ANSWERS

UNIT 1

A. INTRODUCTION
 nature and scope of international business
 concept of globalization and its importance
 impact of globalization
 international business versus domestic business
 modes of entry in international business
B. INTERNATIONAL BUSINESS ENVIRONMENT
 Economic, social cultural and political legal environment
 balance of trade and balance of payment
 internationalization stages and
 orientation EPRG framework India’s foreign trade policy

UNIT 1

A. Introduction

1. Nature and Scope of International Business:

International business involves trading goods, services, and ideas between different countries. It covers
activities like importing, exporting, investing, and collaborating with businesses across borders. For example,
when a company like Apple designs its products in one country and manufactures them in another, it's engaging
in international business.

2. Concept of Globalization and Its Importance:

Globalization is about how countries are more connected than before, sharing ideas, cultures, and economies.
It's important because it opens up markets globally and allows countries to learn from each other. For instance,
social media platforms like Instagram and TikTok are used worldwide, showcasing the impact of globalization.

3. Impact of Globalization:

Globalization has drastically changed how businesses and societies function. It has made it easier to trade and
communicate across borders, leading to economic growth and cultural exchange. For example, global brands
like Nike or Adidas sell their products worldwide due to globalization's influence.

4. International Business versus Domestic Business:

 International business involves operations across different countries, while domestic business operates within
a single country's borders. For example, a family-owned local restaurant operates domestically, while a
company like Walmart operates in multiple countries, making it an international business.

5. Modes of Entry in International Business:

Companies have various ways to enter global markets, such as exporting goods, setting up branches abroad,
forming partnerships, or licensing agreements. For example, McDonald's expanded internationally by
franchising its restaurants in different countries.

B. International Business Environment

1. Economic, Social, Cultural, and Political Legal Environment:

This refers to various factors like economic conditions, cultural norms, political stability, and legal regulations
across different countries. For example, different tax systems and consumer preferences affect how companies
like Amazon operate globally.

2. Balance of Trade and Balance of Payments:

Balance of trade measures the difference between what a country exports and imports. Balance of payments,
on the other hand, tracks all economic transactions between a country and others. For instance, if a country
exports more than it imports, it has a trade surplus.

3. Internationalization Stages and Orientation EPRG Framework:

Companies gradually expand globally through different stages and adopt different managerial approaches
using the EPRG framework (Ethnocentric, Polycentric, Regiocentric, Geocentric). For example, a company
might start with exporting (an early stage) and then establish subsidiaries abroad (a later stage), adopting
different orientations based on market demands.

4. India’s Foreign Trade Policy:

India's foreign trade policy outlines rules and strategies for international trade, aiming to boost exports, attract
foreign investment, and regulate imports. For example, India's "Make in India" initiative focused on increasing
manufacturing within the country and promoting exports.
Understanding these concepts helps individuals comprehend the complexities and opportunities in the global
business arena.

UNIT 2: International Organizational Arrangements

UNIT 2 :-

 international organizational and arrangements:

 GATT
 WTO
 its objectives principles
 ,organizational structure
 and functioning; overview of other organizations
 UNCTAD,
 Bretton woods conference
 IMF
 and world bank,
 Subsidiaries of World bank.

GATT (General Agreement on Tariffs and Trade)

Objective: GATT was a multilateral agreement established in 1947 to reduce barriers to international trade by
cutting tariffs and fostering fair trade practices. It aimed to promote global economic cooperation and prosperity
by lowering trade barriers.

Real-life example: Under GATT, negotiations led to substantial tariff reductions. For instance, the Uruguay
Round (1986-1994) led to the creation of the WTO and significantly reduced tariffs on various goods, boosting
global trade.

WTO (World Trade Organization)

Objective: Formed in 1995, the WTO is an international organization regulating trade rules between nations. It
facilitates negotiations, resolves trade disputes, and ensures smooth global trade relations.

Real-life example: The WTO's Dispute Settlement Body helps resolve conflicts. For instance, the U.S.-EU
dispute over aircraft subsidies involving Boeing and Airbus was addressed by the WTO.

