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Guwahati University BCom 6th semester international business solved question paper 2022
COMMERCE
(Honours Elective)
Paper COM-HE-6046
(International Business)
2022
(Solved Paper)
Full Marks: 80
Time: Three hours
The figures in the margin indicate full marks for the questions.
Answer either in English or in Assamese.
1. Answer any ten questions from the following: 1×10=10
(i) Which of the following is a feature of international business?
(a) Use of common currency .
(b) Involvement of at least two aus countries
(c) Integration of economies
(d) All of the above
Ans:-b) Involvement of at least two aus countries
(ii) “Socio-economic background of the people influences the international business." State whether True or False?
Ans:-True
(iii) Importing of goods and services for re- export to another country is called
(a) Export trade
(b) Import trade
(c) Entrepot trade
Ans:-c) Entrepot trade
(iv) Who developed the comparative advantage theory of international trade?
Ans:-David Ricardo
(v) Which of the following is not a tariff tool of international trade?
(a) Export duty
(b) Import quota
(c) Import duty
Ans:-a) Export duty
(vi) In which year the World Trade Organisation was established?
Ans:-1995
(vii) Write the full form of ASEAN.
Ans:-Association of Southeast Asian Nations
(viii) The number of members of the World Bank at present is
(a) 189
(b) 170
(c) 130
Ans:- a)189
(ix) Write the full form of TRIPS.
Ans:- TRIPS stands for Trade-Related Aspects of Intellectual Property Rights.
(x) Which of the following institutions is not a member of the World Bank group?
(a) International Development Association
(b) International Finance Corporation
(c) Asian Development Bank
(d) None of the above
Ans:-d) None of the above
(xi) The number of parties involved in corporate guarantee is 2/3/4. (Choose the correct answer)
Ans:- 3
(xii) In which year the EXIM Bank was established?
Ans:- 1985
(xiii) The Foreign Exchange Management Act was passed in the year.
(a) 1990
(b) 1999
(c) 2009
Ans:- b) 1999
(xiv) Define multinational company.
Ans:- A multinational company is a business organization that operates in multiple countries.
(xv) Give the meaning of IT outsourcing.
Ans:- IT outsourcing is the process of hiring an external company to handle some or all of an organization's information technology (IT) functions.
2. Answer any five questions of the following in about 50 words : 2×5=10
(i) What is portfolio investment?
Ans:- Portfolio investment refers to investment made in a variety of financial securities such as stocks, bonds, and mutual funds.
(ii) Define global business environment.
Ans:- The global business environment refers to the economic, political, legal, and cultural conditions that influence international trade and investment.
(iii) Define ad valorem tax.
Ans:- Ad valorem tax is a tax imposed on the value of goods or services, typically as a percentage of the selling price.
(iv) What is anti-dumping duty?
Ans:- Anti-dumping duty is a trade measure imposed on imported goods to counteract the damage caused to domestic producers by foreign companies pricing their goods below fair market value.
(v) Write two objectives of International Monetary Fund.
Ans:- The two objectives of the International Monetary Fund (IMF) are to promote international monetary cooperation and facilitate the balanced growth of international trade.
(vi) What is greenfield investment ?
Ans:- Greenfield investment refers to a type of foreign direct investment where a company builds new facilities and operations in a foreign market, as opposed to acquiring existing ones.
(vii) Mention the participants in foreign exchange market.
Ans:- Participants in the foreign exchange market include commercial and investment banks, central banks, hedge funds, currency speculators, and multinational corporations.
(viii) Write the benefits of economic grouping.
Ans:- The benefits of economic grouping include increased trade and investment flows, improved competitiveness, and enhanced economic and political stability.
3. Answer any four questions from the following in about 150 words : 5 x 4 = 20
(i) Explain the importance of economic globalization in international business.
Ans:- Following are the importance of economic globalization in international business:-
Increased Trade: Economic globalization has led to an increase in international trade and investment, providing businesses with access to new markets and consumers.
Diversification of Markets: Businesses can diversify their markets and reduce their dependence on a single market or economy.
Access to Raw Materials: Globalization provides businesses with access to a wider range of raw materials and inputs, helping to lower costs and improve the quality of their products.
Competition: Competition from other countries and companies leads to innovation, efficiency and improved products and services.
Transfer of Technology: Globalization facilitates the transfer of technology and knowledge between countries, leading to technological advancements and innovation.
