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International Business – Class 11 Business Studies Chapter 11 Notes & NCERT PDF

Class 11Business StudiesChapter 11NCERT book: Business Studies - Class 11

Notes and a simple summary of Chapter 11 of the NCERT Class 11 Business Studies book, with the official chapter PDF, flashcards, an MCQ quiz and an AI tutor for your doubts.

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Chapter 11: International Business

Introduction

Mr. Sudhir Manchanda makes automobile components in Gurgaon, employing about 55 workers with ₹9.2 million invested in plant and machinery. A friend tells him there is a market for auto components in South-East Asia and the Middle East, but warns that international business is more complex than domestic business. His son, back from an MBA in the USA, suggests a fully owned factory in Bangkok. Should Mr. Manchanda export directly, route goods through export houses, or set up abroad? The chapter answers such questions.

Key Concepts

11.1 Introduction

Better communication, technology and transport, the WTO and government reforms have made the world a 'global village'.

Box A — India embarks on globalisation: facing a debt trap and balance of payment crisis, India approached the IMF in 1991. IMF lent money on the condition of structural changes, which led India to liberalise its economic policies.

11.1.1 Meaning of International Business

  • Domestic/internal business (home trade): within national boundaries.
  • International business: manufacturing and trade beyond the boundaries of one's own country — movement of goods, services, capital, personnel, technology and intellectual property (patents, trademarks, know-how, copyrights).
  • International business is broader than international trade: it includes trade in services, foreign investment and overseas production.

    • 11.1.2 Reason for International Business

    Countries cannot produce all goods equally well or cheaply because of unequal distribution of natural resources and differences in productivity. Each country produces what it can produce efficiently and trades for the rest — geographical specialisation / territorial division of labour. Within India, West Bengal specialises in jute and Maharashtra in cotton textiles; labour-rich developing countries export garments and import textile machinery.

    11.1.3 International vs Domestic Business (8 bases)

  • Nationality of buyers and sellers — same country vs different countries.
  • Nationality of other stakeholders — employees, suppliers, shareholders from one nation vs many.
  • Mobility of factors of production — labour and capital move more freely within a country.
  • Customer heterogeneity — domestic markets more homogeneous (e.g. Chinese prefer bicycles, Japanese bikes; India right-hand-drive cars, USA left-hand-drive).
  • Business systems and practices — vary more across countries.
  • Political system and risks — one country vs many; tendency to favour home products.
  • Business regulations and policies — tariffs, quotas, subsidies differ.
  • Currency — international business uses multiple currencies; exchange rates fluctuate.

    • Box B: firms must adapt — price-sensitive consumers in developing Africa/Asia vs high-quality preference in Japan, USA, Europe.

    11.1.4 Scope of International Business

  • Merchandise exports and imports — tangible goods (trade in goods).
  • Service exports and imports — invisible trade: tourism, transport, communication, banking, insurance, consultancy, etc. Tourism, transportation and business services dominate (Box C).
  • Licensing and franchising — e.g. Pepsi and Coca-Cola through local bottlers; McDonald's franchising.
  • Foreign investment —

    • - Foreign Direct Investment (FDI): investing in plant and machinery abroad with controlling interest (joint venture or 100% wholly owned subsidiary).

    - Portfolio investment: buying shares or giving loans; earns dividends or interest without managing operations.

    11.1.5 Benefits of International Business

    To countries: earning foreign exchange; more efficient use of resources; improved growth and employment (Singapore, South Korea, China — "export and flourish"); higher standard of living.

    To firms: higher profits; increased capacity utilisation (economies of scale); prospects for growth when domestic demand saturates; a way out of intense domestic competition; improved business vision.

    11.2 Modes of Entry

  • Exporting and importing — direct (firm deals itself) or indirect (through export houses/buying offices).

    • - Advantages: easiest way; less investment of time and money; little foreign investment risk.

    - Limitations: extra packaging, transport, insurance and customs costs; not feasible with import restrictions; little contact with foreign markets.

  • Contract manufacturing (outsourcing) — local foreign manufacturers produce components, assemble products or manufacture complete goods to the firm's specifications (Nike, Reebok, Levis, Wrangler). Godrej makes Dettol soap for Reckitt and Colman, using its spare capacity.

