International Business Class 11 Notes: CBSE 11th Business Studies Chapter 11, Download PDF

Jul 19, 2023, 11:44 IST

CBSE Class 11 International Business Revision Notes: Here, students can find detailed handwritten notes for CBSE Class 11 Business Studies Chapter 11, International Business. These revision notes have been prepared by our subject experts, as per the Updated CBSE Syllabus 2023-2024

Download PDF for CBSE Class 11 Chapter 11 International Business Notes

International Business Class 11 Notes: This article hands out complete revision notes for CBSE Class 11 Business Studies Chapter 11, International Business. We have also attached a PDF download link for future reference. Students can always save the notes by downloading the PDF.

Whenever students prepare for examinations, they should be careful about the updated syllabus. Every year, the official education board changes the syllabus for all subjects to make updates as per the requirement of the current generation. In the process, students often get confused with their syllabus and end up reading the wrong ones. The correct syllabus can save you time because it tells you what chapters have to be excluded and what included material has to be studied.

Students don’t have to worry about the syllabus while going through these revision notes, since they are prepared as per the Revised CBSE Syllabus 2024.

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Revision Notes for CBSE Class 11 Business Studies Chapter 11 are presented below:

What is International Business?

Manufacturing and trade beyond the boundaries of one’s own country is known as international business.

Difference between International Business vs Traditional Business

International Business	Traditional Business
In international business where buyers and sellers come from different countries.	In domestic business, both the buyers and sellers are from the same country.
Stakeholders such as employees, suppliers, shareholders/ partners, and the general public belong to one country	Stakeholders such as employees, suppliers, shareholders/ partners, and the general public belong to different countries.
The degree of mobility of factors like labour and capital is generally less between countries	The degree of mobility of factors like labor and capital is generally more in one country.
Since buyers in international markets hail from different countries, they differ in their sociocultural background	Since buyers in traditional markets hail from the same countries, they do not differ in their sociocultural background
The differences in business systems and practices are considerably much more among multiple countries	The differences in business systems and practices are considerably less within a country.
Political systems and their impact on business operations are difficult to predict.	Political systems and their impact on business operations are easy to predict.
Business regulations and policies differ between countries.	Business regulations and policies are the same.
It involves the use of different currencies.	It involves the use of the same currency.

Scope of International Business

Merchandise exports and imports
Service exports and imports
Licensing and franchising
Foreign investments

Benefits of International Business

1.Benefits to countries:

Earning foreign exchange
More efficient use of resources
Improving growth prospects and employment potentials
Increased standard of living

2.Benefits to firms:

Prospects for higher profits
Increased capacity utilization
Prospects for growth
Way out to intense competition in the domestic market
Improved business vision

Modes of Entry into International Business

Exporting and Importing
Contract Manufacturing
Licensing and franchising
Joint Ventures
Wholly Owned Subsidiaries

1.Exporting and Importing- Exporting refers to sending of goods and services from the home country to a foreign country. Importing is the purchase of foreign products and bringing them into one’s home country.

Advantages:

Easier to enter into international markets and less complex as an activity.
Exporting/importing is less involved in the sense that business firms are not required to invest that much time and money as is needed when they desire to enter into joint ventures or set up manufacturing plants and facilities in host countries.
Exposure to foreign investment risks is nil or much lower.

Limitations:

The additional cost of packaging and transportation, since the goods physically move from one country to another.
Exporting is not a feasible option when import restrictions exist in a foreign country.
In this situation, the executives are far away from customers and there is no personal contact.

2.Contract Manufacturing- It is a type of international business where a firm enters into a contract with one or a few local manufacturers in foreign countries to get certain components or goods produced as per its specifications.

