u2014private and governmental that involve two or more countries. Private companies undertake such transactions for profits; government may or may not do the same in their transactions.\u201d
                    \nAccording to Michael R Czinkota, \u201cInternational business consists of transactions that are devised and carried out across national borders to satisfy the objectives of the individuals, companies and organizations. These transactions take on various forms which are often correlated.\u201d<\/p>\n

                    Question 2. Explain different forms of Joint Ventures.<\/strong>
                    \n Answer:\u00a0<\/strong>\u00a0A joint venture refers to establishing a firm which is jointly owned by two or more independent firms. It can be entered into three ways:<\/p>\n

                      \n
                    1. A foreign investor may buy interest in a local company<\/li>\n
                    2. Local firm may acquire an interest in an existing foreign firm.<\/li>\n
                    3. Both local and foreign firms jointly establish a new enterprise.<\/li>\n<\/ol>\n

                      Question 3. Explain different forms of contract manufacturing.<\/strong>
                      \n Answer:\u00a0<\/strong>\u00a0Contract manufacturing can take three forms:<\/p>\n

                        \n
                      1. Getting produced certain parts of final products:<\/strong> In case of automobiles or purses or shoes some parts are got manufactured from foreign countries which are used for the production of final products later.<\/li>\n
                      2. Assembly of components into final products:<\/strong> In case of electronic items, different parts are assembled at that country where they are to be sold.<\/li>\n
                      3. Complete manufacture of the products:<\/strong> In some cases, commodities like garments a contract is given for complete manufacturing and products are sold in brand name of foreign companies.<\/li>\n<\/ol>\n

                        Question 4. India embarks on the path of globalisation. Comment<\/strong>
                        \n Answer:\u00a0<\/strong>\u00a0Since 1991, with the announcement of New Economic Policy, 1991 India also embarks on the path of globalisation. India was facing a severe financial crisis. It approached International Monetary Fund and World Bank for help. IMF agreed to led money to India on the condition that India will introduce structural changes in its economy. As a result, India announced the policy of LPG i.e. Liberalisation, Privatisation and Globalisation. Then on 1 January, 1995 WTO was formed. India became founder member of WTO and thereby was under a compulsion to follow rules and regulations of WTO. Therefore, it had to open up its economy for rest of the world and they also allowed India to enter their markets. Though the process of reforms has somewhat slowed down, India is very much on the path of globalisation.<\/p>\n

                        Question 5. What are the benefits of international trade to firms?<\/strong>
                        \n Answer:\u00a0<\/strong>\u00a0Given below sue benefits of international business for firms:<\/p>\n

                          \n
                        1. Prospects for higher profits:<\/strong> It creates better prospects for higher profits.<\/li>\n
                        2. Increased capacity utilisation:<\/strong> It leads to better utilisation of capacity.<\/li>\n
                        3. Prospects for growth:<\/strong> It creates better prospects for growth.<\/li>\n
                        4. Way out to intense competition in domestic market:<\/strong> International business acts as an alternate when there is intense competition in domestic market.<\/li>\n
                        5. Improved business vision:<\/strong> When a business firm acts globally, it gives it an improved business vision.<\/li>\n<\/ol>\n

                          Question 6. Write a short note on India\u2019s foreign investments.<\/strong>
                          \n Answer:\u00a0<\/strong>\u00a0There has been a phenomenal increase in foreign capital inflow and outflow. Inward foreign investments have increased from 201 crores in 1990-91 to 151406 crores in 2003-04. India\u2019s investment in foreign countries has increased from 19 crores in 1990\u00ac91 to 83616 crores in 2003-04.
                          \nInward foreign investments have grown more than 750 times while India\u2019s investment abroad have increased 4927 times.
                          \nTable showing inflow and outflow of foreign capital in and from India:
                          \n\"NCERT<\/p>\n

                          Question 7. Discuss the merits and demerits of entering into joint ventures.<\/strong>
                          \n Answer:\u00a0<\/strong>\u00a0Merits of Joint Venture<\/strong><\/p>\n

