Class 11 Business Studies – Chapter 11: International Business

Part 1: Meaning, Need, Domestic vs International Business & Scope

Chapter Overview

International Business refers to all business activities that take place between two or more countries. It includes the exchange of goods, services, technology, capital, and knowledge across national borders.

With improvements in communication, transportation, and technology, countries are becoming more connected than ever before. This process is called globalisation.

1. Introduction

Earlier, most countries depended mainly on their own resources. Today, no country is completely self-sufficient. Every nation imports goods that it cannot produce efficiently and exports products in which it has an advantage.

Examples:

India exports medicines, software, tea, and textiles.
India imports crude oil, gold, and advanced machinery.

This increasing exchange of goods and services has made international business an important part of every country’s economy.

2. Meaning of International Business

Definition

International Business means all commercial activities carried out between people, companies, or governments located in different countries.

It includes:

Buying and selling goods
Providing services
Foreign investments
Licensing
Franchising
Technology transfer

Simple Definition

International Business is the exchange of goods, services, capital, technology, and knowledge across national boundaries.

International Business Includes

International Business
│
├── Trade in Goods (Exports & Imports)
├── Trade in Services
├── Foreign Investment
├── Licensing
├── Franchising
└── Overseas Production

3. Why Do Countries Engage in International Business?

Countries trade because no nation can produce everything efficiently.

Main Reasons

1. Unequal Distribution of Natural Resources

Resources are not equally available everywhere.

Example:

Saudi Arabia has abundant oil.
India has fertile agricultural land.
Australia has rich mineral deposits.

Countries exchange resources through trade.

2. Difference in Labour Skills

Some countries have highly skilled workers.

Example:

India has skilled software professionals.
Germany is known for engineering expertise.

3. Difference in Technology

Advanced countries develop better technology.

Example:

Japan produces advanced electronic products.
Many developing countries import modern machinery.

4. Difference in Cost of Production

Some countries can produce goods at lower costs because of:

Cheap labour
Better technology
Easy availability of raw materials
Efficient production systems

Example:
Garments are produced cheaply in Bangladesh and exported worldwide.

5. Better Use of Resources

Countries specialise in producing goods they can make efficiently.

This increases production and reduces waste.

Flowchart

Unequal Resources
        ↓
Different Production Costs
        ↓
Specialisation
        ↓
International Trade
        ↓
Mutual Benefit

4. Domestic Business vs International Business

Meaning

Domestic Business

Business activities conducted within one country.

Example:
A company in Delhi selling products only in India.

International Business

Business activities involving two or more countries.

Example:
An Indian company exporting products to the USA.

Differences Between Domestic and International Business

Basis	Domestic Business	International Business
Area	Within one country	Between different countries
Buyers & Sellers	Same nationality	Different nationalities
Currency	One currency	Multiple currencies
Laws	One country’s laws	Laws of many countries
Language	Mostly same	Different languages
Culture	Similar	Different cultures
Risk	Lower	Higher
Government Control	Less complicated	More regulations
Transportation	Easier	Longer and costlier
Documentation	Simple	More complex

Detailed Differences

1. Nationality of Buyers and Sellers

Domestic:
Buyer and seller belong to the same country.

International:
Buyer and seller belong to different countries.

2. Stakeholders

Domestic:
Employees, suppliers, and customers usually belong to one country.

International:
Stakeholders belong to different nations.

3. Mobility of Factors of Production

Domestic:
Labour and capital move easily.

International:
Movement is restricted because of visas, laws, and regulations.

4. Customer Preferences

Domestic:
Customer preferences are relatively similar.

International:
Preferences vary because of language, religion, customs, and lifestyle.

Example:

Indians prefer spicy food.
Europeans generally prefer milder flavours.

5. Business Practices

Domestic:
Business customs are mostly uniform.

International:
Business practices differ across countries.

6. Political Environment

Domestic:
One government.

International:
Different governments with different policies.

Political changes can affect trade.

7. Business Regulations

International business must follow:

Import rules
Export rules
Customs laws
Taxation
Foreign exchange regulations

8. Currency

Domestic:
Single currency.

International:
Different currencies.

Exchange rate changes create additional risks.

Memory Trick

N S M C B P R C

Remember:

“New Students Make Clever Business Plans Really Carefully.”

N → Nationality

S → Stakeholders

M → Mobility

C → Customers

B → Business Practices

P → Political System

R → Regulations

C → Currency

5. Scope of International Business

International business is broader than international trade.

It includes all cross-border commercial activities.

Scope

International Business
│
├── Merchandise Exports
├── Merchandise Imports
├── Service Exports
├── Service Imports
├── Licensing
├── Franchising
└── Foreign Investment

A. Merchandise Exports and Imports

Merchandise means physical goods.

Examples:

Clothes
Cars
Furniture
Mobile phones

Export

Selling goods to another country.

Example:
India exports tea.

Import

Buying goods from another country.

Example:
India imports crude oil.

B. Service Exports and Imports

Services are intangible products.

Examples include:

Tourism
Banking
Insurance
Transportation
Education
Consultancy
Information Technology (IT)
Communication
Advertising

Example:
An Indian software company providing services to a US client is exporting services.