Advantages:

These firms make use of the production facilities already existing in foreign countries.
Since there is no or little investment in foreign countries, there is hardly any investment risk involved in foreign countries.
It gives an advantage of getting products manufactured or assembled at lower costs especially if the local producers happen to be situated in countries that have lower material and labour costs.
Contract Manufacturing in a way provide a ready market for their products and ensure greater utilization of their production capacities.
The local manufacturer also gets the opportunity to get involved with international business and avail incentives, if any, available to the export firms in case the international firm desires goods so produced to be delivered to its home country or to some other foreign countries.

Limitations:

Local firms might not adhere to production design and quality standards, thus causing serious product quality problems for the international firm.
A local manufacturer in a foreign country loses control over the manufacturing process because goods are produced strictly as per the terms and specifications of the contract.
The local firm producing under contract manufacturing is not free to sell the contracted output as per its will. It has to sell the goods to the international company at predetermined prices.

3.Licensing and Franchising- Licensing is a contractual arrangement in which one firm grants access to its patents, trade secrets, or technology to another firm in a foreign country for a fee called royalty. The firm that grants such permission to the other firm is known as licensor and the other firm in the foreign country that acquires such rights to use technology or patents is called the licensee. The term franchising applies to service businesses. The parent company is called the franchiser and the other party to the agreement is called the franchisee. The franchiser can be any service provider be it a restaurant, hotel, travel agency, bank wholesaler, or even a retailer.

Advantages:

Less expensive mode since the licensor invests and sets up the business.
Since no or very little foreign investment is involved, the licensor/ franchiser is not a party to the losses, if any, that occur to foreign business.
Since the business in the foreign country is managed by the licensee/franchisee who is a local person, there are lower risks of business takeovers or government interventions.
L licensee/franchisee being a local person has greater market k n o w l e d g e a n d c o n t a c t s which can prove quite helpful to the licensor/franchiser in successfully conducting its marketing operations.
Other firms cannot use the trademarks and patents.

Limitations:

Can cause severe competition to the licensor/franchiser
If not maintained properly, trade secrets can get divulged to others in foreign markets.
Over time, conflicts often develop between the licensor/franchiser and licensee/franchisee over issues such as maintenance of accounts, payment of royalty, and non-adherence to norms relating to the production of quality products.

4.Joint Ventures:- A joint venture means establishing a firm that is jointly owned by two or more otherwise independent firms. It can also be described as any form of association which implies collaboration for more than a transitory period.

Advantages:

Since the local partner also contributes to the equity capital of such a venture, the international firm finds it financially less burdensome to expand globally.
Joint ventures make it possible to execute large projects requiring huge capital outlays and manpower.
The foreign business firm benefits from a local partner’s knowledge of the host countries regarding the competitive conditions, culture, language, political systems, and business systems.
In many cases entering into a foreign market is very costly and risky.

Limitations:

Foreign firms entering into joint ventures share the technology and trade secrets with local firms in foreign countries, thus always running the risks of such technology and secrets being disclosed to others.
The dual ownership arrangement may lead to conflicts, resulting in a battle for control between the investing firms.

5.Wholly Owned Subsidiaries- This entry mode of international business is preferred by companies that want to exercise full control over their overseas operations. A wholly owned subsidiary in a foreign market can be established in either of the two ways:

Setting up a new firm altogether to start operations in a foreign country — also referred to as a green field venture, or
Acquiring an established firm in a foreign country and using that firm to manufacture and/or promote its products in the host nation.

Advantages:

The parent firm is able to exercise full control over its operations in foreign countries.
Since the parent company on its own looks after the entire operations of a foreign subsidiary, it is not required to disclose its technology or trade secrets to others.

Limitations:

The parent company has to make 100 percent equity investments in foreign subsidiaries. This form of international business is, therefore, not suitable for small and medium-size firms which do not have enough funds with them to invest abroad.
Since the parent company owns 100 percent equity in the foreign company, it alone has to bear the entire losses resulting from the failure of its foreign operations.
Some countries are averse to setting up 100 percent wholly owned subsidiaries by foreigners in their countries. This form of international business operations, therefore, becomes subject to higher political risks.

Export Procedures