    • - Advantages: large-scale production without investment; little risk; lower costs; local firms use idle capacity and gain export incentives.

    - Limitations: quality lapses; local firm loses control over process; must sell at predetermined prices.

  • Licensing and franchising — licensor grants patents, trade secrets or technology to a licensee for a royalty; cross-licensing is mutual exchange. Franchising is used for services and is more stringent (McDonald's, Pizza Hut, Wal-Mart).

    • - Advantages: licensee invests, so low cost; licensor not party to losses; low risk of takeover; local market knowledge; exclusive legal use.

    - Limitations: licensee may become a competitor; trade secrets may leak; conflicts over accounts and royalty.

  • Joint ventures — a firm jointly owned by two or more independent firms. Formed by (i) foreign investor buying interest in a local company, (ii) local firm acquiring interest in a foreign firm, (iii) both forming a new enterprise.

    • - Advantages: less financial burden; large projects possible; local partner's knowledge; shared costs and risks.

    - Limitations: technology and secrets shared; conflicts over control.

  • Wholly owned subsidiaries — 100% equity; set up as a green field venture or by acquiring an existing foreign firm.

    • - Advantages: full control; no need to disclose technology.

    - Limitations: huge investment (unsuitable for small firms); bears entire losses; higher political risk.

    11.3 Export–Import Procedure and Documentation

    Export procedure (17 steps):

  • Receipt of enquiry and sending quotation (proforma invoice)
  • Receipt of order or indent
  • Assessing importer's creditworthiness; securing a letter of credit
  • Obtaining export licence — open RBI-authorised bank account; get IEC number from DGFT; register with export promotion council (e.g. EEPC, AEPC) and get RCMC; register with ECGC
  • Obtaining pre-shipment finance
  • Production or procurement of goods
  • Pre-shipment inspection (Export Quality Control and Inspection Act, 1963; Export Inspection Agency) — not compulsory for star trading houses, EPZ/SEZ units and 100% EOUs
  • Excise clearance — refund of excise is duty drawback
  • Certificate of origin
  • Reservation of shipping space — shipping order
  • Packing and forwarding — railway receipt
  • Insurance of goods
  • Customs clearance — shipping bill (5 copies) with export order, L/C, commercial invoice, certificate of origin, inspection certificate, marine insurance policy; carting order; C&F agent
  • Mate's receipt
  • Payment of freight and bill of lading (airway bill for air)
  • Preparation of invoice
  • Securing payment — documents sent through bank against bill of exchange (sight draft = documents against payment; usance draft = documents against acceptance); negotiation of documents; letter of indemnity; bank certificate of payment

    • Import procedure (10 steps):

  • Trade enquiry → proforma invoice
  • Procurement of import licence (EXIM policy; IEC number)
  • Obtaining foreign exchange (sanction via RBI-authorised bank; Exchange Control Department of RBI)
  • Placing order or indent
  • Obtaining letter of credit
  • Arranging finance (avoid demurrage)
  • Receipt of shipment advice
  • Retirement of import documents (accepting the bill of exchange)
  • Arrival of goods — import general manifest
  • Customs clearance and release — delivery order, port trust dues receipt, bill of entry, examination, release order

    • Documents at a glance

  • Goods: export invoice, packing list, certificate of origin, certificate of inspection (EICI).
  • Shipment: mate's receipt, shipping bill, bill of lading, airway bill, marine insurance policy, cart ticket.
  • Payment: letter of credit, bill of exchange, bank certificate of payment.
  • Import-specific: trade enquiry, proforma invoice, import order, shipment advice, bill of entry, sight/usance draft, import general manifest, dock challan.

    • Key-Facts Sheet

  • India approached the IMF in 1991.
  • IEC number from DGFT; RCMC from export promotion council; ECGC for payment risk.
  • Export Quality Control and Inspection Act, 1963.
  • Shipping bill — main document for customs permission to export; bill of entry — for import duty assessment.
  • Mate's receipt → bill of lading.

