International Business Overview
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Questions and Answers

What are the three main reasons for the shift in global business?

The three main reasons for the shift in global business are: 1) Development of communication, technology, and infrastructure; 2) Development of faster and more efficient means of transportation; and 3) increased interaction between countries due to the WTO and other reforms.

What are the two types of business?

  • International and Domestic (correct)
  • National and Global
  • Local and International
  • Internal and External

What is the fundamental reason behind international business?

The fundamental reason behind international business is the unequal distribution of natural resources and productivity levels among countries, leading to differing costs and capabilities for producing specific goods and services. Consequently, nations specialize in producing and exporting the goods and services they produce most efficiently and cost-effectively, while importing goods and services that they are not well-equipped to make.

International business is restricted to trade in goods, but not services.

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

What are the three main differences between domestic and international business?

<p>Nationality of buyers and sellers, nationality of other stakeholders, and mobility of factors of production (B)</p> Signup and view all the answers

What is the significance of customer heterogeneity across markets in international business?

<p>Customer heterogeneity across markets in international business implies that consumers in different countries have differing tastes, fashions, languages, beliefs, and customs, impacting product preferences and marketing strategies. This emphasizes the need for businesses to tailor their operations to meet the specific needs and expectations of consumers in each market.</p> Signup and view all the answers

The differences in business systems and practices are more significant within a single country than between different countries.

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

What are the key differences between the political system of a country and international business?

<p>The political system of a country, including government structure, political ideologies, and political stability, significantly influences the operations of international business. Unlike domestic business, which operates under a single country's political framework, international business deals with a diverse range of political systems, laws, and regulations across different countries.</p> Signup and view all the answers

What are the four main forms of international business operations?

<p>Contract manufacturing, licensing, franchising, and wholly owned subsidiaries (A)</p> Signup and view all the answers

What are the major advantages of exporting as a mode of entry into international business?

<p>The major advantages of exporting as a mode of entry into international business include: Ease of entry, less financial investment required, minimal exposure to foreign investment risks, and lower operational costs compared to other modes of entry.</p> Signup and view all the answers

What is contract manufacturing, and what are the three major forms?

<p>Contract manufacturing refers to an arrangement where a company contracts with local manufacturers in a foreign country to produce components or finished goods as per its specifications. The three major forms of contract manufacturing are: production of components, assembly of components into final products, and complete manufacturing of products.</p> Signup and view all the answers

What are the primary advantages of contract manufacturing?

<p>Contract manufacturing provides several advantages, including reduced investment risks, access to readily available production facilities in foreign countries, potential cost savings from lower labor and material costs, and opportunities for local manufacturers to enhance their utilization and gain experience in global markets.</p> Signup and view all the answers

What are the main disadvantages or limitations of contract manufacturing?

<p>The primary limitations of contract manufacturing include: potential quality control issues with local manufacturers, potential difficulty aligning manufacturing with design and quality standards specified by the international company, and potential risk of technology transfer or copying by local manufacturers.</p> Signup and view all the answers

What are the key advantages of licensing as a mode of entry into international business?

<p>Licensing provides several advantages such as: minimal investment risk, a lower entry barrier, access to local market knowledge and contacts, and a lower risk of business takeovers or government interventions.</p> Signup and view all the answers

What are the primary limitations or disadvantages of licensing as a mode of entry into international business?

<p>Licensing faces limitations such as: potential loss of control over production and marketing of products by licensees, vulnerability to technology or trade secret disclosures, conflicts with licensees over royalty payments or product quality, and potential competition from licensees who may choose to market similar products under their own brand names.</p> Signup and view all the answers

What is a joint venture, and what are the three main ways it can be established?

<p>A joint venture is a collaborative business undertaking where two or more firms establish a new or acquire an existing business. The three main ways a joint venture can be established are: foreign investor buying an interest in a local company, a local firm acquiring an interest in an existing foreign firm, or both foreign and local entrepreneurs jointly forming a new enterprise.</p> Signup and view all the answers

What are the key advantages of a joint venture?

<p>Joint ventures offer several advantages, including: shared financial investment, access to local market knowledge and expertise, reduced risk through shared costs and liabilities, and a stronger competitive position in the foreign market</p> Signup and view all the answers

What are the main disadvantages or limitations of a joint venture?

<p>The primary limitation of joint ventures include: the potential for conflicts between partners due to differing goals and control strategies, the risk of losing control over technology or trade secrets, and the potential for leakage of valuable knowledge to competitors.</p> Signup and view all the answers

What is a wholly owned subsidiary?

<p>A wholly owned subsidiary is a foreign company that is completely owned and controlled by a parent company in its home country.</p> Signup and view all the answers

What are the benefits of establishing a wholly owned subsidiary?

