Exercise Solutions Available
Step-by-step answers for all textbook questions in this chapter
How to Use This Solutions Page
1. Attempt all NCERT questions on your own. 2. Compare answers — especially the sequence of export/import steps. 3. Memorise key documents and their purposes.
Key Concepts Recap
- Modes of entry: Export/Import (low risk), Licensing (IP only), Franchising (IP + system), JV (shared), Wholly-owned (full control), FDI (investment + control).
- Export steps: Order → IEC → Production → Insurance → Customs → Shipment → Documents → Payment.
- Import steps: Enquiry → IEC → Order → Forex → Arrival → Customs → Delivery.
- WTO (1995): Replaced GATT; TRIPS, GATS, TRIMS.
- EPCG: Duty-free capital goods; 6x export obligation in 6 years.
- SEZ: Tax holiday, duty-free, single window.
- IEC: Mandatory — from DGFT.
Intext Questions
Q: What is the difference between licensing and franchising?
| Basis | Licensing | Franchising |
|---|---|---|
| Scope | IP rights only (patent, trademark, technology) | IP + complete business system (brand, operations, training) |
| Control | Very low | Moderate to high |
| Support | Minimal from licensor | Training, marketing, operations from franchisor |
| Example | A pharma company licensing a drug patent | McDonald's franchising its outlets |
| Fee | Royalty on sales | Initial fee + ongoing royalty |
Q: Name the document that is mandatory for both exports and imports.
Chapter-End Exercise Solutions
Q1: What is international business? Why do nations engage in international business?
International business refers to business transactions that take place across national boundaries — between two or more countries. It includes exports, imports, licensing, franchising, joint ventures, and FDI.
Reasons for engaging in international business: 1. Unequal distribution of resources — no country has all natural and human resources; trade fills the gap. 2. Specialisation and comparative advantage — countries produce what they can make most efficiently. 3. Larger market — domestic market may be too small for economies of scale. 4. Higher profits — international prices may be higher than domestic. 5. Technology access — importing advanced technology and machinery from developed countries. 6. Foreign exchange earnings — exports earn foreign exchange needed for imports. 7. Political relations — trade strengthens diplomatic ties between nations.
Q2: Explain the different modes of entry into international business.
| Mode | Description | Investment | Control | Risk |
|---|---|---|---|---|
| Exporting | Selling domestically produced goods to foreign buyers | Low | Low | Low |
| Importing | Buying foreign goods for domestic use | Low | N/A | Low |
| Licensing | Granting foreign firm rights to use IP for royalty | None | Very low | Low |
| Franchising | License + complete business system | Low | Moderate | Low |
| Joint Venture | Partnership with a foreign firm, shared ownership | Moderate | Shared | Shared |
| Wholly-Owned Subsidiary | 100% owned foreign unit | High | Full | High |
| FDI | Investment in foreign company equity for management control | High | High | High |
Choosing a mode depends on: investment capacity, desired control, risk appetite, and regulatory environment of the host country.
Q3: State the procedure for exporting goods from India.
1. Receive export order — from foreign buyer specifying product, price, quantity, delivery, and payment terms. 2. Assess feasibility — check ability to supply, profitability, and compliance requirements. 3. Obtain IEC — Importer Exporter Code from DGFT (mandatory for all exporters). 4. Produce/procure goods — as per the order specifications and quality requirements. 5. Obtain excise/GST clearance — exports are zero-rated under GST; claim input tax credit. 6. Obtain certificate of origin — from Chamber of Commerce certifying the country of manufacture. 7. Arrange marine insurance — insure goods against transit risk. 8. Customs clearance — submit shipping bill to customs; get examination and clearance. 9. Ship the goods — book shipping space; load goods; get mate's receipt from ship captain. 10. Prepare export documents — commercial invoice, packing list, bill of lading, certificate of origin, insurance policy. 11. Receive payment — through letter of credit (LC), advance payment, or documentary collection.
Q4: State the procedure for importing goods into India.
