international business

1Pradhyumn SomaniPradhyumn Somani

Class-XI Commerce

Presented By :-

Pradhyumn Somani2

Chapter - 11

Pradhyumn SomaniPradhyumn Somani

Contents Meaning & Types of International Trade

Features

Internal V/S External trade

Reasons

International Business V/S Domestic Business

Scope of International Business

Importance

Modes of Entry

Export Procedure

Import Procedure

Documents Section

World Trade Organization3


Meaning

&

Type of

International Trade4

Pradhyumn Somani

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Import Export

Entrepot


6

AustraliaAmerica

India

Africa

Import & ExportEntrepot


1) Involvement of Two Countries

2) Payment in Foreign Currency

3) Legal Procedure

4) Restrictions

5) High Risk

6) Different Languages


Point of Difference Internal Trade External Trade

1. Meaning Trade within geographicallimits of a country .

Trade beyond geographicallimits of a country .

2. Countries Involved Only one country . Minimum two countries .

3. Risk Less degree of risk . High degree of risk .

4. Currency Used Home currency only . Foreign currency only .

5. Procedure Involved No long procedure or formalities .

Long procedure & many formalities .

6. Mode of Payment Cash or cheques . Bill of Exchange , letter of credit or by bank .

7. Legal Rules & Regulations

National laws International laws

8. Mode of Transport Road or Railway transport . Sea or Air transport .

9. Cost Involved Low operating cost . High operating cost due to long distance .

10. Effect on Foreign Reserves

No effect . Direct impact . 9Pradhyumn SomaniPradhyumn Somani

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1) Productive Quality

2) Scattered Natural Resources

3) Factors of Production

4) Difference in Operating Cost

5) Lack of Perfect Production

6) Efficient Production & Trade IdeaPradhyumn SomaniPradhyumn Somani

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1. Nationality of buyer and seller .

2. Nationality of other stake holders .

3. Mobility of factors of production .

4. Customer heterogeneity across the market .Pradhyumn SomaniPradhyumn Somani

5. Differences in business practices .

6. Political system & risk

7. Business regulation & policies .

8. Currency used in transaction . 12Pradhyumn SomaniPradhyumn Somani

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1) Merchandise exports &

Imports .

2) Service export & import .

3) Licensing & Franchising .

4) Foreign investment .

I. Direct investment .

II. Portfolio investment .


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Benefits to Nations

1) Earning of Foreign Exchange .

2) Efficient Use of Resources .

3) Improving Growth Prospects &

Employment Potential .

4) Increases Standard of Living .Pradhyumn SomaniPradhyumn Somani

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Benefits to Firms

1) Prospects for Higher Profits .

2) Increased Capacity Utilization .

3) Prospects for Growth .

4) Way out from Intense Competition .

5) Improved Business Visits .Pradhyumn SomaniPradhyumn Somani

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1) Licensing .

2) Franchising .

3) Joint Venture .

4) Exporting & Importing

I

N

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N

A

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N

A

L

B

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S

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1) A agreement between Licensor & Licensee .

2) Permit for using patent right , trade secret

& technology of licensor .

3) Licensor – Home Country

Licensee – Foreign Country


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1) A agreement between Franchisee & Franchiser .

2) Royalty – A fees paid for the brand name .

3) Franchisee – Independent unit .

Franchiser – Parent company .


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Benefits of Franchise

1) Franchiser allows franchisee to use his trade or service mark

2) Payment for license makes the franchisee part of network .

3) Franchiser provides all marketing support & equipments .

4) Franchisee follows all policies of parent company .

5) Franchiser may give training to personnel working under franchisee .

Benefits of Franchiser

1) Expansion 2) Direct Feedback

3) Enhancing the Goodwill


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Merits

1) Established Brand

2) Quality Product

3) Advertisement

4) Financing

5) Training

6) Technological upgradation

7) Uniform Control System

8) Better Start

Demerits

1) High Royalty Payment

2) No Independence

3) Limited Varity


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1) Companies contribute capital & share

profit .

2) Firms join together to establish new

enterprise called JOINT VENTURE .

3) Purpose

I. Produce a product using technical

know-how .

II. Managerial expertise by foreign

company

III. Market the product of foreign

company Pradhyumn SomaniPradhyumn Somani

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Merits

1) Reduce Competition

2) Reduce Risk

3) Protection for Small Companies

4) Advance Technology

5) Better Competence

6) Large Capital

7) Reduction in Cost

Demerits

1) Problem of Sharing Capital

2) Legal Restriction

3) Conflicts

4) Mergers & Monopolies

5) Lack of Coordination


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1) Export & Import of goods & services .

2) Exporting can be done in two ways:-

I. Direct

II. Indirect

3) Most popular method of international trade

.Pradhyumn SomaniPradhyumn Somani

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Merits

1) Easiest way to get entry in

foreign country .

2) Comparatively less investment .

3) Risk involved is very less or

comparatively nil .

Demerits

1) Physically movement of goods

involves huge cost .

2) Import restrictions &trade

barriers .

3) Far locality of exporter creates

lack of customer support

services .Pradhyumn SomaniPradhyumn Somani

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Pre – Requisites of Export License

1) Obtaining IEC Number (Import-Export code)

2) Obtaining RCMC (Registration Cum Membership Certificate )

3) Registration with ECGC ( Export Credit Guarantee Corporation)


5) Obtaining Pre-Shipment Finance

6) Production and Procurement of goods

7) Pre-shipment Inspection


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Quality Control & Inspection Act

1) Consignment wise Inspection

2) In Process Quality Control

3) Self - Certification


8) Excise Clearance

9) Obtaining Certificate of Origin

10) Reservation of Shipping Space

11) Packing and Forwarding

12) Insurance of Goods


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13) Custom Clearance

14) Obtaining Mate’s Receipts

15) Payment of Freight and Insurance of Bill of Lading

16) Preparation of invoice

17) Securing Payment


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1) Trade Enquiry

2) Procurement of Import License

3) Obtaining Foreign Exchange

4) Placing Order or Indent

5) Obtaining Letter of Credit


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6) Arranging of Finance

7) Receipt of Shipment Advice

8) Retirements of Import Documents

9) Arrival of Goods

10) Custom Clearance


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1) Commercial Invoice

2) Bill of Lading

3) Certificate of Inspection

4) Certificate of Origin

5) Bill of Exchange

Principal Export Documents


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1) Proforma Invoice

2) Intimation of Inspection

3) Shipping Instructions

4) Shipping Order

5) Mate’s Receipt

6) Application for Certificate of

Origin

Auxiliary Export Documents


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1) Bill of Entry

I. Bill of Entry for Home Consumption

II. Bill of Entry for Warehousing

III. Ex – Bond Bill of Entry

Import Documents


1) Free on Board (FOB)

2) Cost and Freight (CFR)

3) Cost Insurance and Freight (CIF)


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{World Trade Organization}

1) Trade b/w nations at global level .

2) Limits the trade policies of nations .

3) Purpose of Liberalizing trade .

4) Settle disputes with neutral procedure .

5) Ensures smooth & free flow of trade .

Nature of WTO


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{World Trade Organization}

Benefits of WTO

1) Promotes International Peace .

2) Settle disputes among member nations .

3) Frame common rules & regulations .

4) Helps in economic growth of developing nations .

5) Improved – Quality products & standard of living .Pradhyumn SomaniPradhyumn Somani

Pradhyumn Somani

international business

Education

pradhyumn somani2chapter

business practices

foreign investment

improved business visits

business regulation

currency usedhome currency

foreign reservesno effect

high operating cost