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

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

Case Study

Passage with linked questions

Case Set

Case Set 1

Case Analysis

Passage

Ramesh Traders is a mid-sized garment manufacturer based in Tiruppur, Tamil Nadu. The firm has been exporting cotton T-shirts to European markets for the past three years. Recently, a buyer from Germany placed a bulk order worth €2,00,000. Ramesh, the proprietor, was unsure about the steps to be followed. He first sent a proforma invoice mentioning prices, quality, and delivery terms. On receiving the confirmed order (indent), he assessed the German buyer's creditworthiness and obtained a Letter of Credit from the buyer's bank. He then secured an IEC number from DGFT, registered with AEPC, and applied for pre-shipment finance from his bank to procure raw materials. The goods were inspected by the Export Inspection Agency before being dispatched to the port.

Question 1: What is a proforma invoice and why does an exporter send it?

A proforma invoice is a quotation sent by the exporter in response to an enquiry from the prospective buyer.
It contains details such as price, quality, grade, size, weight, mode of delivery, packing, and payment terms so the buyer can decide whether to place an order.

Question 2: Why did Ramesh obtain a Letter of Credit from the German buyer's bank? What protection does it offer?

A Letter of Credit is a guarantee issued by the importer's bank that it will honour payment up to a certain amount of export bills drawn on the bank of the exporter.
It protects the exporter against the risk of non-payment once the goods reach the import destination, making it the most secure method of settling international transactions.

Question 3: Explain the importance of obtaining an IEC number, registering with an Export Promotion Council, and registering with ECGC before exporting.

IEC (Import Export Code) number obtained from DGFT is mandatory for every exporter and must be filled in various export/import documents; without it, exports cannot legally proceed.
Registration with the appropriate Export Promotion Council (e.g., AEPC for apparel) is obligatory to obtain the RCMC certificate required to avail government benefits and incentives for exporters.
Registration with ECGC protects overseas payments from political and commercial risks, and also helps the exporter obtain financial assistance from commercial banks.

ByteNotes

Case Study

Passage with linked questions

Case Set

Case Set 2

Case Analysis

Passage

Sunrise Electronics Ltd., an Indian company, wants to import semiconductor chips from Japan. The purchasing manager, Ms. Anita Sharma, begins by sending a trade enquiry to several Japanese exporters requesting price and supply details. After comparing proforma invoices, she selects a supplier and places a formal import order. Since Japan demands payment in Japanese Yen, Anita approaches an RBI-authorised bank to obtain foreign exchange. Her bank scrutinises the application and sanctions the required forex. She also applies for an import licence from DGFT as the chips fall under a restricted import category. Later, she arranges for a Letter of Credit to assure the Japanese supplier about payment.

Question 1: What is a trade enquiry in the context of import transactions?

A trade enquiry is a written request sent by an importing firm to various exporters seeking information about the price and terms and conditions on which the exporter is willing to export goods.
It helps the importer identify the best supplier in terms of price, quality, and delivery conditions.

Question 2: Why must an importer in India obtain foreign exchange sanction from an RBI-authorised bank?

Since international transactions involve payment in foreign currency, importers must exchange Indian rupees into the required foreign currency.
All foreign exchange transactions in India are regulated by the Exchange Control Department of the Reserve Bank of India (RBI), and importers must apply to an RBI-authorised bank with prescribed forms and import licence to obtain the sanction.

Question 3: Describe the role of an Import Licence and Letter of Credit in facilitating import transactions.

An import licence, obtained from DGFT, is required for importing restricted goods and specifies the quantity, value, and source of goods that the importer is permitted to bring in.
A Letter of Credit is a guarantee issued by the importer's bank assuring the exporter that payment will be made up to a specified amount, thus building trust between the trading parties.
Together, these documents ensure legal compliance and financial security, allowing the import transaction to proceed smoothly.

ByteNotes

Case Study

Passage with linked questions

Case Set

Case Set 3

Case Analysis

Passage

PepsiCo operates in over 200 countries worldwide. Rather than setting up its own bottling plants in every country, it allows local companies to produce and sell its beverages using its brand, formulas, and packaging standards. In India, it has entered into agreements with local bottlers who pay a fee (royalty) to PepsiCo for using its brand and technology. Similarly, McDonald's operates its fast-food outlets globally through a system where local business owners pay an agreed fee and follow strict operating guidelines set by McDonald's. Both these arrangements allow the companies to expand globally without making large capital investments in foreign countries.

Question 1: Identify and distinguish between the two modes of international business described in the passage.

PepsiCo's arrangement with local bottlers is Licensing — where a firm grants another party in a foreign country the right to produce goods using its patents, trademarks, or technology in exchange for a royalty fee.
McDonald's arrangement is Franchising — similar to licensing but applied to service businesses, with the franchiser setting strict rules on how franchisees must operate.

Question 2: What are two major advantages of licensing/franchising as a mode of entry into international markets?

The licensor/franchiser makes virtually no investment abroad since the licensee/franchisee sets up and funds the business, making it a less expensive entry mode.
Since the business in the foreign country is managed by a local person (licensee/franchisee), there are lower risks of business takeovers or government interventions.

Question 3: Explain any three disadvantages of licensing as a mode of international business from the licensor's perspective.