C. Licensing

Licensing means allowing another company to use:

Patent
Trademark
Copyright
Technology

in exchange for a fee called royalty.

Example

A company allows a foreign manufacturer to produce its product using its patented technology.

D. Franchising

Franchising is similar to licensing but mainly applies to service businesses.

The franchisor allows another business to operate under its brand name and business model.

Examples include many international restaurant and retail chains.

E. Foreign Investment

Foreign investment means investing money in another country.

There are two types:

1. Foreign Direct Investment (FDI)

The investor has ownership and control over the business.

Example:
Setting up a factory in another country.

2. Portfolio Investment

Investment is made by purchasing shares, bonds, or securities without taking control of management.

Scope Summary Table

Activity	Meaning
Merchandise Export	Selling goods abroad
Merchandise Import	Buying goods from abroad
Service Export	Providing services to foreign customers
Service Import	Receiving services from foreign providers
Licensing	Allowing use of patents or trademarks for a fee
Franchising	Allowing use of a business model and brand
Foreign Investment	Investing money in businesses located abroad

One-Page Revision

International Business

Business conducted across national borders.

Reasons

Unequal resources
Different labour skills
Different technology
Lower production costs
Better utilisation of resources
Specialisation

Domestic vs International

Nationality
Stakeholders
Mobility
Customers
Business practices
Political system
Regulations
Currency

Scope

Export of goods
Import of goods
Export of services
Import of services
Licensing
Franchising
Foreign investment

Important Exam Questions

1-Mark

Define international business.
What is merchandise export?
What is invisible trade?
What is licensing?
What is franchising?
Define FDI.
Define portfolio investment.

3-Mark

State any three reasons for international business.
Differentiate between domestic and international business (any three points).
Explain the scope of international business.

5-Mark

Explain the major differences between domestic and international business.
Discuss the scope of international business with suitable examples.
Why do countries engage in international business? Explain.

Part 2: Benefits of International Business & Modes of Entry

6. Benefits of International Business

Although international business involves more risk and legal formalities than domestic business, it provides significant benefits to both countries and business firms.

Benefits to Countries

1. Earning Foreign Exchange

Exports help a country earn foreign currency (such as US Dollars, Euros, etc.).

Foreign exchange is used to:

Import essential goods
Buy advanced technology
Purchase machinery
Pay international debts

Example:
India earns foreign exchange by exporting software, medicines, tea, and textiles.

2. Better Utilisation of Resources

Every country has different resources.

International trade allows countries to specialise in producing goods they can make efficiently and import the rest.

Result

Less wastage
Higher production
Lower costs

3. Economic Growth

International trade increases production.

Higher production leads to:

More industries
More investments
Higher GDP
Faster economic development

4. Employment Generation

Export industries require more workers.

This creates employment in:

Manufacturing
Agriculture
IT sector
Transportation
Banking
Tourism

5. Higher Standard of Living

Consumers get:

Better quality products
Greater variety
Latest technology
Competitive prices

Example:
People in India can purchase imported laptops, cars, medicines, and electronics.

Flowchart

International Business
        ↓
Higher Production
        ↓
More Employment
        ↓
Higher Income
        ↓
Better Standard of Living

Benefits to Business Firms

1. Higher Profits

International markets often offer:

Larger customer base
Better selling prices
Increased sales

This results in higher profits.

2. Better Capacity Utilisation

Sometimes factories cannot sell all their products in the domestic market.

Exporting helps firms use their unused production capacity efficiently.

Example:
A textile factory producing 10,000 shirts but selling only 7,000 in India can export the remaining 3,000 shirts.

3. Growth Opportunities

Domestic markets may become saturated.

International markets provide opportunities to:

Increase sales
Expand operations
Reach new customers

4. Escape from Domestic Competition

Competition within one country can reduce profits.

Selling in foreign markets allows firms to enter less competitive markets.

5. Better Business Vision

International exposure helps firms:

Learn new technologies
Improve management
Understand global markets
Increase innovation

Summary Table

Benefits to Countries	Benefits to Firms
Earn foreign exchange	Higher profits
Better use of resources	Better use of capacity
Economic growth	Business expansion
Employment generation	Reduced dependence on domestic market
Better standard of living	Improved global image

Memory Trick

Remember:

F R G E S

“Friendly Rabbits Grow Every Spring.”

F → Foreign exchange

R → Resource utilisation

G → Growth

E → Employment

S → Standard of living

7. Modes of Entry into International Business

A company can enter foreign markets in different ways.

The choice depends on:

Investment capacity
Risk
Government policies
Nature of products
Long-term objectives

Major Modes

Modes of Entry
│
├── Exporting & Importing
├── Contract Manufacturing
├── Licensing
├── Franchising
├── Joint Venture
└── Wholly Owned Subsidiary

1. Exporting and Importing

Export

Selling goods or services to another country.

Import

Purchasing goods or services from another country.

This is the simplest and most common method of entering international markets.

Types of Exporting

A. Direct Exporting

The company directly sells products to foreign customers.

Features:

Greater control
Higher profits
More responsibility

B. Indirect Exporting

The company sells through export houses or agents.