1. Trade enquiry — gather information about foreign suppliers, prices, and terms. 2. Obtain IEC — Importer Exporter Code from DGFT (mandatory). 3. Place import order — submit an indent to the supplier with product, quantity, price, and delivery terms. 4. Obtain foreign exchange — from an authorised dealer (bank) under RBI guidelines. 5. Goods arrive at port — shipping company sends arrival notice to the importer. 6. Customs clearance — submit bill of entry; pay customs duty and IGST; get goods examined. 7. Take delivery — after customs clearance, goods are released from the port or warehouse.
Q5: What is FDI? How is it different from portfolio investment?
FDI (Foreign Direct Investment) is a long-term investment by a foreign entity in the equity of a domestic company that gives the investor management control (usually 10%+ equity).
Difference:
| Basis | FDI | Portfolio Investment |
|---|---|---|
| Nature | Long-term, strategic | Short-term, financial |
| Control | Management control | No management control |
| Purpose | Establish operations, expand market | Earn dividend or capital gain |
| Minimum equity | 10%+ for lasting interest | Any amount |
| Stability | Stable — not easily reversible | Volatile — can be withdrawn quickly |
| Example | Toyota setting up a factory in India | Foreign fund buying shares on BSE |
Q6: Explain the role of WTO in international trade.
The World Trade Organisation (WTO), established in 1995, replaced GATT (General Agreement on Tariffs and Trade). It is the global body that governs international trade rules.
Objectives: 1. Reduce trade barriers — tariffs, quotas, and non-tariff barriers. 2. Promote free and fair trade among member nations. 3. Resolve trade disputes between member countries through a structured process. 4. Provide a forum for trade negotiations and agreements. 5. Ensure transparency in trade policies through regular reviews.
Key Agreements:
- TRIPS — Trade-Related Aspects of Intellectual Property Rights — sets minimum standards for IP protection.
- GATS — General Agreement on Trade in Services — liberalises trade in services.
- TRIMS — Trade-Related Investment Measures — removes restrictions on foreign investment.
- AoA — Agreement on Agriculture — reduces agricultural subsidies and improves market access.
WTO and India:
- India is a founding member.
- Benefits: access to global markets, MFN treatment, dispute resolution.
- Concerns: pressure to reduce agricultural subsidies, competition from imports, TRIPS impact on affordable medicines.
Q7: What are the export promotion schemes in India?
| Scheme | Purpose | Key Feature |
|---|---|---|
| EPCG | Export Promotion Capital Goods | Zero-duty import of capital goods; export obligation of 6x duty saved within 6 years |
| SEZ | Special Economic Zones | Tax holiday (5 years), duty-free import/export, single-window clearance |
| EPZ | Export Processing Zones | Designated areas for export production with infrastructure and incentives |
| 100% EOU | 100% Export-Oriented Units | Tax benefits, duty-free imports, dedicated to exports |
| MEIS/SEIS | Merchandise/Services Exports from India Scheme | Duty credit scrips for exporters |
| Export Finance | Pre-shipment and post-shipment credit | Banks provide low-interest finance for export activities |
Key Institutions:
| Institution | Role |
|---|---|
| DGFT | Formulates and implements export-import policy |
| EXIM Bank | Finances and promotes export-import trade |
| ITPO | Organises trade fairs and exhibitions |
| FIEO | Apex body of export promotion councils |
| EDIF | Export Development Fund for export promotion |
Q8: List the important documents used in international trade.
| Document | Purpose |
|---|---|
| Commercial Invoice | Seller's bill for goods sold — description, quantity, price |
| Packing List | Details of packing, contents, and weight of each package |
| Bill of Lading | Contract of carriage by sea; receipt of goods loaded on ship |
| Airway Bill | Contract of carriage by air; receipt of goods |
| Certificate of Origin | Certifies the country where goods were manufactured |
| Marine Insurance Policy | Covers risk of loss or damage during sea transit |
| Letter of Credit (LC) | Bank's guarantee of payment to the seller on presenting documents |
| Bill of Entry | For imports — submitted at customs for clearance |
| Shipping Bill | For exports — submitted at customs for clearance |
| Mate's Receipt | Issued by ship captain acknowledging cargo has been loaded |
Internal Links
- [Chapter 11 Guide — International Business](/school/cbse/class/11/business-studies/cbse-international-business)
- [All Class 11 Business Studies Solutions](/school/cbse/class/11/business-studies/solutions)
- [Class 11 Business Studies Subject Guide](/school/cbse/class/11/business-studies)