CHAPTER 11
INTERNATIONAL BUSINESS -I
As studied earlier, Business transaction taking place within the geographical boundaries of a nation is known as domestic or national business.
Business transaction taking place within the geographical boundaries of a nation is known as domestic or national business.
The fundamental reason behind international business is that the countries are not SELF SUFFICIENT. (i.e., cannot produce equally well or cheaply all that they need).
This may be due to various socio-economic region, geographical and political reasons, difference in climate, etc.
Q. Distinguish between International Business vs. Domestic Business?
Ans.
Basis Domestic Business International Business
Meaning It refers to buying & selling of It refers to buying and
goods within the geographical selling of goods beyond the
boundary. geographical boundary.
Countries Only one country is involve. Minimum two countries are
involve are involved.
Risk Less degree of risk is received High degree of risk is involved
in home currency.
Currency Payment are made & received Payment are made in
Used in home currency only. foreign currency only.
Mode of It used road, railway mode Usually by water way and
transfer of transport. air way.
Advantages of international trade are:
a) To Nation
b) To firm/Business
a] Advantages of international trade towards Nation:
(i) Earning of foreign exchange:
International business helps a country to earn foreign exchange which can be used to imports of capital goods, technology, petroleum products and fertilizers, pharmaceutical products, etc.
(ii) More efficient use of resources:
international business operates on a simple principle — produce what your country can produce more efficiently, and trade the surplus production with other countries to procure what they can produce more efficiently.
For example, Japan may produce electronic goods more efficiently and India may produce agriculture goods more efficiently. Thus, India can buy electronic goods from japan can sell agricultural goods to them.
(iii) Improving growth prospects and employment potentials:
International Business boosts up the economic growth of a country as the firm of developing countries increase their production capacity to supply goods in foreign countries. Increased production result in increase in GDP lending to economic growth of the country and increase the demand for labour increases which creates employment opportunities.
b] Advantage of international trade towards firm/business:
(i) Prospects for higher profits:
International business can be more profitable than the domestic business. When the domestic prices are lower, business firms can earn more profits by selling their products in countries where prices are high
(ii) Increased capacity utilization:
Companies involved in external trade increase their production capacities, and with increase in production capacity these firm can get benefits a larger production and reduce the cost of production.
(iii) Prospects for growth:
Business firms find it quite frustrating when demand for their products starts getting saturated in the domestic market. Firms can considerably improve prospects of their growth by plunging into overseas markets.
(iv) Improved business vision:
The growth of international business of many companies is essentially a part of their business policies.
Write disadvantages of International trade or Business [Problems] :
1. Too many legal formalities and long procedures.
2. High risk of damage of good in transit and risk of bad debts.
3. Arrangement of foreign currency to make payments for imports of good and services.
4. Difference in business systems and practices. Also customer is heterogeneous that is difference in customers, traditions, value, etc.
5. Too many restriction in import and export due to obtaining licence.
6. Political distraction and interference.
Meaning of export trade:
Exporting refers to sending of goods and services from the home country to a foreign country. India exports jute, spiceses, tea, etc to foreign country.
India exports tea to Brazil.
Important documents:
1. Letter of credit.
2. Indent.
3. Shopping order.
4. Shipping bill.
5. Mates receipt's.
6. Certificate of origin.
1. Letter of credit:
A letter of credit is a guarantee issued by the importer's bank that it will honor payment up to bank of the exporter.
2. Indent:
It is a receipt of order from prospective buyer. It contains a description of the goods ordered, price to be paid, delivery term's, packing and marketing details.
3. Shopping order:
When export firm applies to the shipping company for shipping space. Application regarding types of goods, to be exported, date of shipment & destination is submitted by exporters. The shipping company issues a shipping order.
4. Shipping Bills:
Shipping bills is the main document on the basic of which the costumes office gives the permission for export. Shipping bill contains particulars of the vessel the part at which goods are to be discharged, country of final destination, exporter's name and address, etc.
5. Mates receipt's:
A mate receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board, and contains the information about the name of the vessel, berth (Space), date of shipment, description of packages, marks & no., condition of the cargo at the time of receipt on board the ship, etc.
