The chapter on international business is an important part of the class 11 CBSE syllabus for business studies. The chapter deals with all the aspects of international business, including its scope, meaning and benefits. Struggling with the numerous concepts discussed in this chapter? To aid in your understanding, we have brought you some simplified notes on the chapter on the topic of international business in class 11, which will help you ace your exams. Take a look!
This Blog Includes:
- International Business
- Benefits of International Business
- Problems Faced by International Business
- International Business Management
- International Business Environment
- International Business Law
- World Trade Organization
- Domestic vs International Business
- Export Procedures
- Import Procedures
- Organisational Support (Indian Organisations)
- Modes of Entry into International Business
International business refers to the trade and transactions between different nations across the globe. It includes manufacturing and trading goods from a country to another. International business may be of two basic types of imports and exports, although business may also involve foreign investments, licensing, and franchising. The class 11 chapter on International Business comprises the following important topics:
- International business
- international business management
- International business environment
- International business law
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Benefits of International Business
There are various benefits of international business as they benefit both the nation and the firm, with international business the nation can promote its goods, services, and traditions throughout the world and also earn foreign exchange. According to the Class 11 chapter on international business, a nation can improve the standard of living and adjust the prices. The company can have a direct investment in any business or can have a portfolio investment and can earn dividends on shares and loans.
The company can enjoy the resources and services provided by the nations through international business and can increase their capital and sales; firms may have technological up-gradation and improved business opportunities and vision. It helps firms in improving their growth prospects. Life in most countries would be much more difficult were it not for the many strategic metals that must be imported. Trade affords countries and their citizen’s higher standards of living than otherwise possible. Without trade, product shortages force people to pay more for less, products taken for granted, such as coffee and bananas, may become unavailable overnight.
Problems Faced by International Business
There are various problems faced by international businesses such as blocking up of the capital due to foreign exchange, transaction problems, currency problems, and heterogeneity among suppliers and customers. Transportation and supply of goods in visible trade may face difficulties depending on the nature of business. Furthermore, the restrictions imposed by law and the order of the country restrict the freedom of traders. International business is greatly dependent on the local firms of different countries; the nature of quality and standard of their products and services may cause problems to the international rums.
The local markets may be monopolized by the large international firms in terms of manufacturing and production of goods even determining the price for them and issues such as trading restrictions, and import/export restrictions may affect the business.
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International Business Management
The topic of international business management in Class 11 business studies introduces the students with their future careers in a global environment, i.e. multinational companies, international organizations, or an SME (Small and Medium Enterprises) with international operations. Managing the business is also an issue now due to globalization of the world economy due to companies with large capital. Also, the middle capital is going global for better exposure and vision. International business management explains the interactions between strategy, planning, sourcing, producing, delivering, and returning products. Management also involves the evaluation of risk and profit associated with the marketing and supply strategies in the context of internationalization.
Management involves decision-making in the international business environment. It familiarises students with the issues which arise in international business negotiations and sets forth to develop their multi-cultural understanding, negotiation, and management skills to solve the problems and gain opportunities in an international environment with multi-cultural competency.
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International Business Environment
There are commonly two types of business environment: microenvironment and the macro environment. The international business is a major topic in business studies class 11. The microenvironment and macro environment are usually interlinked; the microenvironment depends greatly on the macro factors which may shape opportunities or pose threats to the firm. The macro factors are generally more controllable. The various types of business environment are:
- Marketing Intermediates
- Democratic and Political factors
- Economic Environment
- Natural Environment
- Demographic Environment
- Physical and Technological Environment
- International Environments
Distance also is an important factor. If the distance is large, the shipment cost and the time required for delivery will also increase. Distance may also affect other factors depending upon the product and location. The benefit due to export is enormous. Import also contributes to the local economy as it provides material for local markets to thrive, which promotes many businesses. Imports are essential as they help regulate the price in local markets. Without imports, the consumer will have to pay more for the goods and services to the local business, which will result in a price hike highly profiting the local business. This development usually acts as a prelude to worker’s demand for higher wages, further exacerbating the problem of inflation.
According to business studies class 11, the international business environment is analyzed through environmental analysis which involves strategic monitoring of the economic market and government factors. The possibility of business not only depends on the resources but on the environment as well. The buying and consumption habits of the people, their language, beliefs and values, customs and traditions, tastes and preferences, and education are factors that also affect business. Demographic factors need to be taken into consideration as well, such as the family factors, the growth rate of a country, age ratio in the population, population size, spatial dispersal, employment rate, occupational majorities, etc., may affect the sales and production.
International business is important in today’s world. The gains for greater awareness and knowledge of the international business is far immense for nations, multinational enterprises, trading companies exporters, and even individuals. To go to global business, the first step would be to understand the international business environment in business studies class 11.
International Business Law
International business law deals with the business and trade-related law between two or more nations so as proper negotiation with no conflict and disputes may take place since every country has its own rules and regulations regarding the trades. Studying this chapter on International Business, you will get to know about these different trade aspects regulating throughout the world. Therefore, for a trade to take place internationally, it has to comply with both international as well as domestic law. Treaties and agreements are made between the trade parties to ensure the establishment of acceptance regarding the laws.
