Chapter 11: International Business

Ans: Difference between international trade and international business are as following:

Ans:  Three advantages of international business are:

• Foreign exchange: International business facilitates foreign exchange within a country that aids in the payment of imported goods expenses 

• Efficient use of resources: Every country is specialised in the production of goods and services, leading to efficient utilisation of resources.

• Growth: Exporting and flourishing in international trade helps in improving the economic growth of the country and creates opportunities for employment of people.
  
  

Ans:  The major reason underlying trade between nations are:

• Unequal Distribution of Natural Resources: Countries cannot manufacture the same level of quality and at the same cost. This is due to the unequal distribution of natural resources and differences in productivity levels among different geographical places.

• Varied Differences: There is a disparity between labour productivity and manufacturing costs. Because of varied socioeconomic, geographical, and political factors, it varies in each country, thus creating a need for trade.

• Specialization Advantage: The principle of territorial division of labour can be applied internationally as well. Most developing countries with plenty of labour, for example, specialise in producing and exporting clothing.

• Price Differences: Firms also engage in the export and import of goods due to the difference in prices of products. They import cheaper things from other countries and export goods to other countries where they can fetch better prices for their products.
  
  

Ans: The following are some of the most compelling arguments in favour of licencing as a means of a company's global expansion.

• Less expensive: Because the licensor does not need to make large expenditures abroad, it is a less expensive way to access international markets.

• Lower risk of government intervention: The licensee, who is a local person, manages the business in the overseas market. As a result, licencing reduces the danger of government intrusion in business operations.

• Better knowledge and contacts: As a local, the licensee has a better understanding of the market dynamics in his or her nation than the licensor. This, in turn, aids the licensor's seamless market operations and global expansion.
  
  

Ans: Difference between contract manufacturing and setting up wholly owned production subsidiary abroad are as following:

Ans: Prerequisites for getting an export license:

• Opening a bank account with any bank that has been approved by the Reserve Bank of India;

• Getting an Import Export Code (IEC) from the Directorate General of Foreign Trade (DGFT) or a Regional Import Export Licensing Authority;

• Creating an account with the right export promotion council. 

• To protect against non-payment risks, you should register with the Export Credit and Guarantee Corporation (ECGC).

• A company must submit an exporter/importer profile, a bank receipt for the required fee, a certificate from the banker, two copies of photographs attested by the banker, details of non-resident interest, and a declaration about the application to obtain an IEC number to the Director General for Foreign Trade (DGFT).

• It is a legal requirement for all exporters to register with the proper export promotion council.

• To secure international payments from political and commercial interference, you must register with the ECGC.
  
  

Ans:  To be eligible for benefits provided  by the , the exporter firms must have a certificate (RCMC). To secure payment from political and commercial dangers  from other organisations in other countries such registration is required.

It also aids the export company in obtaining commercial financing support from financial institutions such as banks etc.

Ans: There is a requirement for the inspection of some products by a competent agency recognised by the government. For this aim, the government created the Export Quality Control and Inspection Function in 1963 and authorised specific entities to act as inspection agencies. At the time of export, the pre-shipment inspection report is required to be submitted along with other export paperwork.

Such inspection is not needed in the event of the goods exported by star trading houses, export houses, trading houses etc.

Ans: Bill of lading: After receipt of the freight, the shipping company issues a bill of lading which serves as an evidence that the shipping company has accepted the goods for carrying to the designated destination.

It is different from the bill of entry because the bill of entry is required at the time of import and filed by the importer at the time of import of goods. This is required for customs duty assessment. Hence, bill of lading is a legal document acknowledging the receipt of cargo, whereas bill of entry is more like a declaration, specifying elements like quantity, quality, value of the goods imported/exported.

Ans: A mate receipt is a receipt that is provided by the ship's commanding officer when the cargo is loaded on board. The receipt contains information such as the vessel's name, berth, date of shipping, package description, marks and numbers, cargo condition at the moment of receipt on board the ship, and so on. The port superintendent gives the C&F agent the mate's receipt after receiving the port dues.