Features:

Easier
Less risk
Lower profits

Advantages

Easy to start
Low investment
Lower risk
Suitable for beginners
No need to establish factories abroad

Limitations

High transportation cost
Customs duties increase cost
Limited contact with customers
Import restrictions may reduce exports

2. Contract Manufacturing

Meaning

A foreign company hires a local manufacturer to produce goods according to its specifications.

The foreign company sells these goods under its own brand.

Example:
Many international brands get garments, shoes, and electronics manufactured in countries with lower production costs.

Advantages

Low investment
Low risk
Lower production cost
Efficient use of existing factories
Creates employment in host country

Limitations

Quality may vary
Less control over production
Local manufacturer cannot freely sell the products
Possibility of delays

3. Licensing

Meaning

Licensing is an agreement in which one company allows another company to use its:

Patent
Trademark
Technology
Copyright

in return for a payment called Royalty.

Parties

Licensor → Gives permission

Licensee → Receives permission

Example

A pharmaceutical company allows another company to manufacture its patented medicine.

Advantages

Very little investment
Low risk
Regular royalty income
Local partner understands the market
Protection through legal agreement

Limitations

Technology may be copied
Trade secrets may leak
Possible disputes over royalty
Difficult to maintain quality standards

4. Franchising

Meaning

Franchising is similar to licensing but mainly applies to service businesses.

The franchisor allows another party to use:

Brand name
Business model
Operating methods

Parties

Franchisor → Owner of brand

Franchisee → Local operator

Examples

International restaurant, retail, education, and hospitality chains often expand using franchising.

Advantages

Fast business expansion
Low investment
Local knowledge
Reduced risk

Limitations

Less control
Reputation depends on franchisee
Conflicts over business standards

Difference Between Licensing and Franchising

Licensing	Franchising
Mainly used for products	Mainly used for services
Transfers technology	Transfers complete business system
Less control	More control by franchisor
Royalty is paid	Franchise fee and royalty are paid

5. Joint Venture

Meaning

A Joint Venture is a business owned jointly by two or more companies from different countries.

Both partners:

Invest money
Share profits
Share risks
Participate in management

Ways to Form a Joint Venture

Foreign company buys shares in a local company.
Local company buys shares in a foreign company.
Both create a new company together.

Advantages

Shared investment
Shared risks
Access to local market knowledge
Easier government approval
Better use of technology and resources

Limitations

Differences in management decisions
Conflicts between partners
Sharing of technology may create future competition

6. Wholly Owned Subsidiary

Meaning

A foreign company owns 100% of the business in another country.

The parent company has complete ownership and control.

Ways to Establish

A. Greenfield Venture

Setting up a completely new factory or business in another country.

B. Acquisition

Buying an existing company in another country.

Advantages

Full control
Complete profit
Better protection of technology
Strong company image

Limitations

Very high investment
High financial risk
Political risk
Not suitable for small firms

Comparison of Modes of Entry

Mode	Investment	Risk	Control
Exporting	Low	Low	Low
Contract Manufacturing	Low	Low	Moderate
Licensing	Very Low	Very Low	Low
Franchising	Low	Low	Moderate
Joint Venture	Medium	Medium	Shared
Wholly Owned Subsidiary	Very High	Very High	Full

Flowchart

Lowest Investment
        ↓
Exporting
        ↓
Contract Manufacturing
        ↓
Licensing
        ↓
Franchising
        ↓
Joint Venture
        ↓
Wholly Owned Subsidiary
Highest Investment

One-Page Revision

Benefits to Countries

Foreign exchange
Better resource use
Economic growth
Employment
Higher standard of living

Benefits to Firms

Higher profits
Better capacity utilisation
Business expansion
Reduced domestic competition
Better business vision

Modes of Entry

Exporting
Contract Manufacturing
Licensing
Franchising
Joint Venture
Wholly Owned Subsidiary

Memory Tricks

Benefits to Countries

FREGS

F → Foreign exchange

R → Resource utilisation

E → Employment

G → Growth

S → Standard of living

Modes of Entry

ECLFJW

“Every Child Learns Fast Just Weekly.”

E → Exporting
C → Contract Manufacturing
L → Licensing
F → Franchising
J → Joint Venture
W → Wholly Owned Subsidiary

Important Exam Questions

1-Mark

What is contract manufacturing?
Define licensing.
What is franchising?
Define joint venture.
What is a wholly owned subsidiary?
What is royalty?

3-Mark

State three benefits of international business to countries.
Explain any three advantages of exporting.
Distinguish between licensing and franchising.
State three advantages of joint ventures.

5-Mark

Explain the benefits of international business to firms and countries.
Explain the various modes of entry into international business.
Compare exporting, licensing, franchising, joint ventures, and wholly owned subsidiaries.

Part 3: Export Procedure, Import Procedure & Important Documents

8. Export Procedure

Meaning

Export procedure refers to the series of legal and business steps followed by an exporter to send goods from one country to another.

International trade involves customs laws, foreign exchange regulations, banking procedures, and documentation. Therefore, exporting is more complex than selling goods within a country.