<p>The benefits of establishing a wholly owned subsidiary include: full control over operations, greater flexibility in decision-making, and the ability to protect proprietary technology or intellectual property.</p> Signup and view all the answers

What are the limitations of establishing a wholly owned subsidiary?

<p>The limitations of establishing a wholly owned subsidiary include: significant financial investment required, higher risk of losses due to complete control over the subsidiary, and vulnerability to political risks in foreign markets.</p> Signup and view all the answers

Identify the key differences between international trade and international business.

<p>International trade refers to the exchange of goods and services across national borders, while international business encompasses a much wider range of activities, including foreign investment, production, and service delivery. In essence, international business goes beyond just trade, focusing on the broader strategic and operational aspects involved in growing and managing an international presence.</p> Signup and view all the answers

What is the major advantage of international business for a country, and what are the corresponding benefits for a company?

<p>The primary advantage of international business for a country is its ability to access a wider range of products, services, and resources, leading to increased efficiency, growth, and a higher standard of living. For companies, international business offers opportunities for higher profits, increased market share, enhanced production capacity utilization, and diversification of risks.</p> Signup and view all the answers

Which of the following is NOT a key advantage of a wholly owned subsidiary?

<p>Easier to establish compared to joint ventures (A)</p> Signup and view all the answers

Explain the concept of duty drawback.

<p>Duty drawback is a scheme that provides a refund or exemption of excise duty paid on goods that are subsequently exported. This incentive aims to boost exports and make domestically produced goods more competitive in international markets.</p> Signup and view all the answers

Why is it important for an exporter to obtain a certificate of origin?

<p>A certificate of origin is essential for exporters as it acts as a proof that the goods were manufactured in the country of origin. It allows importers to avail tariff concessions or exemptions offered by the importing country for goods originating from a specific country. The certificate also helps to meet import regulations in certain countries that restrict or ban imports from specific regions.</p> Signup and view all the answers

Explain the process involved in 'negotiation of documents'

<p>The process of 'negotiation of documents' involves the exporter sending a set of documents, including the bill of exchange, to the importer's bank. The bank then verifies the documents and ensures that the payment for the goods is guaranteed. Once the bank accepts the documents, they are released to the importer in exchange for payment.</p> Signup and view all the answers

What are the essential steps involved in securing payment for exports?

<p>Securing payment for exports involves a series of steps: 1) Obtaining an export license; 2) Obtaining a letter of credit from the importer; 3) Producing or procuring the goods as per the importer's specifications; 4) Obtaining pre-shipment finance; 5) Shipping the goods; and 6) Ensuring proper documentation and presenting it to the bank to secure payment.</p> Signup and view all the answers

Flashcards

International Business

Business activities carried out across national borders, including trade in goods and services, capital, personnel, and intellectual property.

Domestic/National Business

Business conducted within a country's borders.

Exporting

Selling goods or services to a foreign country.

Importing

Buying goods or services from a foreign country.

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Direct Exporting

Exporting goods directly to customers in foreign countries.

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Indirect Exporting

Exporting through intermediaries such as export houses.

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Foreign Investment

Investment in a foreign country, including direct investment (FDI) and portfolio investment.

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Direct Investment (FDI)

Investing directly in properties like plants and machinery abroad to produce and sell.

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Portfolio Investment

Investing in foreign stocks, bonds, etc., without controlling the business.

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Joint Venture

A business formed by two or more firms, sharing ownership and control.

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Licensing

Granting permission to use your technology or brand in a foreign country.

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Franchising

Granting permission to another firm to operate a business using your trade name and system.

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Wholly Owned Subsidiary

A foreign company fully owned and controlled by a parent company.

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Contract Manufacturing

Employing a foreign company to produce goods according to your specifications.

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Export Procedure

Steps and documents needed for an export transaction.

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Import Procedure

Steps required to import goods.

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Pro-forma Invoice

A quotation from an exporter to a potential buyer.

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Study Notes

Learning Objectives

  • State the meaning of International Business
  • Distinguish between Internal and International Business
  • Discuss the scope of International Business
  • Enumerate the benefits of International Business
  • Discuss the documents required for import and export transactions
  • Identify the incentives and schemes available for international firms
  • Discuss the role of different organisations for the promotion of International Business
  • List the major international institutions and agreements at the global level for the promotion of international trade and development.

Introduction

  • Countries are undergoing a fundamental shift in how they produce and market goods and services
  • Economies are increasingly reliant on others for goods and services
  • Increased cross-border trade and investment have connected countries.

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Chapter 11 International Business PDF

Description

This quiz covers the fundamental concepts of International Business, including its meaning, scope, and benefits. Participants will also explore the differences between Internal and International Business, necessary documentation for trade, and the roles of various organizations in promoting international trade. Understand the major institutions and agreements that shape global commerce.

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