Jurisdiction is one of the most significant factors in international law as per this chapter on International Business in class 11. It is up to students if they want to go into the detailed study of international business laws as well as the domestic laws, understanding these laws may be helpful for students as a whole for comparative study. The international business law involves contracts and legal provisions to meet the terms of trade by every party.
World Trade Organization
WTO is the prime organization that deals with the problems related to trading and business between nations for international peace and profit regarding trade and negotiations. It was established in 1995 in Switzerland. The purpose of WTO is to promote an integrated, more viable and durable trading system among nations, to maintain sustainable development by optionally using world’s resources, to improve the standard of living, facilitate higher trade and production, increase demand, increase employment, to reduce the trade traffic and barriers imported by different countries in the smooth flow of international trade.
WTO acts as a jurisdiction body for solving disputes among nations for international trade to be successful by laying down some common ground for negotiation and code of conduct accepted by countries regarding the policies.
Domestic vs International Business
The strategies and plans for business are different for the domestic market and the international market. Here are some of the key differences:
- The nationality of the participating buyers and sellers differ in international business, while it remains the same for domestic business
- The same is true for other stakeholders of the business such as employees, partners, suppliers etc
- The degree of mobility of different factors of production like capital or labour is lesser in international business in comparison to domestic business
- International business has to deal with a more heterogeneous customer demand
- Business systems and practices differ to greater extent in international business
- International business is riskier since it has to deal with different political environments
- International business has to deal with different sets of business regulations and policies
- Unlike domestic business, international business involves the usage of different currency types
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There are different steps involved in an export transaction, which may differ for different exports. The general procedure of a typical export transaction consists of the following steps:
- Sending quotations as a reply to an enquiry
- Receiving an order or indent
- Making enquiries regarding the creditworthiness of the importer
- Getting an export license
- Acquiring pre-shipment finance
- Producing or procuring the goods
- Pre-shipment inspection of the goods
- Obtaining excise clearance
- Getting a certificate of origin from the trade consulate
- Reserving shipping space
- Packing and forwarding the goods
- Getting insurance for the goods
- Obtaining customs clearance
- Getting the mate’s receipt
- Paying freight and issuance of bill of lading
- Preparing the invoice
- Receiving payment
Import procedures are different for different countries depending on their policies. Here are the different steps involved in a typical import transaction:
- Collecting information through trade enquiries
- Obtaining an import license
- Obtaining foreign exchange for payment
- Placing an import order or indent
- Obtaining the letter of credit
- Making finance arrangements
- Receiving shipment advice
- Retirement of import documents
- Arrival, customs clearance and release of the goods
Organisational Support (Indian Organisations)
The Indian government has set up various organisations to support international business. As per this chapter in Class 11 Business Studies, some of the major organisations set up for facilitating international business include the following:
- The Department of Commerce
- Export Promotion Councils (EPCs)Commodity Boards
- Export Inspection Council (EIC)
- Indian Trade Promotion Organisation (ITPO)
- Indian Institute of Packaging (IIP)
- Indian Institute of Foreign Trade (IIFT)
- State Trading Organisations
Modes of Entry into International Business
The modes of entry into an international business are the different ways in which a company can engage in foreign trade. Some of the different modes through which you can enter into the international business are:
Importing and Exporting
Importing is purchasing foreign goods and then bringing them to your home country. Whereas exporting is the sending and selling of goods and services from your home country to a foreign country.
Advantages of Importing and Exporting
- It is the simplest and easiest way to get entry into the international market. It is not a very complicated process.
- It is less time-consuming. This is because the process of importing and exporting does not require firms to invest a large amount of money and time like they have to do in joint ventures or in setting up manufacturing plants in host countries.
- Since the process of importing and exporting does not need investment in other or foreign countries, foreign investment risks are much lower and almost nil.
Disadvantages of Importing and Exporting
- Importing and exporting requires the packaging of goods as they move from one country to another. This involves transportation and insurance costs.
- The products are also subject to customs duty once they reach the destination country.
- Exporting can be a problem if there are import restrictions in the country. In such situations, firms and companies have to opt for licensing, joint ventures or franchising.
This is a type of international business where firms or companies contact local manufacturers in foreign countries. They do so to get their goods produced according to their specifications. It is also known as outsourcing. There are three types of contract manufacturing:
- Complete manufacture
Advantages of Contract Manufacturing
- Goods can be produced at a large scale by international firms. It does not require the setting up of production facilities.
- No investment risk involved.
- There is an opportunity for the local manufacturer to get involved in international business. They can even avail incentives.
Disadvantages of Contract Manufacturing
- A lot of times there is no adherence to the quality standards and production designs by the local firms.
Hence, we hope these study notes on Class 11 International Business helped you comprehend the essential concepts covered in this important chapter. Planning to study a business degree after 12th? Our Leverage Edu experts are here to guide you in finding the best program and university as per your interests and preferences! Sign up for a free session with us now!