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Class 11 International Business: cheat sheet
CBSE Business Studies. Business across national borders: how it differs from domestic business, its benefits, the modes of entry, export and import procedures and documents, and the balance of trade.
Key ideas
- International business differs from domestic business in the nationality of buyers and sellers, less mobile factors, varied customers, and different currencies, laws and business systems.
- Its scope covers exports and imports of goods and services, licensing and franchising, and foreign investment.
- Nations gain foreign exchange, better use of resources, growth and jobs; firms gain profit, use of spare capacity and growth beyond a crowded home market.
- Modes of entry run from exporting (least investment and risk) through contract manufacturing, licensing and franchising to joint ventures and wholly owned subsidiaries (most control and risk).
- In licensing a firm lets a foreign firm use its patent, trademark or process for a royalty; franchising is the same idea for services.
- Exporting runs from enquiry, order, credit check and licence, through production, inspection, shipping and customs, to the bill of lading and payment.
- Importing runs from enquiry, licence and foreign exchange, through the order and letter of credit, to the arrival of goods and customs clearance.
Remember
| Balance of trade | exports − imports: above zero a surplus, below zero a deficit |
| Royalty | licensee’s sales × royalty% ÷ 100 |
| Rupees from an export | dollars received × rupees per dollar |
| Proforma invoice | the quotation of price and terms sent to the importer |
| Letter of credit | the importer’s bank guarantees payment to the exporter |
| Shipping bill / bill of entry | customs document for exports / for imports |
| Mate’s receipt / bill of lading | from the ship’s captain on loading / from the shipping company, a title to the goods |
| Certificate of origin | states the country where the goods were made |
Watch out
- Swapping the shipping bill (exports) and the bill of entry (imports).
- Subtracting exports from imports: the balance of trade is exports minus imports.
- Confusing the mate’s receipt with the bill of lading: the shipping company gives the bill of lading in exchange for the mate’s receipt.
Worked example
Put these steps of the import procedure in order: (a) trade enquiry (b) procurement of import licence (c) obtaining foreign exchange
Working: trade enquiry → procurement of import licence → obtaining foreign exchange
Answer: a, b, c
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