Flowchart: Export Procedure

Trade Enquiry
      ↓
Quotation (Proforma Invoice)
      ↓
Export Order (Indent)
      ↓
Letter of Credit
      ↓
Export Licence & IEC
      ↓
Pre-shipment Finance
      ↓
Production/Procurement
      ↓
Pre-shipment Inspection
      ↓
Excise Clearance
      ↓
Certificate of Origin
      ↓
Shipping Space Reservation
      ↓
Packing & Forwarding
      ↓
Insurance
      ↓
Customs Clearance
      ↓
Mate's Receipt
      ↓
Bill of Lading
      ↓
Invoice Preparation
      ↓
Payment Collection

Step 1: Trade Enquiry

The importer first asks different exporters for information about:

Price
Quality
Quantity
Delivery terms
Payment terms

This request is called a Trade Enquiry.

Step 2: Quotation (Proforma Invoice)

The exporter replies by sending a Proforma Invoice.

It contains:

Price
Quantity
Quality
Packing details
Delivery terms
Payment terms

A Proforma Invoice is not the final bill—it is only an offer.

Step 3: Receipt of Order (Indent)

If the buyer agrees to the quotation, an Export Order (also called an Indent) is placed.

The order includes:

Product details
Quantity
Price
Delivery schedule
Packing instructions

Step 4: Assessing Creditworthiness & Letter of Credit (LC)

The exporter checks whether the importer is financially reliable.

To reduce the risk of non-payment, the exporter asks for a Letter of Credit (LC).

Letter of Credit (LC)

A Letter of Credit is a guarantee issued by the importer’s bank stating that payment will be made to the exporter if all conditions are fulfilled.

Importance

Safe payment
Reduces financial risk
Most common payment method in international trade

Step 5: Obtaining Export Licence

Before exporting, the exporter must complete legal formalities.

Requirements

Open a bank account
Obtain Import Export Code (IEC)
Register with Export Promotion Council
Register with Export Credit Guarantee Corporation (ECGC)

Import Export Code (IEC)

A unique code issued by the government that is compulsory for import and export businesses.

Without an IEC, international trade cannot normally be carried out.

ECGC

Export Credit Guarantee Corporation (ECGC) protects exporters against the risk of non-payment by foreign buyers.

Step 6: Pre-shipment Finance

Banks provide short-term loans to exporters before shipment.

This money is used for:

Buying raw materials
Manufacturing
Packaging
Transportation

Step 7: Production or Procurement

The exporter:

Manufactures goods, or
Purchases them from suppliers

The goods must match the importer’s specifications.

Step 8: Pre-shipment Inspection

Certain products must be inspected by authorised agencies before export.

Purpose:

Ensure quality
Meet international standards
Protect India’s export reputation

After inspection, an Inspection Certificate is issued.

Step 9: Excise Clearance

Earlier, manufacturers had to obtain excise clearance before exporting.

Many export goods receive exemption or refund of duties to encourage exports.

Duty Drawback

Duty Drawback means the refund of duties paid on materials used in manufacturing export goods.

Purpose:

Reduce export cost
Increase international competitiveness

Step 10: Certificate of Origin

This certificate confirms that the goods were manufactured in a particular country.

Importance

Helps obtain tariff concessions
Required by many importing countries
Proves the country of manufacture

Step 11: Reservation of Shipping Space

The exporter books space with a shipping company.

After booking, the shipping company issues a Shipping Order.

Step 12: Packing and Forwarding

Goods are:

Properly packed
Labelled
Marked

Information on packages includes:

Importer’s name
Exporter’s name
Country of origin
Weight
Port of destination

Goods are then transported to the port.

Step 13: Insurance

Goods are insured against risks like:

Fire
Theft
Sea accidents
Damage during transportation

Insurance protects the exporter from financial losses.

Step 14: Customs Clearance

Before shipment, customs authorities verify the goods.

The exporter submits a Shipping Bill, which is the main document required for export clearance.

Step 15: Mate’s Receipt

After goods are loaded onto the ship, the ship’s officer issues a Mate’s Receipt.

It confirms:

Goods received
Ship name
Loading date
Condition of goods

Step 16: Bill of Lading

The shipping company issues a Bill of Lading.

It serves as:

Receipt of goods
Evidence of shipment
Document of title

For air transport, this is called an Airway Bill.

Step 17: Invoice and Payment

The exporter prepares the final invoice.

Required documents are sent to the importer through the bank.

Payment is received according to the agreed method.

9. Import Procedure

Import procedure is the process followed to bring goods into a country.

Flowchart

Trade Enquiry
      ↓
Proforma Invoice
      ↓
Import Licence (if required)
      ↓
Foreign Exchange
      ↓
Letter of Credit
      ↓
Finance Arrangement
      ↓
Shipment Advice
      ↓
Import Documents
      ↓
Arrival of Goods
      ↓
Customs Clearance
      ↓
Payment of Duty
      ↓
Delivery of Goods

Step 1: Trade Enquiry

The importer contacts foreign suppliers to obtain information regarding:

Price
Quality
Delivery
Payment

Step 2: Proforma Invoice

The exporter sends a Proforma Invoice.

The importer studies the offer before placing the order.

Step 3: Import Licence

Some products require an import licence.