Other Organizations
UNCTAD (United Nations Conference on Trade and Development): Established in 1964, UNCTAD
focuses on trade, investment, and development issues in developing countries.

Bretton Woods Conference: Held in 1944, it laid the foundation for the IMF and World Bank to promote
international economic cooperation after World War II.

IMF (International Monetary Fund) and World Bank: The IMF provides financial assistance to countries
facing economic crises, while the World Bank offers loans and grants for development projects.

Subsidiaries of World Bank: Includes institutions like the International Finance Corporation (IFC), focusing
on private sector development, and the International Development Association (IDA), providing interest-free
loans and grants to the poorest countries.

Unit 3:-

a)

 regional economic cooperation

 forms and stages of religion grouping
 and economic integration
 SAARC
 NAFTA
 ASEAN
 EU
 OPEC.

b)

 international financial environment:

 international financial system
 and institutions component of international financial environment foreign exchange markets
 and risk management foreign investments
 types and flows foreign investment in Indian perspective

UNIT 3a: Regional Economic Cooperation

 Forms of Regional Groupings
 SAARC (South Asian Association for Regional Cooperation): Aims to enhance regional cooperation
among South Asian nations for economic growth and stability.
 NAFTA (North American Free Trade Agreement): An agreement between the US, Canada, and
Mexico, eliminating tariffs and encouraging trade among member countries.
 ASEAN (Association of Southeast Asian Nations): Promotes economic growth, social progress, and
regional stability among Southeast Asian countries.
 EU (European Union): An economic and political union of European countries with a single market
and common policies for trade, currency, and more.
 OPEC (Organization of the Petroleum Exporting Countries): Manages oil production and prices to
ensure stability and fair revenue distribution among member countries.

Other info

SIMILARITIES

While SAARC, NAFTA, ASEAN, EU, and OPEC are diverse regional groupings with different purposes
and focuses, they do share some common similarities:

### Common Similarities:

1. **Regional Cooperation:** All these organizations aim to foster cooperation and collaboration among
countries within a specific geographic region.

2. **Economic Objectives:** Each organization emphasizes economic cooperation, whether through trade
agreements, reducing tariffs, or facilitating economic growth and development within the region.

3. **Trade Promotion:** They often work towards enhancing trade among member countries, either by
eliminating tariffs (NAFTA), creating a single market (EU), or encouraging preferential trade agreements
(ASEAN).

4. **Focus on Regional Stability:** These organizations seek to promote stability within their respective
regions, whether it's through economic integration, conflict resolution, or joint policies to ensure peace and
security.

5. **Policy Formation:** They involve policy formation and decision-making at a regional level, impacting
member countries' trade policies, economic regulations, and sometimes even foreign policies.
6. **Regular Summits and Meetings:** These organizations often conduct regular meetings, summits, and
conferences among member countries to discuss common issues, make decisions, and strengthen ties.

7. **Influence on Global Affairs:** While primarily focused on regional matters, some of these
organizations have global influence or impact due to the economic and geopolitical significance of their
member countries.

8. **Member Countries' Sovereignty:** Despite integration efforts, member countries still retain their
sovereignty, allowing them to make independent decisions on certain matters outside the organization's
purview.

9. **Coordination and Collaboration:** These groups emphasize the need for collaboration in areas such as
energy (OPEC), trade (NAFTA), security (ASEAN), or political integration (EU), aiming for collective
benefits.

10. **Commitment to Objectives:** Each organization has a charter or set of objectives that member
countries commit to achieving, often involving mutual cooperation and support among members.

While these organizations share commonalities, it's important to note that the extent and nature of these
similarities can vary significantly due to the diverse goals, memberships, and scopes of each organization.

DISIMILARITIES

Certainly! While SAARC, NAFTA, ASEAN, EU, and OPEC share some similarities, they also possess
several dissimilarities due to their varying purposes, memberships, and areas of focus:

### Dissimilarities:

1. **Geographic Scope:**

- **SAARC:** Focuses on South Asian countries (e.g., India, Pakistan, Bangladesh).

