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Chapter 11 of the NCERT Class 11 Business Studies deals with International Business. It explains the meaning and scope of international business, reasons for international business, differences between international and domestic business, and the modes of entry into international markets. These solutions are written in simple, easy-to-understand language and are completely aligned with the latest CBSE pattern and NCERT textbook. You can also download the free PDF for quick revision.
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NCERT Solutions Class 11 Business Studies Chapter 11: International Business
This section provides detailed and student-friendly answers for the Class 11 Business Studies Chapter 11 exercise questions. Each answer is explained clearly to strengthen understanding and exam preparation.
Exercise
Short Answer Questions
1. Differentiate between international trade and international business.
International trade refers to the buying and selling of goods between two or more countries, focusing mainly on exports and imports of tangible products. It is a narrower concept limited to merchandise exchange. International business, however, is broader and includes not only trade in goods but also services, technology, capital, and knowledge across borders. It encompasses activities like foreign investments, licensing agreements, and management contracts, making it more comprehensive than just trade.
2. Discuss any three advantages of international business.
Here are the three advantages of international business:
(i) Prospects for higher profits – Firms can earn higher margins by selling in countries where demand is strong, and consumers are willing to pay more.
(ii) Increased capacity utilisation – By selling in foreign markets, companies can produce at full capacity and spread fixed costs over a larger output.
(iii) Prospects for growth – When the domestic market gets saturated, international markets provide new customers and opportunities for expansion.
3. What is the major reason underlying trade between nations?
The major reason is differences in resource endowment and cost of production among nations. No country is self-sufficient in all resources. Some countries have abundant minerals, oil, skilled labour or technology, while others lack them. Trade allows each nation to specialise in what it can produce most efficiently (comparative advantage) and obtain the rest through trade.
4. Differentiate between contract manufacturing and setting up a wholly owned production subsidiary abroad.
| Basis | Contract Manufacturing | Wholly Owned Subsidiary |
| Ownership | No ownership in foreign unit | 100 % ownership by the parent company |
| Investment & Risk | Very low investment and risk | Very high investment and risk |
| Control over operations | Limited control (only on specifications) | Complete control over quality, technology & operations |
| Profit sharing | Fixed fee or margin per unit | The entire profit belongs to the parent company |
| Suitable for | Testing market, low commitment | Long-term presence and full control |
5. Why is it necessary for an export firm to go in for pre-shipment inspection?
Pre-shipment inspection is compulsory for many items. It ensures that only good quality products are exported so that:
- India’s image in international markets is protected.
- Buyer does not reject the consignment.
- An exporter can obtain the mandatory inspection certificate required for customs clearance and claim export incentives.
6. What is a bill of lading? How does it differ from a bill of entry?
Bill of Lading (B/L) is a document issued by the shipping company. It serves as:
- Receipt that goods have been loaded on the ship,
- Evidence of contract of carriage,
- Document of title (whoever holds the B/L can claim the goods).
Bill of Entry is a document prepared by the importer and submitted to customs authorities at the time of import clearance. It contains details of imported goods for the assessment of duty.
| Basis | Bill of Lading | Bill of Entry |
| Issued by | Shipping company | Importer |
| Used for | Export shipment | Import clearance |
| Purpose | Proof of loading & title | Duty assessment & clearance |
7. What is a letter of credit? Why does an exporter need this document?
A Letter of Credit (LC) is a written guarantee given by the importer’s bank that it will make payment to the exporter if the exporter submits the required shipping documents within the stipulated time.
Exporter needs it because:
- It eliminates the risk of non-payment by an unknown foreign buyer.
- Payment is assured by a reputed bank rather than depending on the buyer’s creditworthiness.
8. Discuss the process involved in securing payment for exports.
The usual steps are:
(i) Exporter and importer agree on payment terms (mostly through Letter of Credit).
(ii) After shipment, the exporter prepares documents (invoice, B/L, packing list, certificate of origin, insurance, etc.).
(iii) The exporter submits these documents to his bank.
(iv) Exporter’s bank sends documents to the importer’s bank.
(v) Importer’s bank checks documents → releases payment to exporter’s bank → exporter gets money.
(vi) Importer’s bank hands over documents to the importer → importer clears goods from customs.
Also Read: CBSE Class 10 Economics Chapter 3 NCERT Solutions
Long Answer Questions
1. “International business is more than international trade”. Comment.
International business is much wider than international trade. International trade is limited to the export and import of goods only. International business includes:
- Trade in services (IT, tourism, banking, transportation)
- Licensing and franchising (McDonald’s, Subway)
- Contract manufacturing (Nike, Reebok)
- Joint ventures and wholly owned subsidiaries
- Foreign portfolio and direct investment
Thus, while international trade is only a part of international business, the latter covers the movement of goods, services, capital, technology and personnel across national boundaries.