The importer also needs an Import Export Code (IEC).

Step 4: Foreign Exchange

Payment to foreign suppliers must be made in foreign currency.

The importer obtains foreign exchange through an authorised bank.

Step 5: Letter of Credit

The importer requests the bank to issue a Letter of Credit to assure payment to the exporter.

Step 6: Finance Arrangement

The importer arranges funds before goods arrive to avoid delays and penalties.

Step 7: Shipment Advice

After dispatching the goods, the exporter sends a Shipment Advice.

It includes:

Ship name
Invoice number
Date of shipment
Description of goods

Step 8: Retirement of Import Documents

The importer receives documents from the bank after making payment or accepting the bill of exchange.

Step 9: Arrival of Goods

Goods arrive at the destination port.

The shipping company informs the importer.

Step 10: Customs Clearance

The importer submits documents and pays customs duty.

Customs officers inspect the goods before release.

Step 11: Delivery of Goods

After customs clearance and payment of charges, the importer takes possession of the goods.

10. Important Export Documents

1. Proforma Invoice

A quotation sent by the exporter before the order is confirmed.

2. Commercial Invoice

The final bill showing:

Quantity
Price
Total amount
Payment details

3. Packing List

Contains details about:

Number of packages
Contents
Weight
Packing method

4. Certificate of Origin

Certifies the country where goods were produced.

5. Inspection Certificate

Confirms that the goods meet quality standards.

6. Shipping Bill

The main customs document for export.

Without it, goods cannot be exported.

7. Shipping Order

Issued by the shipping company allowing goods to be loaded.

8. Mate’s Receipt

Issued after goods are loaded onto the ship.

9. Bill of Lading

Issued by the shipping company.

Functions:

Receipt of goods
Proof of shipment
Document of ownership

10. Airway Bill

Used instead of a Bill of Lading for air transport.

11. Marine Insurance Policy

Protects goods against losses during sea transport.

12. Letter of Credit

Guarantees payment by the importer’s bank.

13. Bill of Exchange

A written order by the exporter asking the importer to pay a specified amount.

Types

Sight Draft

Payment is made immediately.

Usance Draft

Payment is made after a specified period.

14. Bank Certificate of Payment

Confirms that payment has been received according to foreign exchange regulations.

Summary Table of Important Documents

Document	Purpose
Proforma Invoice	Quotation
Commercial Invoice	Final bill
Packing List	Package details
Certificate of Origin	Country of manufacture
Inspection Certificate	Quality proof
Shipping Bill	Customs permission
Shipping Order	Permission to load
Mate’s Receipt	Goods loaded
Bill of Lading	Receipt + Title of goods
Airway Bill	Receipt for air transport
Marine Insurance Policy	Insurance protection
Letter of Credit	Payment guarantee
Bill of Exchange	Payment order
Bank Certificate of Payment	Proof of payment

One-Page Revision

Export Procedure (Mnemonic)

T Q O L E P P I E C S P I C M B I P

Think Quick! Our Lovely Export Process Produces Internationally Excellent Customer Satisfaction, Packing, Insurance, Customs, Mate’s Receipt, Bill of Lading, Invoice, Payment.

Import Procedure (Mnemonic)

T P I F L F S I A C D

“The Patient Importer Finds Lovely Fresh Supplies In All Cities Daily.”

Trade Enquiry
Proforma Invoice
Import Licence
Foreign Exchange
Letter of Credit
Finance
Shipment Advice
Import Documents
Arrival
Customs
Delivery

Important Exam Questions

1-Mark

What is a Letter of Credit?
Define Shipping Bill.
What is a Bill of Lading?
What is Duty Drawback?
What is a Proforma Invoice?
Define Certificate of Origin.
What is a Mate’s Receipt?

3-Mark

Explain the importance of the Letter of Credit.
State any three export documents.
Explain the need for pre-shipment inspection.
Differentiate between a Bill of Lading and an Airway Bill.

5-Mark

Explain the export procedure in sequence.
Explain the import procedure.
Discuss the important documents used in international trade.
Differentiate between export and import procedures.

Part 4: International Institutions, Export Promotion, WTO, IMF, World Bank & Final Revision

11. Export Promotion

Meaning

Export promotion refers to the efforts made by the government to encourage businesses to sell their products and services in international markets.

Exports help a country by:

Increasing foreign exchange earnings
Creating employment
Increasing production
Improving economic growth

Need for Export Promotion

1. To Increase Foreign Exchange

Exports bring foreign currency into the country.

Foreign exchange helps in:

Paying for imports
Purchasing technology
Developing industries

2. To Improve Balance of Payments

A country must maintain a balance between:

Money received from exports
Money spent on imports

Increasing exports helps reduce trade deficits.

3. To Encourage Industries

Export opportunities motivate firms to:

Increase production
Improve quality
Adopt new technology

4. To Create Employment

Export industries require more workers, creating jobs.

Measures for Export Promotion

The government uses various methods to encourage exports.

1. Export Promotion Councils (EPCs)

Export Promotion Councils are organisations established to promote exports of different products.