- **NAFTA:** Includes North American countries (e.g., USA, Canada, Mexico).

- **ASEAN:** Comprises Southeast Asian nations (e.g., Thailand, Indonesia, Vietnam).

 - **EU:** Encompasses European nations (e.g., France, Germany, Spain).

- **OPEC:** Consists of oil-producing nations across different continents (e.g., Saudi Arabia, Venezuela,
Iran).

2. **Primary Objectives:**

- **SAARC:** Primarily focuses on regional cooperation, economic growth, and social development
among South Asian countries.

- **NAFTA:** Concentrates on promoting free trade and economic cooperation among North American
nations.

- **ASEAN:** Aims to enhance economic growth, social progress, and cultural development in Southeast
Asia.

- **EU:** Strives for economic and political integration, forming a single market and common policies
among European countries.

- **OPEC:** Coordinates oil production policies to stabilize oil markets and ensure fair prices for
member countries' petroleum exports.

3. **Level of Integration:**

- **EU:** Represents a high level of integration, with a single market, common currency (Euro), and
shared policies in various fields.

- **NAFTA, ASEAN, OPEC, SAARC:** These organizations vary in the depth of their integration, with
some focusing more on trade facilitation (NAFTA) while others concentrate on collaboration in specific
areas like energy (OPEC) or regional cooperation (ASEAN and SAARC).

4. **Trade Agreements:**

- **NAFTA, EU:** Involve free trade agreements, reducing or eliminating tariffs among member
countries.

- **ASEAN:** Focuses on trade liberalization within the region but also engages in agreements with
other countries or regions (ASEAN+3, ASEAN+6).

- **SAARC, OPEC:** Less focused on direct trade agreements but emphasize cooperation in specific
sectors (e.g., energy in OPEC, regional development in SAARC).

5. **Cultural Diversity:**
 - **SAARC, ASEAN:** Comprise countries with diverse cultures, languages, and traditions within their
respective regions.

- **EU:** Embraces significant cultural diversity but has made efforts towards cultural integration
alongside economic and political integration.

- **NAFTA, OPEC:** Less emphasis on cultural integration, primarily focusing on economic cooperation
and trade-related matters.

6. **Membership and Influence:**

- **EU:** Membership involves stringent criteria and deep integration commitments, influencing policies
of member countries significantly.

- **NAFTA, ASEAN, SAARC, OPEC:** Membership criteria and influence on domestic policies vary,
with differing levels of impact on member countries' policies and decisions.

These dissimilarities highlight the diverse objectives, memberships, and scopes of these regional
organizations, leading to varying degrees of integration, trade agreements, and cultural influences within
their respective regions.

UNIT 3b: International Financial Environment

 International Financial System and Institutions: Comprises global financial institutions like the IMF,
World Bank, and central banks that regulate monetary policies and support economic stability
worldwide.
 Foreign Exchange Markets: Platforms where currencies are traded, determining exchange rates and
enabling businesses to engage in international trade.
 Foreign Investments: Include foreign direct investment (FDI) and foreign portfolio investment (FPI).
FDI involves acquiring a lasting interest in a foreign enterprise, while FPI refers to investments in
financial assets like stocks and bonds of foreign entities.

unit 4:
a)

 organizational structure for international business operations

 key issues involved in making international production
 finance
 marketing,
 and human resource decisions,
 international business negotiation

b)

 developments and issues in international business

 outsourcing
 and its potential for India
 strategic alliances ,
 Mergers
 and acquisitions,
 role of IT in international business
 international business and ecological considerations

UNIT 4a: International Business Operations

Organizational Structure

Key Decisions: International companies need to strategize production, finance, marketing, and human resources
considering global market demands, regulatory variations, and cultural differences.

Negotiations: In international business, negotiations involve reaching agreements between different cultures,
legal systems, and economic conditions.