2. What benefits do firms derive by entering into international business?
Some of the major benefits of international businesses for firms are:
(i) Higher profits due to larger markets and premium pricing abroad.
(ii) Better capacity utilisation and economies of large-scale production.
(iii) Growth opportunities when the domestic market is saturated.
(iv) Reduced dependence on a single market; spreads risk.
(v) Access to cheaper raw materials, labour or technology abroad.
(vi) Enhanced brand image and prestige by becoming a global player.
(vii) Availing export incentives and duty drawbacks offered by the government.
3. In what ways is exporting a better way of entering international markets than setting up wholly owned subsidiaries abroad?
| Basis | Exporting | Wholly Owned Subsidiary |
| Capital requirement | Very low | Very high |
| Risk | Low | High (political, currency, expropriation) |
| Control over the foreign market | Limited | Full control |
| Speed of entry | Fast | Slow (takes years) |
| Flexibility | High – can stop anytime | Low – difficult to exit |
| Government incentives | Many export benefits | Fewer benefits |
Hence, exporting is preferred when the firm wants to test the market, has limited resources, or wants minimal risk.
4. Rekha Garments has received an order to export 2000 men’s trousers to Swift Imports Ltd., located in Australia. Discuss the procedure that Rekha Garments would need to go through for executing the export order.
The step-by-step procedure for exporting the order by Rekha Governments:
1. Obtain an IEC (Importer-Exporter Code) from DGFT.
2. Receive enquiry and send quotation/proforma invoice.
3. Receive confirmed order and Letter of Credit from Swift Imports.
4. Arrange pre-shipment finance from the bank.
5. Produce/manufacture the 2000 trousers as per specifications.
6. Apply for pre-shipment inspection (if required) and obtain an inspection certificate.
7. Obtain a certificate of origin from the Chamber of Commerce/EPC.
8. Get excise clearance and claim duty exemption/rebate.
9. Pack goods, mark cartons and appoint C&F agent.
10. Get an insurance policy and book shipping space.
11. Submit documents to the bank and obtain the mate’s receipt → exchange for Bill of Lading.
12. Prepare shipping bill and complete customs formalities.
13. Submit all documents to the bank and receive payment through LC.
14. Claim export incentives (duty drawback, MEIS, etc.).
5. Your firm is planning to import textile machinery from Canada. Describe the procedure involved in importing.
Here is the Import procedure as mentioned:
1. Obtain the IEC number from DGFT.
2. Place confirmed purchase order/indent with Canadian supplier.
3. Arrange a Letter of Credit or make an advance payment.
4. Supplier ships the machinery and sends shipment advice.
5. Obtain a marine insurance policy.
6. Receive shipping documents through the bank.
7. File Bill of Entry (in triplicate) with customs.
8. Pay applicable customs duty (BCD + IGST).
9. Customs appraises the goods → issues out-of-charge order.
10. Pay port charges and take delivery from the port/ICD.
11. Arrange transportation from the port to the factory.
6. What is the IMF? Discuss its various objectives and functions.
IMF stands for International Monetary Fund. It is a global international organisation headquartered in Washington, D.C., USA, established in July 1944 at the Bretton Woods Conference and started functioning in 1945. As of 2025, it has 190 member countries (almost all countries in the world).
Here are the objectives of the IMF:
- It promotes global monetary cooperation
- It facilitates international trade
- It promotes exchange rate stability
- It ensures high employment and sustainable growth
- It provides temporary financial assistance to correct the balance of payments problems
Here are the functions of the IMF:
- It surveillance of members’ economic policies
- It lends funds to countries facing a BoP crisis
- It offers technical assistance and training
- It conducts research and statistics on the global economy
7. Write a detailed note on the features, structure, objectives and functioning of the WTO.
The WTO is like a “global referee” for international trade. It makes sure that trade between countries takes place smoothly and fairly by creating and enforcing common rules that all member countries must follow.
Here are the features of the WTO:
- It has 164 member countries
- It takes decisions by consensus
- It has legally binding agreements
- It covers goods, services (GATS) and intellectual property (TRIPS)
The structure of the WTO is mentioned below:
- Ministerial Conference (highest body, meets every 2 years)
- General Council (day-to-day work + Dispute Settlement Body + Trade Policy Review Body)
- Various councils and committees (Goods, Services, TRIPS)
Its objectives are:
- To raise living standards and ensure full employment
- To expand production and trade in goods and services
- Have optimal use of world resources
- To protect the environment
- It helps developing countries secure a better share of world trade
Some of the major functions of the WTO are:
- It regulates and administers trade agreements
- It provides a forum for trade negotiations
- It settles trade disputes through panels and the Appellate Body
- It reviews national trade policies
- It assists developing countries through technical cooperation
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