They provide:

Market information
Guidance to exporters
Training
Assistance in export procedures

Examples:

Engineering Export Promotion Council
Apparel Export Promotion Council

2. Export-Oriented Units (EOUs)

These are companies established mainly for producing goods for export.

Features:

Produce mainly for foreign markets
Receive certain government benefits
Help increase exports

3. Special Economic Zones (SEZs)

Meaning

SEZs are specially developed areas where businesses receive better facilities and incentives for export activities.

Features

Better infrastructure
Tax benefits
Easier regulations
Support for foreign investment

Objectives

Increase exports
Attract foreign investment
Create employment
Develop industries

4. Duty Drawback Scheme

Meaning

Duty drawback is the refund of duties paid on imported materials used in manufacturing export goods.

Purpose:

Reduce production cost
Make Indian exports competitive

5. Financial Assistance

Exporters receive financial support through:

Banks
Government agencies
Export credit institutions

12. Export Credit and Guarantee Corporation (ECGC)

Meaning

ECGC is an organisation that provides insurance protection to exporters against risks of non-payment.

Functions

1. Protects Exporters

It protects against:

Commercial risks
Political risks

2. Provides Confidence

Exporters can sell goods internationally without fear of payment failure.

3. Helps Obtain Finance

Banks are more willing to provide loans to exporters protected by ECGC.

13. International Business Organisations

International business requires cooperation among countries.

Several international organisations help in promoting global trade and economic development.

Important organisations:

World Trade Organization (WTO)
International Monetary Fund (IMF)
World Bank

14. World Trade Organization (WTO)

Meaning

The World Trade Organization is an international organisation that regulates and promotes trade between countries.

It started functioning in 1995 and replaced the General Agreement on Tariffs and Trade (GATT).

Objectives of WTO

1. Promote Free Trade

WTO encourages countries to reduce trade barriers.

2. Remove Restrictions

It works to reduce:

Import restrictions
Unfair trade practices
Excessive tariffs

3. Encourage Economic Growth

Free trade helps countries increase production and income.

4. Ensure Fair Competition

WTO provides rules to prevent unfair trade practices.

5. Settlement of Trade Disputes

WTO provides a platform to solve disputes between countries.

Functions of WTO

1. Administration of Trade Agreements

WTO manages international trade agreements.

2. Forum for Trade Negotiations

Countries discuss and negotiate trade issues.

3. Settlement of Disputes

WTO helps solve conflicts related to international trade.

4. Monitoring Trade Policies

It reviews trade policies of member countries.

5. Technical Assistance

WTO helps developing countries understand international trade rules.

Principles of WTO

1. Non-discrimination

All member countries should be treated fairly.

2. Free Trade

Trade barriers should be reduced.

3. Predictability

Countries should maintain stable trade policies.

4. Fair Competition

Countries should compete fairly.

5. Special Treatment for Developing Countries

Developing nations receive additional support.

Advantages of WTO

Increases global trade
Provides common trade rules
Reduces trade conflicts
Helps developing countries participate in world trade

Limitations of WTO

1. Developed Countries Have More Influence

Powerful economies often dominate decisions.

2. Difficult for Developing Countries

Small countries may find it difficult to compete.

3. Trade Conflicts Continue

Some disputes remain unresolved.

15. International Monetary Fund (IMF)

Meaning

The International Monetary Fund is an international organisation created to promote monetary cooperation and financial stability among countries.

It was established in 1944.

Objectives of IMF

1. Promote International Monetary Cooperation

IMF encourages cooperation among countries regarding currency and payments.

2. Maintain Exchange Rate Stability

It helps reduce extreme changes in currency values.

3. Provide Financial Assistance

IMF provides loans to countries facing financial problems.

4. Promote International Trade

It encourages expansion of global trade.

5. Support Economic Growth

IMF helps countries improve economic conditions.

Functions of IMF

Provides financial support
Gives economic advice
Helps manage foreign exchange problems
Promotes stable international payment systems

16. World Bank

Meaning

The World Bank is an international financial institution that provides loans and assistance for economic development.

Objectives of World Bank

1. Reduce Poverty

It supports projects that improve living standards.

2. Economic Development

It finances:

Infrastructure
Education
Health
Agriculture

3. Support Developing Countries

It provides financial and technical assistance.

Functions of World Bank

Provides long-term loans
Supports development projects
Helps improve infrastructure
Encourages investment

Difference Between WTO, IMF and World Bank

Basis	WTO	IMF	World Bank
Main Area	International trade	Monetary stability	Economic development
Established	1995	1944	1944
Main Work	Trade rules	Financial assistance	Development loans
Focus	Trade between nations	Currency and payments	Development projects

17. Complete Chapter Revision

International Business

Business activities conducted between different countries.