After gaining skills in manufacturing and marketing, the licensee may start producing a similar product under a slightly different brand name, creating direct competition to the licensor.
Trade secrets of the licensor may get divulged to others in the foreign market due to lapses on the part of the licensee, causing financial losses to the licensor.
Over time, conflicts often develop between the licensor and licensee over issues like royalty payments, quality standards, and account maintenance, leading to costly legal disputes.

ByteNotes

Case Study

Passage with linked questions

Case Set

Case Set 4

Case Analysis

Passage

Sharma Automobiles Ltd., an Indian company, wants to enter the South-East Asian market. To minimise investment risk, it decides to collaborate with a local firm in Thailand called Thai Motors Co. Both companies agree to jointly own a new enterprise where each will hold 50% equity. Sharma Automobiles will contribute technology and brand name, while Thai Motors will contribute local market knowledge, distribution network, and land for the factory. This joint entity will manufacture and sell cars in Thailand and neighbouring countries. The arrangement allows Sharma Automobiles to benefit from Thai Motors' understanding of the local business environment and share the costs and risks of the new venture.

Question 1: What type of international business mode is described in the passage? Define it.

The passage describes a Joint Venture — a business arrangement where two or more independent firms jointly establish a new firm with shared ownership.
It involves collaboration between a foreign investor and a local firm to combine their respective strengths and share costs, risks, and profits.

Question 2: How does a joint venture benefit the foreign firm in terms of market knowledge and risk?

The local partner provides valuable knowledge about the host country's competitive conditions, culture, language, political systems, and business practices.
Costs and risks of entering a new, unfamiliar foreign market are shared between the two partners, reducing the financial burden on the foreign firm.

Question 3: Analyse the major limitations of a joint venture arrangement from the perspective of both the foreign and local partners.

The foreign firm always runs the risk of its technology, trade secrets, or proprietary processes being disclosed to competitors in the foreign country through the local partner.
Dual ownership can lead to conflicts and disagreements between the investing firms over strategic decisions, resource allocation, and control, resulting in a battle for control.
Differences in management styles, corporate culture, and business objectives between partners from different countries can create friction and reduce operational efficiency.

ByteNotes

Case Study

Passage with linked questions

Case Set

Case Set 5

Case Analysis

Passage

Nike, the American sportswear giant, does not own manufacturing facilities in most developing countries. Instead, it enters into agreements with local manufacturers in countries like Vietnam, Bangladesh, and India to produce shoes and apparel strictly according to Nike's design specifications, quality standards, and technology guidelines. The goods manufactured by these local firms are then delivered to Nike, which sells them under its brand name worldwide. The local manufacturers benefit from utilising their idle production capacity, while Nike avoids the cost of setting up factories abroad. However, some local manufacturers have complained that they have little freedom in the manufacturing process and must sell at predetermined prices.

Question 1: Identify the mode of international business described in the passage and define it.

The passage describes Contract Manufacturing (also known as outsourcing) — a type of international business where a firm enters into a contract with local manufacturers in foreign countries to produce goods as per its specifications.
The goods so produced are sold by the international firm under its own brand name in various countries.

Question 2: What advantages does contract manufacturing offer to Nike as the international firm?

Nike can get goods produced on a large scale without investing in setting up production facilities abroad, using existing local infrastructure instead.
With little or no investment in foreign countries, Nike faces minimal investment risk and benefits from lower material and labour costs in developing countries.

Question 3: Discuss the disadvantages of contract manufacturing from the perspective of both the international firm and the local manufacturer.

For the international firm (Nike), local manufacturers may not adhere to production design and quality standards, causing serious product quality and brand reputation problems.
The local manufacturer loses control over the manufacturing process since goods must be produced strictly as per the international firm's specifications and terms.
The local firm cannot sell the contracted output at market prices; it must sell to the international company at predetermined prices, which may be lower than prevailing market rates, resulting in reduced profits.

ByteNotes

Premium Access

Unlock all Case Study sets

You are viewing 5 free case study sets from this chapter. Upgrade to Premium to unlock the remaining 10 sets.

Upgrade to Premium10 questions locked

Chapter sections

Chapter international-business: International Business | Case Study Questions

Passage

Question 1: What is a proforma invoice and why does an exporter send it?

Question 2: Why did Ramesh obtain a Letter of Credit from the German buyer's bank? What protection does it offer?

Question 3: Explain the importance of obtaining an IEC number, registering with an Export Promotion Council, and registering with ECGC before exporting.

Passage

Question 1: What is a trade enquiry in the context of import transactions?

Question 2: Why must an importer in India obtain foreign exchange sanction from an RBI-authorised bank?

Question 3: Describe the role of an Import Licence and Letter of Credit in facilitating import transactions.

Passage

Question 1: Identify and distinguish between the two modes of international business described in the passage.

Question 2: What are two major advantages of licensing/franchising as a mode of entry into international markets?

Question 3: Explain any three disadvantages of licensing as a mode of international business from the licensor's perspective.

Passage

Question 1: What type of international business mode is described in the passage? Define it.

Question 2: How does a joint venture benefit the foreign firm in terms of market knowledge and risk?

Question 3: Analyse the major limitations of a joint venture arrangement from the perspective of both the foreign and local partners.

Passage

Question 1: Identify the mode of international business described in the passage and define it.

Question 2: What advantages does contract manufacturing offer to Nike as the international firm?

Question 3: Discuss the disadvantages of contract manufacturing from the perspective of both the international firm and the local manufacturer.

Unlock all Case Study sets