International Business

December 2022 Examination

1. “Organisations engaged in International Business often face more complex situations

then the organisations which conduct Domestic Business.” – Critically evaluate the
statement and explain difference between domestic and international Business. (10 Marks)

Ans 1.
Introduction:

Any business that occurs in the domestic country is limited to the geographical boundary within
a country. While however, worldwide barriers aren't anyhow confined to the worldwide
limitations and are loose to trade with any nations according to the desires, anyplace the country
wants to change. Even though the concepts of enterprise-associated obligations, features, and so
forth are the same in the home and a global business, the surroundings in which each business
market performs are different. Unlike a domestic business supervisor, a global business manager
faces some issues, uncertainty, dangers, etc.; therefore, the undertaking of international business
is more complex than domestic business.

Concept and Application:

Domestic vs international business

A number of the challenges faced within the worldwide business is more than the domestic
business. Therefore sometimes, it is considered that the home business is convivial, convincing,
and friendly compared to the international business.

Some of the differences are:

1. Culture- As we know that each country has its tradition, subculture, languages, customs,
demands, and so on. It creates plenty of problems for the worldwide business for doing business
inside the specific country as they require knowing the norms of that country, traditions of that
country, and humanities of that country to study the country's subculture. All these demands on
the premise of the lifestyle need to be acknowledged by the global business operating businesses.
If they are not acquainted with their lifestyle, it can create trouble to run efficiently in that
country. It may be that the subculture of the United States needs now not to be observed within
the UK, china, or any country. It can also be that the culture of California in America need not be
followed in Alaska in the United States. Way of life differs from United States to country or
kingdom to the nation. Therefore international businesses may additionally get into trouble.
Also, operating hours in the United States are 9a.m. to 5 p.m., even as in a country like Spain, it's
miles from 9 a.m. to 1:30 p.m. Therefore, it requires the business to be acquainted with the way
of life of that USA. Home corporations are familiar with the country's traditions as they're privy
to the humanities, subculture, customs, and so on. And consequently, without setting
extraordinary efforts, they could realize approximately it.

2. Currency exchange and inflation rate

The cost of the pound or greenback within the home country wants now not usually equal to the
currency of neither the opposite country nor the number of products and offerings continually
exact in every country. Consequently, it is required for international businesses to be acquainted
with foreign money in their own country with the forex of the opposite country where they want
to set up the business. Also, putting in the enterprise within the unique country now does not
have equal consequences. The go-back from country A can be extra or smaller than the return
from country B because of inflation. It's far consequently crucial for international businesses to
monitor the inflation charge; in any other case, it could affect material and complex work fees, as
well as costs of the goods. In domestic enterprise, companies follow the equal currency and are
familiar with the inflation inside a year; consequently, they face lass challenges as evaluate to the
worldwide companies.

3. Language barrier-

When company units up the global business, it must be familiar with the languages they need to
set up to run the enterprise effectively and efficiently. And putting in place the businesses in
unique nations requires studying different languages to be familiar with the needs of the citizen.
In any other case, it requires a lot of effort to translate into their very own languages, which
could impact businesses financially

4. Laws and regulations-

Corporations looking for worldwide enterprise require knowing the different neighborhood laws
to run the business within the distinct countries. to adhere to the country's norms, it is required to
recognize the law. Global business putting in the enterprise calls for understanding unique laws.
As distinct nations follow different norms and regulations for corporations. Attractive in
international businesses requires following exceptional guidelines. Home groups comply with
static hints.

5. Risks

Sometimes international companies face a greater chance than domestic companies operating in
that country. As home organizations have a better command of the demand of the locals. As they
are familiar with their lifestyle, traditions, and many others. Also, they may be acquainted with
how humans react to unique products. Therefore, a worldwide business faces competition and
consequences in excessive hazard to run in that unique country.

Conclusion:

Domestic businesses are usually acquainted with the languages they set up as they have been
working there from the time immortal, despite the concepts of business-related obligations,
features, and many others. They are identical, each in domestic in addition to global business.
However, the environment or the surroundings in which the two business markets operate is one
of a kind. In contrast to a home business manager, a worldwide business manager faces
numerous problems, uncertainty, dangers, etc. consequently, we can conclude that home
companies have more privileges over international companies.
2. An Indian jewellery Brand “Tanishq” wants to enter into Middle East Market with its
range. What are the choices available to enter into this overseas market and what is the
best-suited option? (10 Marks)

Ans 2.
Introduction:

Investing in some other market or setting up overseas will be risky in numerous ways; however,
it may introduce your organization to massive markets, increase sales, and benefit a higher
reputation for your brand. To reduce this risk of being a failure in that target country, it is very
vital to understand who our target audience is. It is also vital to recognize what the demand of
people is and what suits the culture of that place. These items play a huge role in determining
how your company goes to carry out and how long it will be able to preserve within the market.