                            \n
                          1. Less Expensive:<\/strong> It is.financially less expensive as local producer also makes some contribution in equity capital. Half of the capital is contributed by local producer. It reduces the burden for foreign investor.<\/li>\n
                          2. Beneficial for projects requiring Large Scale Investment:<\/strong> It is beneficial for projects requiring large capital investments like construction of metro. In such projects it is generally difficult for a single investor to invest.<\/li>\n
                          3. Knowledge about host country:<\/strong> Local producers provide knowledge about host country. It helps the foreign investor to establish its foot in host country.<\/li>\n
                          4. Less risky:<\/strong> Risk gets reduced by involving local manufacturer. First, he makes 50% equity and thereby shares losses and other risks. Secondly, he has an understanding of taste and preferences of customers in host country, laws and culture of host country.<\/li>\n<\/ol>\n

                            Disadvantages of Joint Venture<\/strong><\/p>\n

                              \n
                            1. Sharing of Technology:<\/strong> In joint venture, foreign firm shares technology with the local producer. It is risky. He may start a business of his own once he gets acquainted with the technology.<\/li>\n
                            2. Conflicts:<\/strong> There may be conflicts in managerial decisions as there is dual ownership arrangement.<\/li>\n<\/ol>\n

                              III. Long Answer Type Questions<\/strong><\/span>
                              \n Question 1. Discuss the benefits of international business.<\/strong>
                              \n Answer:\u00a0<\/strong>\u00a0The benefits of international business to nations are as follows:<\/strong><\/p>\n

                                \n
                              1. Earning of Foreign exchange:<\/strong> International business helps a country to earn foreign exchange. It can use it for meeting its payments abroad.<\/li>\n
                              2. Better utilization of resources:<\/strong> It is based on the principle of comparative cost advantage. It implies that produces what your country can produce more efficiently, and trade the surplus production so generated with other countries to procure what they can produce more efficiently. When countries produce on these principles, it increases their resource utilization.<\/li>\n
                              3. Improving Growth Prospects and Employment Potentials:<\/strong> Producing solely for the purpose of domestic consumption severely restricts a country\u2019s prospects for growth and employment.<\/li>\n
                              4. Increased Standard of Living:<\/strong> In the absence of international trade of goods and services, it would not have been possible to enjoy the standard of living it is enjoying now.<\/li>\n<\/ol>\n

                                The benefits of international business to firms are as follows:<\/strong><\/p>\n

                                  \n
                                1. Prospects for higher profits<\/strong>: International business proves more profitable as compared to domestic business. When prices in domestic market are lower, business firms can earn higher profits by selling their products in foreign countries.<\/li>\n
                                2. Increased Capacity Utilization:<\/strong> Many firms set up production capacities for their products which are in excess of demand in the domestic market by planning overseas expansion and procuring orders from foreign customers. It allows them to make better use of their surplus capacity.<\/li>\n
                                3. Prospects for growth:<\/strong> Business firms find it very irritating when there is fall in demand or saturation point comes in domestic market. Such firms can grow considerable prospects of their growth by entering into international business.<\/li>\n
                                4. Way out to intense competition in domestic market:<\/strong> When competition in domestic market is very intense, internationalization seems to be the only way for significant growth. Highly competitive domestic market motivates many firms to enter into international business.<\/li>\n
                                5. Improved Business Vision:<\/strong> The growth of international business of many companies is important for their survival and goodwill. Vision to become international is expression of urge to grow and the need to diversify and to take benefit of strategic advantages of internationalisation.<\/li>\n<\/ol>\n

                                  Question.2. Discuss the scope of international business.<\/strong>
                                  \n Answer.<\/strong> There are many ways in which the firm\u2019s operate international major forms of business operations which constitute international business are given below:<\/p>\n

                                    \n
                                  1. Merchandise exports and imports:<\/strong> Merchandise means which are tangible. That can be seen and touched. It is also known as trading goods. It excludes trading services.<\/li>\n
                                  2. Exports and Imports of Services:<\/strong> Service exports and imports involve trade in intangibles. It is because of the intangible aspect of services that trade in services is termed as intangible trade.<\/li>\n
                                  3. Licensing and Franchising:<\/strong> Permitting another party in a foreign country to produce and sell goods under a firm\u2019s trademarks, patents or copyright for which a payment is made which is called royalty is another way of entering into international business. For example, McDonalds\u2019.<\/li>\n
                                  4. Foreign Investments:<\/strong> Foreign investment is another way to operate internationally. It involves investment of funds abroad in exchange for financial return. It may take two forms:<\/li>\n<\/ol>\n