UNIT 4b: Developments in International Business

 Outsourcing: Companies outsource non-core functions to third-party service providers, often in other
countries, to reduce costs or access specialized skills. For instance, tech companies outsourcing software
development to firms in India.
 Strategic Alliances: Collaborations between companies aiming to leverage each other's strengths. For
example, a pharmaceutical company partnering with a research institution for drug development.
 Role of IT: Information Technology facilitates global communication, e-commerce, and data
management, essential for efficient international business operations.
  Ecological Considerations: Businesses now consider environmental impacts in their international
operations, promoting sustainable practices and minimizing their carbon footprint to support a healthier
planet.

 Understanding these concepts aids in comprehending the intricacies of global trade, economic
cooperation among nations, financial systems, and the dynamics of international business operations.

UNIT 5

FOREIGN TRADE PROMOTION MEASURES AND ORGANIZATIONS IN INDIA:

special economic zones and 100% export oriented units EOU ,

measures for promoting foreign investment into and from India in Indian joint venture and
acquisitions abroad.

FINANCING OF FOREIGN TRADE AND PAYMENT TERMS:

sources of trade finance (bank, factoring, forfitting banker’s acceptance and corporate Guarantee)
and form of payment (cash in advance, letter of credit, documentary, collection, open account).

UNIT 5

Foreign Trade Promotion Measures and Organizations in India

Special Economic Zones (SEZs) and 100% Export Oriented Units (EOUs)

 Special Economic Zones (SEZs): These are like special areas in India where businesses receive extra
benefits to encourage them to trade internationally. For instance, imagine a city called "Export City" in
India where companies don’t have to pay some taxes if they produce goods there. An example is the
Kandla Special Economic Zone in Gujarat, where companies get tax benefits to encourage exports.

 100% Export Oriented Units (EOUs): These units are like factories or businesses that mainly make
products to sell in other countries. For example, think of a factory in India that produces mobile phone
parts just for exporting them to countries like the USA or Japan.
Measures for Promoting Foreign Investment into and from India in Joint Ventures and Acquisitions
Abroad

Foreign Direct Investment (FDI): Picture a situation where a company from another country, let’s say the
UK, decides to invest money directly into an Indian business. An example could be a British car company
setting up a factory in India to produce cars.

Joint Ventures and Acquisitions: Joint ventures are like collaborations where an Indian company and a
foreign company team up for business. For example, an Indian clothing brand partnering with a French fashion
house to create and sell new clothes together. An acquisition would be an Indian tech company buying a
software company in the US to expand its business globally.

Financing of Foreign Trade and Payment Terms

Sources of Trade Finance

Bank Financing: This is when banks help businesses with money for international trade. For example, think of
an Indian company that needs money to buy machinery from Germany. A bank can lend them the required
amount for the purchase.

Factoring: Imagine an Indian company that has sold products to a company in the US but needs money
urgently. They can sell their invoice (proof of the sale) to a financial company at a slightly lower price to get
immediate cash.

Forfaiting and Banker’s Acceptance: These are ways for companies to get paid for their goods through
agreements involving banks, making the payment process smoother and safer for both parties.

Corporate Guarantee: Companies sometimes promise to pay for goods if the buyer can’t. For example, an
Indian company might assure a foreign seller that they will get paid even if the buyer doesn’t pay.

Forms of Payment
Cash in Advance: This is when the buyer pays before receiving the goods. Just like when you order something
online and pay before it's delivered, businesses sometimes ask for payment upfront for international trade.

Letter of Credit (LC): Think of this like a guarantee from a bank. When a company in India sells goods to a
company in Australia, the Australian company’s bank promises to pay once they see the required documents,
ensuring the seller gets paid.

Documentary Collection: Banks help in collecting documents from the seller and giving them to the buyer in
exchange for payment, making the transaction secure and smooth.

Open Account: This is like buying something from a trusted friend and paying later. Companies sometimes
agree to send goods and trust the buyer to pay after receiving them.

These methods and organizations make it easier for Indian businesses to trade internationally, helping them sell
their products abroad or buy goods they need from other countries more efficiently and securely.