Concept and application:

There are many ways through which you could input into an overseas market. Some of the ways
are listed beneath: -

1. Exporting – Exporting direct sales of goods and services to another country. It is

considered one of the best approaches to entering a foreign market as it is much less volatile.
There may be no manufacturing price involved in export as production happens in the home
country, after which it is shipped to another country. Transportation cost is the introductory rate
that is there in exporting. Authorities additionally perform an important position in export
corporations because the authority's policies encompass trade obstacles or imposing taxes on
export. In exporting business, you also want distribution partners inside the country you are
exporting your items. If the business enterprise is capable of discovering an organization is a
significant country for distribution, it could earn from very few monetary assets.

2. Licensing – Licensing is a system in which a firm offers permission to any other organization
inside the goal country to use its legally covered assets which can be commonly intangible assets
such as trademarks, copyright, production techniques, formulas, and many others. The
manipulation and obligation over the licensee employer are much greater than the licensor. The
dangers are also worried upon the licensee to take care of. It is a cost-effective approach as the
licensor handiest has to offer permission to use its assets and all of the responsibilities like
production, income, profit, and so forth—shift on the licensee. The licensor employer can revel
in the benefits without worrying about control, ownership, investment, etc.

3. Merger and Acquisition – Home corporations amplify their corporations overseas

through the manner of merger and acquisition also. A home company purchases a foreign
organization in the focused overseas country and gains ownership and management over that
company. It offers straightforward and short access to the international market as the company is
already set up inside the overseas country, and you have to acquire that. Acquiring or merging
yourself also can lead you to buy that company's problems. It's also very tough to appraise the
case of merger & acquisition.

4. Joint Ventures – It's considered an intelligent mode of entering a remote place's

business. Or more excellent organizations come together to shape a new company, one of its
determined companies. The ownership is vested with the buyers who have come collectively to
shape this corporation in a pre-determined share. It could deliver together new and modern
thoughts. It is satisfactory for the ones humans who have confined resources. Permits say, as an
instance, and A is an organization that has restricted financial aid but is nicely acquainted with
the market of that country, like the demand of people, target market, and so on. B alternatively
has monetary resources; however, little or no know-how of the foreign marketplace. Along with
the case, if A and B come together to form an organization, then that would benefit each of them
with the resources they have.

5. Franchising – It's also the shape of licensing. The franchisor, in this example, has more
excellent management over the franchisee company. The franchisee operates below the logo
name of the franchisor, which is already a nicely-installed organization. The franchisor gives the
franchisee services like trademark, running machine, worker schooling, if it is meals and
Beverage Company then the formula/secret of that. The franchisor, in return, has to pay the price
agreed by using each of those entities priories. The advantages of this form of settlement are that
the franchisor receives to enter the worldwide marketplace at a meager funding and minimum
risk. The franchisee gets to use the name of an already well-mounted brand. As a result, there is
no risk of product failure. Both events share equal responsibility of producing and promoting
great products to preserve the consumer’s faith.

Conclusion:

The excellent suited option in the case of Tanishq could be to open a franchise in the center East
marketplace. It might be the company's responsibility first to recognize that country's subculture,
the desire of people living there, the standard of residing of the people, etc. For this activity, a
person who is acquainted with the country or belongs to the area might be a better person. So, if
Tanishq opts for franchising its company, then that might be a higher option as there might be
minimal danger involved for the corporation, which is entering a new region. Franchising can
even place relatively much less burden upon the discern organization as most of the obligations
might be shifted at the franchisee company.

3. Vinayak began an electric fan manufacturing unit in Navi Mumbai ten years ago. He
sells BLDC Energy saver fans to several towns in Maharashtra & South India. Though the
usiness is doing well Vinayak started to feel that he should expand the business by
attracting more customers. Vinayak has an opportunity to sell the masks to Sri Lanka and
Mauritius. He has also been contacted by a party in Gurgaon for sales. Also it has been
observed that worldwide demand for BLDC energy Saving Electric fans is on the rise.
Based on his production capacity Vinayak can either take up the North India market or
plan for Exports.

a. What factors are to be considered by Vinayak to decide if he wants to go for exports in

Sri Lanka and Mauritius. (5 Marks)

Ans 3a.
Introduction:

The objectives will be personal or non-personal. Now and again, people need to do global
change simply to benefit from international recognition. But consider it, your intention is pretty
much global recognition, then you need to move for exports; however, if your number one goal
is to make extra income, then you should move for the other choice to be had as it's far cheaper
and less volatile.

Concept and Application:

Factors in consideration:

1. Goals - Make clear your desires before deciding to export your business. Take into
consideration what are your objectives before exporting. These objectives could be non-public or
non-private. Sometimes humans want to make global trade to benefit from global popularity. But
consider it, your aim is just about international recognition, you then have to pass for exports, but
if your primary aim is to make greater profits, then you ought to go for the alternative option
available as it's far cheaper and less volatile. You do now not have an agreement with the client
in the international market as of now. If you are entering an international market, it'll take time to
make that reputation and get your sales a hike. So there must be readability as to what goals you
want to fulfill.

2. Partners - It's vital to have a distribution channel within the other country you are exporting
to. You have to look at whether or not the potential of that dealer or companion matches yours.
You have to see whether they have got the sources to make a bulk delivery or no longer if they
will be able to distribute in the expanded place. Also, you ought to consider their growth while
developing your business. If they no longer sense that they're getting an appraisal working with
you, they may not need to work with you in the future.

