Chapter international-business: International Business Application Questions | business studies Class 11 CBSE

Chapter international-business: International Business Application Questions | business studies Class 11 CBSE | ByteNotes.in

Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 1

Applied Concept

Mr. Sudhir Manchanda, a small manufacturer of automobile components in Gurgaon, wants to enter international markets. His son suggests setting up a factory in Bangkok, while his friend recommends routing exports through export houses. With reference to the modes of entry into international business, advise Mr. Manchanda on the most suitable option.

For a first-time entrant like Mr. Manchanda with an investment of Rs. 9.2 million, indirect exporting through export houses is the most appropriate initial mode — it requires no foreign investment, involves minimal complexity, and lets him test international markets without significant financial risk.
Setting up a wholly owned subsidiary in Bangkok, as suggested by his son, requires 100 percent equity investment and full operational control, which is capital-intensive and not suitable for a small manufacturer unfamiliar with foreign business environments, legal systems, and market conditions.
Mr. Manchanda could consider a phased approach — starting with indirect exports through export houses to build experience and market knowledge, then transitioning to direct exporting, and eventually considering joint ventures or a subsidiary in Bangkok once he has sufficient resources and international business experience.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 2

Applied Concept

Rekha Garments has received an export order from a buyer in Australia. The buyer demands a letter of credit before payment. Explain the significance of the letter of credit and the steps Rekha Garments must take to secure payment for this export.

A letter of credit is a guarantee issued by the Australian importer's bank to Rekha Garments' bank, committing to honour payment up to a specified amount; it is the most secure payment mechanism in international trade, protecting Rekha Garments from the risk of non-payment.
After receiving the LC, Rekha Garments ships the goods and prepares a set of documents including the commercial invoice, bill of lading, packing list, certificate of origin, and marine insurance policy, along with a bill of exchange drawn on the Australian importer, and submits these to its bank — a process called negotiation of documents.
Rekha Garments' bank forwards the documents to the Australian importer's bank; the importer either pays immediately (sight draft) or accepts the bill of exchange (usance draft) to receive the title documents, and the payment is ultimately credited to Rekha Garments' account through the banking channel.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 3

Applied Concept

Nike and Reebok get their products manufactured in developing countries under contract manufacturing. With reference to this example, explain the advantages of contract manufacturing for both the international firm and the local manufacturer.

For Nike and Reebok, contract manufacturing allows large-scale production without investing in setting up manufacturing plants abroad; they utilise existing production facilities in developing countries, significantly reducing capital expenditure and eliminating direct foreign investment risk.
These international firms gain a major cost advantage by getting products manufactured in countries with lower material and labour costs, making their products more price-competitive globally while maintaining their brand and quality standards.
Local manufacturers in developing countries benefit by securing a guaranteed market for their output — similar to how Godrej manufactures Dettol soap for Reckitt & Colman — helping them utilise idle production capacities and gain exposure to international business standards and potential export incentives.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 4

Applied Concept

McDonald's operates fast food restaurants across the world through a franchising system. With reference to this example, explain what franchising is and discuss its advantages as a mode of international business.

Franchising is an arrangement where the franchiser (McDonald's) grants franchisees in foreign countries the right to operate under its brand name, business format, and trademark, following strict operational rules and paying an agreed royalty or fee, primarily applicable to service businesses.
McDonald's as a franchiser makes virtually no investment abroad — the franchisee invests his or her own capital to set up the restaurant — making franchising a low-cost entry strategy with minimal financial risk for the franchiser, who earns continuous royalty income as long as the franchisee operates.
The franchisee, being a local person, brings valuable local market knowledge, contacts, and cultural understanding that help McDonald's successfully adapt its operations to local conditions; additionally, since the business is locally managed, there are lower risks of government intervention or nationalistic backlash compared to wholly owned subsidiaries.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 5

Applied Concept

Your firm wants to import textile machinery from Canada. Explain the procedure your firm would need to follow from trade enquiry to obtaining foreign exchange.

The import process begins with a trade enquiry — your firm sends a written request to Canadian machinery exporters seeking information on price, quality, and export terms; the Canadian exporter responds with a proforma invoice containing all relevant details about the machinery.
Your firm then checks the EXIM policy to determine whether import of textile machinery requires a licence; if required, an import licence must be obtained from the Directorate General of Foreign Trade (DGFT) after obtaining the mandatory Import Export Code (IEC) number.
Since the Canadian supplier will demand payment in foreign currency, your firm must apply to an RBI-authorised bank for foreign exchange sanction, submitting the application in the prescribed form along with the import licence; the bank scrutinises the application and sanctions the necessary foreign exchange for the transaction.

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Application Question

Hard difficulty • Concept in a practical situation

Hard

Question 6

Applied Concept

A Chinese company wants to enter the Indian market for the first time. It is considering either a joint venture with an Indian firm or setting up a wholly owned subsidiary. What factors should it consider in making this decision?

