Benefits of International Business

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Questions and Answers

Which of the following documents is NOT typically required for international trade?

  • Bill of Lading
  • Certificate of Origin
  • Product User Manual (correct)
  • Commercial Invoice

International trade agreements are designed to increase barriers to trade and make transactions more complex.

False (B)

What is the main purpose of a Certificate of Origin?

A Certificate of Origin confirms the country where the goods were manufactured.

A __ is a payment guarantee issued by a bank assuring the seller of payment.

<p>Letter of Credit</p> Signup and view all the answers

Match the following export/import procedures with their corresponding descriptions:

<p>Obtaining necessary import licenses or permits = Import Procedures Arranging for payment collection = Export Procedures Preparing required export documentation = Export Procedures Overseeing goods unloading and delivery = Import Procedures Complying with customs regulations of the importing country = Import Procedures</p> Signup and view all the answers

Which of the following is a benefit of international business?

<p>Access to specialized resources (A)</p> Signup and view all the answers

Joint ventures require a complete merger of companies.

<p>False (B)</p> Signup and view all the answers

What is the primary purpose of franchising in international business?

<p>To allow a foreign company to use a brand and operational procedures in exchange for fees.</p> Signup and view all the answers

International business can help reduce the impact of economic downturns in any single __________.

<p>region</p> Signup and view all the answers

Which mode of entry into international business entails complete control and higher risk?

<p>Foreign direct investment (A)</p> Signup and view all the answers

Match the following modes of entry into international business with their descriptions:

<p>Exporting = Selling domestically produced goods to foreign buyers Licensing = Granting rights to use intellectual property for royalties Joint Venture = Shared ownership and control between companies Franchising = Using a company’s brand and operational model in exchange for fees</p> Signup and view all the answers

Exporting involves dealing directly with foreign customers only.

<p>False (B)</p> Signup and view all the answers

List two benefits of accessing global supply chains.

<p>Cost optimization and sourcing flexibility.</p> Signup and view all the answers

Flashcards

Export Procedures

Steps needed for sending goods to another country including licenses, documents, and shipping.

Key Export Documents

Essential paperwork required for exporting goods, including invoices and shipping contracts.

Commercial Invoice

A document detailing the goods, quantities, pricing, and sale terms for customs.

Letter of Credit (LC)

A banking document guaranteeing payment to the seller upon shipping confirmation.

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Customs Declaration

Document providing details of imported goods to customs authorities for clearance.

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Enhanced profitability

Increasing revenue by expanding into new markets and reducing reliance on domestic demand.

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Increased market share

Access to global markets leads to a larger customer base and higher market share.

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Economies of scale

Producing for a larger market reduces costs and increases efficiency through bulk production.

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Diversification of risk

Operating in multiple markets reduces the impact of downturns in any single area.

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Exporting

Selling goods or services from one country to buyers in another, via direct or indirect methods.

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Licensing

Allowing a foreign company to use a company's intellectual property for royalty payments.

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Joint ventures

Creating a new company with shared ownership and control between two or more firms.

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Foreign direct investment (FDI)

Establishing or acquiring a foreign subsidiary for complete operational control, though riskier.

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Study Notes

Benefits of International Business (IB)

  • Enhanced profitability: Expanding into new markets increases revenue and reduces dependence on domestic demand.
  • Increased market share: Access to global markets boosts customer base and market share.
  • Economies of scale: Larger markets enable bulk production, lowering costs and increasing efficiency.
  • Diversification of risk: Operating in multiple markets mitigates economic downturns in specific regions.
  • Access to resources: IB provides access to scarce raw materials, labor, or specialized skills.
  • Technological advancements: Global exposure facilitates knowledge transfer and new tech adoption.
  • Innovation and creativity: International competition sparks innovation and creativity.
  • Improved brand image: Successful international entry enhances company reputation and brand image.
  • Increased efficiency through global supply chains: IB leverages global supply chains for optimized costs and sourcing.
  • Enhanced competitiveness: Wider market competition drives efficiency and innovation.

Modes of Entry into IB

  • Exporting: Selling goods/services from one country to another (direct or indirect).
  • Licensing: Allowing foreign use of intellectual property (patents, trademarks) for royalties.
  • Franchising: Granting foreign use of a business model, brand, and operational procedures.
  • Joint ventures: Multiple companies share ownership and control of a new entity.
  • Foreign direct investment (FDI): Setting up a subsidiary or acquiring a foreign firm for complete operational control (high risk/investment).
  • Strategic alliances: Collaborative agreements with foreign firms sharing resources, technology, or markets.
  • Turnkey projects: Building a facility in another country and transitioning ownership to a local entity.

Export-Import Procedures and Documentation

  • Export Procedures:

    • Obtain export licenses/permits.
    • Adhere to varying export regulations by country.
    • Prepare export documents.
    • Arrange shipping/transportation.
    • Establish payment collection method.

  • Import Procedures:

    • Obtain import licenses/permits.
    • Adhere to importing country's customs regulations.
    • Prepare import documents.
    • Arrange import payment.
    • Oversee unloading and delivery.

  • Key Documents:

    • Commercial invoice: Details goods, quantity, price, and terms.
    • Bill of lading: Shipper-carrier contract for goods transport details.
    • Packing list: Goods contents and packing specifications.
    • Certificate of origin: Confirms the country of origin of goods.
    • Insurance certificate: Covers potential shipping losses.
    • Customs declaration: Imports' details to the customs authority.

  • Payment Methods:

    • Letter of credit (LC): Bank-issued payment guarantee for sellers.
    • Cash in advance: Payment before shipment.
    • Open account: Goods shipped before payment.
    • Documentary collections: Payment after documents confirming receipt.

  • International Trade Agreements: Agreements between countries governing trade to reduce barriers and facilitate smooth transactions.

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