International Business - Class 11 Business Studies - Chapter 11 - Notes, NCERT Solutions & Extra Questions
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Extra Questions - International Business | NCERT | Business Studies | Class 11
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Differentiate between international trade and international business.
- International Trade specifically refers to the exchange of goods and services across national borders. This includes imports and exports of tangible goods (merchandise) and intangible services.
- International Business, on the other hand, encompasses a broader range of activities that involve not only international trade but also other forms of operations like foreign investment, production, and marketing of goods and services in foreign countries. It includes activities such as licensing, franchising, and the establishment of manufacturing facilities abroad.
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"International business is more than international trade". Comment.
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International Business Class 11 Notes: A Comprehensive Guide
International business refers to various business activities that occur beyond a nation’s borders. Understanding this subject is essential for Class 11 students, as it provides insights into global trade dynamics, foreign investments, and the complexities involved in operating across different countries. This guide will help you navigate through the key concepts of international business.
Introduction to International Business
What is International Business?
International business encompasses commercial activities conducted across national borders. These activities include trade in goods and services, foreign investments, and various other forms of international cooperation. Unlike domestic business, which is confined within the boundaries of a country, international business involves dealing with different currencies, laws, and markets.
Importance of International Business for Class 11
Understanding international business is crucial as it equips students with knowledge about global markets, business strategies, and economic principles. This knowledge is not only academically enriching but also essential for those aspiring to pursue careers in business, economics, or international relations.
Differences Between Internal and International Business
Key Differences
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Nationality of Buyers and Sellers: Domestic business involves buyers and sellers from the same country, whereas international business involves participants from different countries.
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Mobility of Factors of Production: Within a country, factors like labour and capital move more freely compared to international settings, where legal and economic restrictions hinder their mobility.
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Business Systems and Practices: Business practices and systems vary significantly across countries due to cultural, social, and economic differences.
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Political Systems and Risks: Managing international operations involves navigating different political environments and associated risks.
The Scope and Benefits of International Business
Scope of International Business
The scope of international business is extensive, encompassing:
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Trade in Goods and Services: This includes importing and exporting tangible goods and intangible services.
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Foreign Investments: These cover both direct investments, such as setting up subsidiaries, and portfolio investments, like buying foreign stocks.
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Licensing, Franchising, and Joint Ventures: These are strategic ways businesses enter foreign markets without incurring high risks.
Benefits to Nations and Firms
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Earning Foreign Exchange: Countries earn foreign exchange which can be used to import goods and services they lack.
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Efficient Use of Resources: Countries specialise in producing goods for which they have a comparative advantage, leading to efficient resource utilisation.
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Growth and Employment: International businesses open up new markets, fostering growth and job creation.
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Enhanced Standard of Living: Access to a variety of goods and services improves the standard of living for people globally.
Entry Modes into International Business
Exporting and Importing
- Direct Exporting/Importing: The firm directly handles the international transaction, taking care of logistics and financing.
- Indirect Exporting/Importing: Middlemen such as export houses handle the transactions, making it simpler for the firm.
Contract Manufacturing
Contract manufacturing involves a firm hiring a foreign company to produce goods according to its specifications, reducing production costs.
Licensing and Franchising
Licensing allows a firm to permit another to use its trademarks and technology, while franchising involves allowing a business to operate under a brand name, adhering to the firm’s business model.
Joint Ventures
A joint venture is where two or more firms, usually from different countries, create a new business entity. This helps share risks and capital.
Wholly Owned Subsidiaries
A firm may set up or acquire a business in a foreign country to have full control over its international operations, although this involves higher risks and costs.
Export-Import Procedures and Documentation
Export Procedures
Exporting involves several steps, including obtaining an export licence, ensuring quality inspections, and managing logistics such as shipping and customs clearance. Key documents needed include export invoices, packing lists, and certificates of origin.
Import Procedures
Import procedures are equally intricate. They involve securing an import licence, arranging foreign exchange, and dealing with customs. Essential documents include proforma invoices, bills of lading, and insurance policies.
Organizations and Institutions Promoting International Business
Global Institutions
- World Trade Organization (WTO)
- International Monetary Fund (IMF)
- World Bank
Regional and National Organizations
- Export Promotion Councils
- Trade Associations
India's Journey in International Business
Historical Context
India’s integration into international business accelerated post-1991, following economic liberalisation. This period marked significant policy reforms aimed at opening up the economy.
Current Scenario
Today, India actively engages in international trade, fostering relations through various bilateral and multilateral agreements.
Challenges and Risks in International Business
Political and Economic Risks
Businesses face uncertainties due to changing political landscapes and economic instabilities in foreign markets.
Legal and Cultural Challenges
Navigating different legal systems and cultural expectations is crucial for successful international operations. Businesses must adapt strategies to suit local markets.
Conclusion
Summary of Key Points
International business involves complex activities that extend beyond domestic operations. It offers numerous benefits but also presents unique challenges.
Future Directions
Emerging trends such as digital globalisation and sustainability are shaping the future of international business, making it an ever-evolving field.
This guide aims to elucidate the primary aspects of international business, making it easier for Class 11 students to grasp and apply these concepts, thereby enhancing their academic and practical understanding.
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