The Chinese company should consider its financial capability — a wholly owned subsidiary requires 100 percent equity investment, making it suitable only if it has sufficient funds; a joint venture requires a smaller capital outlay as costs and investment are shared with the Indian partner.
If the Chinese company needs local market knowledge, government relations, and an existing distribution network in India, a joint venture with a reputed Indian partner would be more advantageous, especially given India's complex regulatory and cultural environment.
However, if the Chinese company wants to protect its proprietary technology and trade secrets from disclosure to an Indian partner, and desires full operational control over its Indian operations, a wholly owned subsidiary would be preferable despite higher investment and political risk associated with 100 percent foreign ownership.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 7

Applied Concept

An Indian software company earns revenue by providing IT consulting services to clients in the USA and Europe. Is this considered part of international business? Explain the concept it illustrates.

Yes, this is a classic example of service exports — also called invisible trade — which is a key component of international business; the Indian company is providing intangible services to foreign clients, earning foreign exchange, which counts as international business activity.
Unlike merchandise trade which involves physical movement of tangible goods, service exports like IT consulting involve the cross-border provision of intangible services without physical movement of a product, illustrating the concept of invisible trade.
India is one of the largest exporters of IT and software services in the world, earning substantial foreign exchange from such service exports; this exemplifies how international business extends well beyond traditional goods trade to include the global service economy, demonstrating the broader scope of international business.

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Application Question

Hard difficulty • Concept in a practical situation

Hard

Question 8

Applied Concept

A Japanese car manufacturer wants to sell its cars in India but finds that import duties make its cars uncompetitively priced. What alternative modes of entry into the Indian market could it consider, and what are the relative advantages of each?

The Japanese manufacturer could consider contract manufacturing by engaging an Indian firm to assemble its cars in India using imported components; this avoids high import duties on finished vehicles, utilises India's lower labour costs, and produces locally while the Japanese firm maintains control over technology and brand.
Another option is a joint venture with an established Indian automobile company, providing the Japanese firm with local market knowledge, distribution networks, shared investment, and regulatory support, while also qualifying for domestic production benefits and potentially lower tax rates applicable to Indian joint ventures.
Alternatively, a wholly owned subsidiary with a manufacturing plant in India — a green field venture — would give the Japanese firm complete control over production quality, technology, and marketing, but would require substantial capital investment and full exposure to business risks in the Indian market without any local partner support.

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Application Question

Hard difficulty • Concept in a practical situation

Hard

Question 9

Applied Concept

Examine how developing countries like Singapore, South Korea, and China have benefited from an 'export and flourish' strategy and relate this to the benefits of international business to nations.

Producing solely for domestic consumption limited the growth prospects of these nations due to small domestic markets; by identifying export opportunities, they expanded production scales, created employment, and generated large foreign exchange earnings — exemplifying the benefit of international business in improving growth and employment potentials.
Export-led growth enabled these countries to move up the value chain — from labour-intensive manufacturing to higher-value industries — by using international business revenues to invest in technology, education, and infrastructure, demonstrating how international business facilitates more efficient use of resources and improves national living standards.
India can draw lessons from this strategy — leveraging its competitive advantages in IT services, pharmaceuticals, textiles, and engineering goods to maximise international business benefits, earn foreign exchange, create employment, and accelerate economic development in line with the principles of territorial specialisation described in the chapter.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 10

Applied Concept

A firm exporting readymade garments has received a confirmed export order and a letter of credit. Explain the steps it must follow for pre-shipment inspection and excise clearance.

If the garments fall under the category of products requiring compulsory pre-shipment inspection, the firm must contact the Export Inspection Agency (EIA) or another designated agency to arrange inspection of the goods; the agency inspects the consignment for quality and issues an inspection certificate under the Export Quality Control and Inspection Act, 1963.
For excise clearance, the firm must apply to the concerned Excise Commissioner in the region along with an invoice; if satisfied, the Commissioner issues excise clearance; since the goods are meant for export, the government may exempt excise duty payment or refund it later through the duty drawback scheme.
The inspection certificate must be submitted to customs along with the shipping bill and other documents at the time of customs clearance; notably, garment exporters registered as star trading houses or units in Export Processing Zones/Special Economic Zones are exempt from mandatory pre-shipment inspection.

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Chapter international-business: International Business | Application Questions

Rekha Garments has received an export order from a buyer in Australia. The buyer demands a letter of credit before payment. Explain the significance of the letter of credit and the steps Rekha Garments must take to secure payment for this export.

Nike and Reebok get their products manufactured in developing countries under contract manufacturing. With reference to this example, explain the advantages of contract manufacturing for both the international firm and the local manufacturer.

McDonald's operates fast food restaurants across the world through a franchising system. With reference to this example, explain what franchising is and discuss its advantages as a mode of international business.

Your firm wants to import textile machinery from Canada. Explain the procedure your firm would need to follow from trade enquiry to obtaining foreign exchange.

A Chinese company wants to enter the Indian market for the first time. It is considering either a joint venture with an Indian firm or setting up a wholly owned subsidiary. What factors should it consider in making this decision?

An Indian software company earns revenue by providing IT consulting services to clients in the USA and Europe. Is this considered part of international business? Explain the concept it illustrates.

A Japanese car manufacturer wants to sell its cars in India but finds that import duties make its cars uncompetitively priced. What alternative modes of entry into the Indian market could it consider, and what are the relative advantages of each?

Examine how developing countries like Singapore, South Korea, and China have benefited from an 'export and flourish' strategy and relate this to the benefits of international business to nations.

A firm exporting readymade garments has received a confirmed export order and a letter of credit. Explain the steps it must follow for pre-shipment inspection and excise clearance.

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