Reasons for International Business

Unequal resources
Difference in technology
Different production costs
Specialisation
Better resource utilisation

Benefits

For Countries

Foreign exchange
Economic growth
Employment
Better standard of living

For Firms

Higher profits
Market expansion
Better capacity utilisation
Global recognition

Modes of Entry

Exporting
Contract Manufacturing
Licensing
Franchising
Joint Venture
Wholly Owned Subsidiary

Export Procedure

Trade enquiry → Quotation → Order → Letter of Credit → Licence → Finance → Production → Inspection → Packing → Insurance → Customs → Shipment → Payment

Import Procedure

Trade enquiry → Licence → Foreign Exchange → Letter of Credit → Shipment → Documents → Customs Clearance → Delivery

Important Documents

Goods Related

Invoice
Packing List
Certificate of Origin
Inspection Certificate

Shipment Related

Shipping Bill
Mate’s Receipt
Bill of Lading
Airway Bill
Insurance Policy

Payment Related

Letter of Credit
Bill of Exchange
Bank Certificate of Payment

Important Definitions for Exams

International Business

Exchange of goods, services, capital, and technology between countries.

Export

Selling goods and services to another country.

Import

Buying goods and services from another country.

Licensing

Permission given to use technology, patent, or trademark for a fee.

Franchising

Permission to use a brand name and business model.

Joint Venture

A business owned jointly by two or more independent firms.

Wholly Owned Subsidiary

A foreign business fully owned by the parent company.

Letter of Credit

A bank guarantee assuring payment to exporters.

Bill of Lading

A document issued by a shipping company acknowledging receipt of goods.

Most Important Board Exam Questions

Short Answer

Define international business.
Explain the meaning of licensing.
What is a joint venture?
What is WTO?
State two functions of IMF.
What is SEZ?

Long Answer

Explain different modes of entry into international business.
Explain the export procedure.
Explain important documents used in international trade.
Explain objectives and functions of WTO.
Differentiate between WTO, IMF, and World Bank.
Explain benefits of international business.

Chapter Memory Map

              INTERNATIONAL BUSINESS
                       |
        --------------------------------
        |                              |
     Concepts                    Operations
        |                              |
 Meaning & Scope              Export-Import
        |                              |
 Benefits                     Documents
        |
 Modes of Entry
        |
 International Organisations
 (WTO, IMF, World Bank)

A. Multiple Choice Questions (MCQs)

1. International business refers to business activities conducted:

A. Within a city
B. Within one country
C. Between two or more countries
D. Only by government organisations

Answer: C

2. Which of the following is NOT a part of international business?

A. Export of goods
B. Import of services
C. Foreign investment
D. Selling goods within the same city

Answer: D

3. Selling goods to another country is called:

A. Import
B. Export
C. Licensing
D. Franchising

Answer: B

4. Buying goods from another country is known as:

A. Export
B. Import
C. Investment
D. Production

Answer: B

5. The main reason for international trade is:

A. Countries are completely self-sufficient
B. Equal distribution of resources
C. Unequal distribution of resources
D. No differences among countries

Answer: C

6. Which of the following creates additional risk in international business?

A. Single currency
B. Different currencies
C. Same laws
D. Same culture

Answer: B

7. Domestic business is conducted:

A. Across borders
B. Within the boundaries of a country
C. Between continents only
D. Only through exports

Answer: B

8. Which is a feature of international business?

A. One currency
B. One legal system
C. Different political environments
D. Same customer preferences

Answer: C

9. The document containing price and terms of export is:

A. Bill of lading
B. Proforma invoice
C. Shipping bill
D. Mate’s receipt

Answer: B

10. Permission to use patents and trademarks is called:

A. Exporting
B. Licensing
C. Importing
D. Outsourcing

Answer: B

Modes of Entry MCQs

11. The simplest method of entering international markets is:

A. Joint venture
B. Exporting
C. Wholly owned subsidiary
D. Acquisition

Answer: B

12. Contract manufacturing means:

A. Selling directly abroad
B. Hiring foreign companies to produce goods
C. Buying shares abroad
D. Opening a branch abroad