    • Exam Focus

  • Differentiate international trade and international business; bill of lading vs bill of entry; contract manufacturing vs wholly owned subsidiary.
  • Explain the need for pre-shipment inspection and a letter of credit.
  • Long answer: "International business is more than international trade"; benefits to firms; exporting vs subsidiaries; export procedure for Rekha Garments (2000 trousers to Swift Imports, Australia); import procedure for textile machinery from Canada.
  • Note: the exercises also ask about IMF and WTO, but the rationalised chapter text does not cover their objectives in detail.

    • Key Terms

  • International business (अंतर्राष्ट्रीय व्यवसाय)
  • Invisible trade (अदृश्य व्यापार)
  • Foreign direct investment (प्रत्यक्ष विदेशी निवेश)
  • Portfolio investment (पोर्टफोलियो निवेश)
  • Contract manufacturing (अनुबंध विनिर्माण)
  • Licensing / Franchising (लाइसेंसिंग / फ्रेंचाइज़िंग)
  • Royalty (रॉयल्टी / स्वामित्व शुल्क)
  • Joint venture (संयुक्त उपक्रम)
  • Wholly owned subsidiary (पूर्ण स्वामित्व वाली सहायक कंपनी)
  • Letter of credit (साख पत्र)
  • Bill of lading (जहाज़ी बिल्टी)
  • Shipping bill (नौवहन बिल)
  • Bill of entry (प्रवेश बिल)
  • Duty drawback (शुल्क वापसी)

    • Common Mistakes

  • Treating international business and international trade as the same.
  • Mixing up the shipping bill (export, customs permission) and bill of entry (import, customs duty).
  • Saying franchising applies to goods — it applies to services, while licensing is for production of goods.
  • Confusing sight draft (payment first) with usance draft (acceptance first, payment later).
  • Forgetting that mate's receipt must be surrendered before the bill of lading is issued.

    • 💡 Key Learning Points

    • ✓International business is broader than international trade: it covers merchandise and service trade, licensing/franchising and foreign (direct and portfolio) investment.
    • ✓Domestic and international business differ on eight bases, including nationality of parties, factor mobility, customer heterogeneity, political risk, regulations and currency.
    • ✓Modes of entry — exporting/importing, contract manufacturing, licensing/franchising, joint ventures and wholly owned subsidiaries — each have specific advantages and limitations.
    • ✓The export procedure runs from enquiry and proforma invoice through IEC, RCMC, ECGC, pre-shipment finance, inspection, customs (shipping bill), mate's receipt and bill of lading to securing payment.
    • ✓The import procedure includes trade enquiry, import licence, foreign exchange sanction, indent, letter of credit, retirement of documents, bill of entry and release order.

    👨‍🏫 Teaching Tips

    • →Start with the Manchanda case and ask students which mode of entry they would recommend and why.
    • →Use a comparison chart on the board for the five modes of entry: investment, control, risk.
    • →Turn the 17-step export procedure into a relay game where each group places the next step in order.
    • →Show sample (blank) formats of a proforma invoice, shipping bill and bill of lading to make documents concrete.
    • →Use the Rekha Garments exercise as a case study: students write each step of the export order.
    • →Bring product labels (Pepsi, McDonald's, Nike) to discuss licensing, franchising and contract manufacturing.
    • →Clarify pairs of confusing terms (shipping bill vs bill of entry, sight vs usance draft) with a quick quiz.

    📋 Assessment Questions

    1. Can the student explain why international business is more than international trade?
    2. Can the student state the benefits of international business to countries and firms?
    3. Can the student compare modes of entry with their advantages and limitations?
    4. Can the student describe the export procedure in the correct sequence with documents?
    5. Can the student distinguish bill of lading from bill of entry and sight draft from usance draft?

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    Keep learning

    All chapters in Business Studies - Class 11

    1. 1. Business, Trade and Commerce
    2. 2. Forms of Business Organisation
    3. 3. Private, Public and Global Enterprises
    4. 4. Business Services
    5. 5. Emerging Modes of Business
    6. 6. Social Responsibilities of Business and Business Ethics
    7. 7. Formation of a Company
    8. 8. Sources of Business Finance
    9. 9. MSME and Business Entrepreneurship
    10. 10. Internal Trade
    11. 11. International Business