INTERNATIONAL BUSINESS -I
As studied earlier, Business transaction taking place within the geographical boundaries of a nation is known as domestic or national business.
Business transaction taking place within the geographical boundaries of a nation is known as domestic or national business.
The fundamental reason behind international business is that the countries are not SELF SUFFICIENT. (i.e., cannot produce equally well or cheaply all that they need).
This may be due to various socio-economic region, geographical and political reasons, difference in climate, etc.
Q. Distinguish between International Business vs. Domestic Business?
Ans.
Basis Domestic Business International Business
Meaning It refers to buying & selling of It refers to buying and
goods within the geographical selling of goods beyond the
boundary. geographical boundary.
Countries Only one country is involve. Minimum two countries are
involve are involved.
Risk Less degree of risk is received High degree of risk is involved
in home currency.
Currency Payment are made & received Payment are made in
Used in home currency only. foreign currency only.
Mode of It used road, railway mode Usually by water way and
transfer of transport. air way.
Advantages of international trade are:
a) To Nation
b) To firm/Business
a] Advantages of international trade towards Nation:
(i) Earning of foreign exchange:
International business helps a country to earn foreign exchange which can be used to imports of capital goods, technology, petroleum products and fertilizers, pharmaceutical products, etc.
(ii) More efficient use of resources:
international business operates on a simple principle — produce what your country can produce more efficiently, and trade the surplus production with other countries to procure what they can produce more efficiently.
For example, Japan may produce electronic goods more efficiently and India may produce agriculture goods more efficiently. Thus, India can buy electronic goods from japan can sell agricultural goods to them.
(iii) Improving growth prospects and employment potentials:
International Business boosts up the economic growth of a country as the firm of developing countries increase their production capacity to supply goods in foreign countries. Increased production result in increase in GDP lending to economic growth of the country and increase the demand for labour increases which creates employment opportunities.
b] Advantage of international trade towards firm/business:
(i) Prospects for higher profits:
International business can be more profitable than the domestic business. When the domestic prices are lower, business firms can earn more profits by selling their products in countries where prices are high
(ii) Increased capacity utilization:
Companies involved in external trade increase their production capacities, and with increase in production capacity these firm can get benefits a larger production and reduce the cost of production.
(iii) Prospects for growth:
Business firms find it quite frustrating when demand for their products starts getting saturated in the domestic market. Firms can considerably improve prospects of their growth by plunging into overseas markets.
(iv) Improved business vision:
The growth of international business of many companies is essentially a part of their business policies.
Write disadvantages of International trade or Business [Problems] :
1. Too many legal formalities and long procedures.
2. High risk of damage of good in transit and risk of bad debts.
3. Arrangement of foreign currency to make payments for imports of good and services.
4. Difference in business systems and practices. Also customer is heterogeneous that is difference in customers, traditions, value, etc.
5. Too many restriction in import and export due to obtaining licence.
6. Political distraction and interference.
Meaning of export trade:
Exporting refers to sending of goods and services from the home country to a foreign country. India exports jute, spiceses, tea, etc to foreign country.
India exports tea to Brazil.
Important documents:
1. Letter of credit.
2. Indent.
3. Shopping order.
4. Shipping bill.
5. Mates receipt's.
6. Certificate of origin.
1. Letter of credit:
A letter of credit is a guarantee issued by the importer's bank that it will honor payment up to bank of the exporter.
2. Indent:
It is a receipt of order from prospective buyer. It contains a description of the goods ordered, price to be paid, delivery term's, packing and marketing details.
3. Shopping order:
When export firm applies to the shipping company for shipping space. Application regarding types of goods, to be exported, date of shipment & destination is submitted by exporters. The shipping company issues a shipping order.
4. Shipping Bills:
Shipping bills is the main document on the basic of which the costumes office gives the permission for export. Shipping bill contains particulars of the vessel the part at which goods are to be discharged, country of final destination, exporter's name and address, etc.
5. Mates receipt's:
A mate receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board, and contains the information about the name of the vessel, berth (Space), date of shipment, description of packages, marks & no., condition of the cargo at the time of receipt on board the ship, etc.
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