Answer: B

13. Payment received by a licensor is called:

A. Dividend
B. Salary
C. Royalty
D. Interest

Answer: C

14. Licensing mainly involves:

A. Complete ownership transfer
B. Permission to use technology or brand
C. Importing goods
D. Government control

Answer: B

15. Franchising is mainly related to:

A. Agriculture
B. Service businesses
C. Mining
D. Manufacturing only

Answer: B

16. The owner of a franchise is called:

A. Franchisee
B. Franchisor
C. Licensee
D. Importer

Answer: B

17. A company that receives rights under licensing is called:

A. Licensor
B. Licensee
C. Franchisor
D. Exporter

Answer: B

18. A joint venture involves:

A. Single ownership
B. Joint ownership by two or more firms
C. No investment
D. Government ownership only

Answer: B

19. A wholly owned subsidiary requires:

A. 10% investment
B. 25% investment
C. 50% investment
D. 100% investment

Answer: D

20. Setting up a completely new business abroad is called:

A. Licensing
B. Greenfield venture
C. Franchising
D. Exporting

Answer: B

Export Procedure MCQs

21. The first step in export procedure is:

A. Insurance
B. Trade enquiry
C. Shipment
D. Customs clearance

Answer: B

22. Exporter sends ______ in response to trade enquiry.

A. Bill of exchange
B. Proforma invoice
C. Shipping bill
D. Insurance policy

Answer: B

23. Letter of Credit is issued by:

A. Exporter
B. Importer’s bank
C. Government
D. Transport company

Answer: B

24. IEC stands for:

A. International Export Certificate
B. Import Export Code
C. Indian Export Company
D. International Exchange Code

Answer: B

25. ECGC provides protection against:

A. Production loss
B. Payment risks
C. Labour problems
D. Transport costs

Answer: B

26. Finance obtained before shipment is called:

A. Post-shipment finance
B. Pre-shipment finance
C. Foreign finance
D. Trade finance

Answer: B

27. Shipping Bill is required for:

A. Import clearance
B. Export customs clearance
C. Payment collection
D. Insurance claim

Answer: B

28. Certificate of Origin shows:

A. Price of goods
B. Country of manufacture
C. Quantity of goods
D. Insurance amount

Answer: B

29. Duty drawback means:

A. Increase in duty
B. Refund of duties paid
C. Export tax
D. Import restriction

Answer: B

30. Bill of Lading is issued by:

A. Bank
B. Shipping company
C. Export council
D. Government

Answer: B

Import Procedure MCQs

31. Import trade means:

A. Selling goods abroad
B. Buying goods from abroad
C. Producing goods locally
D. Transporting goods

Answer: B

32. Importer needs foreign exchange because:

A. Exporters accept only foreign currency
B. Import payments are usually made in foreign currency
C. Government demands it
D. It reduces taxes

Answer: B

33. Customs clearance is required:

A. Before manufacturing
B. Before receiving imported goods
C. Before export order
D. Before licensing

Answer: B

International Organisations MCQs

34. WTO was established in:

A. 1944
B. 1995
C. 2000
D. 2010

Answer: B

35. WTO replaced:

A. IMF
B. World Bank
C. GATT
D. ECGC

Answer: C

36. WTO deals mainly with:

A. International trade
B. Health
C. Education
D. Currency printing

Answer: A

37. IMF mainly works for:

A. Trade promotion
B. Monetary stability
C. Industrial production
D. Transport development

Answer: B

38. World Bank provides:

A. Short-term consumer loans
B. Development assistance
C. Export licences
D. Insurance services

Answer: B

B. Fill in the Blanks

International business involves exchange across ______ boundaries.
Answer: national
Selling goods to another country is called ______.
Answer: export
Buying goods from another country is called ______.
Answer: import
Payment received under licensing is called ______.
Answer: royalty
The owner of a franchise is called a ______.
Answer: franchisor
The person receiving franchise rights is called a ______.
Answer: franchisee
IEC stands for ______.
Answer: Import Export Code
ECGC protects exporters against ______ risks.
Answer: payment
A document issued by shipping company is called ______.
Answer: Bill of Lading
WTO started functioning in ______.
Answer: 1995
IMF was established in ______.
Answer: 1944
SEZ stands for ______.
Answer: Special Economic Zone
Refund of duties paid on export goods is called ______.
Answer: duty drawback
A guarantee of payment issued by bank is called ______.
Answer: Letter of Credit
A new business established abroad is called a ______ venture.
Answer: greenfield

C. True or False

International business takes place within one country only.
❌ False
Export means selling goods abroad.
✅ True
Import requires foreign exchange.
✅ True
Licensing involves transfer of ownership.
❌ False
Franchising is mainly used in service businesses.
✅ True
Joint ventures involve shared ownership.
✅ True
Wholly owned subsidiaries require 100% investment.
✅ True
WTO was established before GATT.
❌ False
Letter of Credit reduces payment risk.
✅ True
Bill of Lading is issued by banks.
❌ False

D. Match the Following

Column A	Column B
Licensing	Royalty
Franchising	Service business
WTO	International trade
IMF	Monetary stability
World Bank	Development loans
ECGC	Export insurance
Bill of Lading	Shipping document
IEC	Export-import registration

E. Assertion and Reason Questions

1. Assertion:

International business is riskier than domestic business.

Reason:
It involves different currencies, laws and political environments.

Answer: Both Assertion and Reason are true, and Reason correctly explains Assertion.

2. Assertion:

Licensing requires less investment.

Reason:
The licensee establishes the business in a foreign country.

Answer: Both are true and Reason explains Assertion.

3. Assertion:

Wholly owned subsidiaries provide complete control.

Reason:
The parent company owns 100% equity.

Answer: Both are true and Reason explains Assertion.

F. Case-Based Questions

Case 1

A company allows a foreign firm to manufacture products using its patent. The foreign firm pays fees for this permission.

Questions:

Identify the mode of entry.

Answer: Licensing

What is the payment called?

Answer: Royalty

Who gives permission?

Answer: Licensor

Case 2

A restaurant chain allows another company to operate using its brand name and business methods.

Questions:

Identify the method.

Answer: Franchising

Who owns the brand?

Answer: Franchisor

Who operates the local business?

Answer: Franchisee

Case 3

A company establishes a factory abroad with complete ownership.

Questions:

Identify the mode.

Answer: Wholly owned subsidiary

How much investment does the company make?

Answer: 100%

State one advantage.

Answer: Complete control over operations

G. Very Short Answer Questions

Define export.
Define import.
What is royalty?
What is IEC?
What is ECGC?
Define joint venture.
What is a greenfield venture?
What is WTO?
What is IMF?
What is SEZ?