3. Market research - It's essential to apprehend the market you want to enter through exporting.
Suppose you are promoting a product that is not truly the requirement of the humans of that
place. In that case, they will not purchase it, which will be a failure of your business. For
example, if you are contemplating selling winter clothes in South Africa, humans will no longer
buy them because it is no longer their requirement. Search for your target customer and
customize the product to the region you are selling. If you are shifting demographically to a new
area, then make certain through market studies that you have sufficient customers to maintain
your enterprise. Also, look for the opposition inside the market. See how many more excellent
businesses are accessible inside the same business as yours. Examine the mistakes that they have
got devoted and attempt to avoid that. If a method works nicely for them, try adopting similar
strategies.

4. Financial Option - Many corporations want to increase themselves by using their cash in
hand, even as different businesses want investments. You must be very vigilant about how you
advise your idea in the market to attract more and more investors to your selling your idea most
temptingly. Speak to the bankers, release IPOs, problem debentures, etc. Those price ranges let
you purchase the device, buy assets, set up your business and production, and pay the employees.
In case you think that you are short of finance, then staying inside the domestic us of can be a
better option because it will be less expensive in phrases of putting in the business as you may
not need to install an entirely new production unit or purchase a new system and so forth.

5. Hiring - within the path of expanding your business, you can want additional staff. This
additional workforce may be both boon and bane to your business because it depends on the
experience and expertise of the person you hire. It isn't always really possible if you want to be at
one place at a time, so you hire a team of workers on your behalf who act like a manager of the
area while you are not there. All the choice-making powers, coping with the team of workers,
and so on are vested with the supervisor. If the supervisor isn't top enough that can flip the table
for you.

Conclusion:

All this stuff ought to be considered even as you are contemplating expanding your business to
the new United States of America. At the same time as hiring, you need to think about what
function you are hiring that individual. Is he right in shape for that function? Does he have all the
required qualifications and the ability set to do the process?

b. If Vinayak decides to go for Exports, what procedure and documents are required? (5
Marks)
Ans 3b.

Introduction:

Moving items to the other in a domestic setup no longer requires much documentation, nor is it a
challenging method. But in the case of global change, i.e., Export, it is a complex method, and
many documents are required to facilitate transport.

Concept and Application:

Procedures and documents required:

The process of export is as follows: -

Step 1: - Receipt order: - The business is exporting the products will receive the order from the
importer.

Step 2: - obtaining license quota: - It is a felony necessity for the exporter first to acquire
permission from the government of his country in the shape of a license. Simplest then can he
export the products.

Step 3: - Letter of Credit: - A letter of credit score is an assurance of payment from a registered
bank on behalf of the importer. If the importer no longer connects the letter of credit score with
the order, he can be asked for it.

Step 4: - Fixing the Exchange Rate: - It is also vital to fix the price at which the home currency
can be exchanged with the foreign currency. Since the foreign exchange price fluctuates from
time to time, it's far vital to restoring a rate.

Step 5: - Foreign Exchange Formalities: - As consistent with the foreign exchange law Act of
India (FERA), every product exporter must grant a declaration in the form prescribed in a way
within the Act.
Step 6: - Preparation for Executing the Order: - The exporter must make all the
arrangements, set up the goods to be exported, and computer them. All of the preparations want
to be executed to execute the order.

Step 7:- Formalities by a Forwarding Agent:- The Forwarding agent performs the project of
acquiring a permit from the customs branch, preparing the shipping bill, and paying the dues
after disclosing the required info of the product being exported.

Step 8:- Bill of lading:- bill of lading is a reliable receipt that gives the full description of the
goods loaded on the ship and the name of the destination port. It is the exporter’s process to
provide the receipt reproduction of the goods to the transport company, and in return, the
transport company gives the bill of lading.

Step 9:- Shipment Advise to the Importer:- The exporter has to offer cargo advice to the
importer to permit him to realize the dispatch of goods. It also includes a non-negotiable replica
of the invoice of lading, packing listing, and business reproduction.

Step 10:-Presentation of Documents to the Bank:- In the end, the exporter confirms that he
possesses all the files that are wanted, just like the bill of Lading, Marine insurance coverage,
and so forth. Then the exporter draws a bill of exchange on the idea of the economic invoice.

Step 11:- The Realization of Export Proceeds:- The closing step is to realize the proceeds of
exported items. The exporter has to go through certain formalities, and on submission of the bill
of exchange, these formalities are initiated.

Conclusion:

The files required for this procedure are the Export bill and an invoice containing all the facts
about the transaction. The packing listing states the range of packs and the character of the
goods. Certificates of the beginning specify the name of the country in which the goods are
produced. Certificates of Inspection assure that the goods to be exported are of the right quality.
An invoice of lading is a legitimate receipt that offers the full description of the goods loaded at
the ship and the name of the destination port: marine coverage, letter of credit, and bill of
exchange, amongst others.