Q. State three causes of international trade. (3marks) (2015)
-> 1. Prospects for higher profits- International business can be more profitable than the domestic business. When the domestic prices are lower, business firms can earn more profits by selling their products in countries where prices are high.
2. Increased capacity utilisation- Many firms set up production capacities for their products which are in excess of demand in the domestic market. By planning overseas expansion and procuring orders from foreign customers, they can think of making use of their surplus production capacities and also improving the profitability of their operations.
3. Prospects for growth- Business firms find it quite frustrating where demand for their products started getting saturated in the domestic market. Such firms can considerably improve prospects of their growth by plunging into overseas markets.
4. Way out to intense competition in the domestic market- When competition in the domestic market is very intense, internationalisation seems to be the only way to achieve significant growth. Highly competitive domestic markets drive many companies to go international in search of markets for their products.
5. Improved business vision- The growth of international business of many companies is essentially a part of their business policies or strategic management. The vision to become international comes from the urge to grow, the need to become more competitive, the need to diversify and to gain strategic advantages of internationalisation.
Q. Briefly explain the benefits of joint venture. (3marks) (2017)
-> The benefits of joint venture are as follows:-
- Increased resources and capacity- Joining hands with another or teaming up adds to existing resources and capacity enabling the joint venture company to grow and expand more quickly and efficiently.
- Access to new markets and distribution networks- When a business enters into a joint venture with a partner from another country. It opens up a vast growing market.
- Access to technology- Technology is a major factor for most businesses to enter into joint ventures. Advanced techniques of production leading to superior quality products saves a lot of time, energy and investment as they do not have to develop their own technology.
Q. Explain the importance of International business. (5marks) (2019/2017)
-> The importance of International business:-
1. Prospects for higher profits- International business can be more profitable than the domestic business. When the domestic prices are lower, business firms can earn more profits by selling their products in countries where prices are high.
2. Increased capacity utilisation- Many firms set up production capacities for their products which are in excess of demand in the domestic market. By planning overseas expansion and procuring orders from foreign customers, they can think of making use of their surplus production capacities and also improving the profitability of their operations.
3. Prospects for growth- Business firms find it quite frustrating where demand for their products started getting saturated in the domestic market. Such firms can considerably improve prospects of their growth by plunging into overseas markets.
4. Way out to intense competition in the domestic market- When competition in the domestic market is very intense, internationalisation seems to be the only way to achieve significant growth. Highly competitive domestic markets drive many companies to go international in search of markets for their products.
5. Improved business vision- The growth of international business of many companies is essentially a part of their business policies or strategic management. The vision to become international comes from the urge to grow, the need to become more competitive, the need to diversify and to gain strategic advantages of internationalisation.
Q. Distinguish between domestic and international trade. (5marks) (2015)
->
| Domestic Trade | International Trade |
| A business is said to be domestic, when its economic transactions are conducted within the geographical boundaries of the country. | International business is one which is engaged in economic transactions with several countries in the world. |
| Domestic markets are relatively more homogeneous in nature. | International market lacks homogeneity due to differences in language across markets. |
| Domestic business is subject to rules, laws and policies, taxation system, etc. of a single country. | International business transactions are subject to rules laws and policies and quotas, etc of multiple countries. |
| Business research can be conducted easily. | Business research is difficult to conduct research. |
| In domestic business capital investment is less. | In international business capital investment is huge. |