Improved Standards of Living: Economic globalization can lead to increased economic growth, job creation and improved standards of living, especially in developing countries.
(ii) Differentiate between domestic business and international business.
Ans:- The Difference between domestic business and international business are given below:-
On the basis of Geographical scope: Domestic business is confined within the boundaries of a single country, while international business operates across multiple countries.
On the basis of Market: Domestic business caters to a single domestic market, while international business operates in multiple, often culturally diverse, markets.
On the basis of Competition: Domestic business faces competition within the country, while international business faces competition globally.
On the basis of Regulations: Domestic businesses must comply with domestic laws and regulations, while international business must comply with the laws and regulations of each country in which it operates.
On the basis of Culture: Domestic businesses are familiar with the cultural norms of their home country, while international businesses must navigate and adapt to a variety of cultural differences.
On the basis of Currency: Domestic businesses primarily deal in a single currency, while international businesses often deal in multiple currencies and must manage currency exchange risks.
(iii) Explain different types of import quotas used by countries to restrict imports.
Ans:- Import quotas are government-imposed limits on the amount of a specific good that can be imported into a country. Some common types of import quotas include:
Absolute Quotas: A fixed maximum amount of a specific good that can be imported over a specific time period.
Tariff-Rate Quotas (TRQs): A combination of tariffs and quotas, where a lower tariff is applied to goods within the quota limit, and a higher tariff is applied to goods exceeding the quota.
Voluntary Export Restraints (VERs): Agreements between exporting and importing countries to limit the quantity of goods that are exported, often in exchange for other trade concessions.
Emergency Quotas: Temporary quotas imposed in response to sudden spikes in imports or to protect domestic industries from injury.
Country-Specific Quotas: Quotas that apply to specific countries and are used to limit imports from particular countries.
These import quotas can be used to protect domestic industries, regulate trade, and manage balance-of-payment issues.
(iv) Write the meaning and objectives of commercial policy.
Ans:- Commercial policy refers to the set of measures and rules a country adopts to regulate its international trade.
The objectives of commercial policy can be summarized as follows:
Promoting domestic production: By implementing tariffs, trade restrictions, and other trade barriers, a country aims to protect its domestic industries and increase their competitiveness.
Generating Revenue: Commercial policies can also help a country generate revenue through the collection of tariffs, taxes and other trade-related fees.
Balancing Trade: Commercial policies are aimed at correcting imbalances in trade by reducing trade deficits and increasing exports.
Encouraging Fair Trade Practices: Commercial policies aim to ensure that international trade is conducted on a level playing field and that countries comply with fair trade practices such as labor and environmental standards.
Facilitating Trade: Commercial policies also aim to promote trade and make it easier for businesses to engage in international trade by removing trade barriers and improving the flow of goods and services across borders.
Developing Strategic Relationships: Commercial policies can also be used to develop strategic relationships with key trading partners to promote a country's long-term economic interests.
(v) Write the functions performed by UNCTAD.
Ans:- UNCTAD (United Nations Conference on Trade and Development) is a specialized agency of the United Nations established in 1964. The main functions of UNCTAD are to:
(1) provide a forum for developing countries to discuss trade and development issues and to negotiate trade agreements;
(2) provide technical assistance to developing countries in the areas of trade, investment and technology;
(3) conduct research on trade and development issues and make recommendations to member countries; and
(4) provide a database of trade and investment information. UNCTAD's ultimate goal is to improve the economic and social well-being of the people in developing countries.
(vi) Explain the meaning and types of letters of credit. 2+3=5
Ans:- A letter of credit is a financial tool used in international trade to provide an assurance to the seller (beneficiary) that payment will be received in accordance with the terms and conditions agreed upon between the seller and the buyer. There are several types of letters of credit, including:
Commercial Letter of Credit: used for normal trade transactions.
Standby Letter of Credit: serves as a guarantee of payment in case the buyer defaults on payment.
Revocable Letter of Credit: can be amended or cancelled by the issuing bank without prior notice to the beneficiary.
Irrevocable Letter of Credit: cannot be amended or cancelled without the agreement of both the issuing bank and the beneficiary.
(vii) Define special economic zones and write its features. 2+3=5
Ans:- Special Economic Zones (SEZs) are designated areas within a country that are subject to unique economic regulations that are different from the rest of the country. The aim of SEZs is to promote economic development by attracting foreign investment, stimulating trade and exports, and creating jobs. Features of SEZs include:
Special Tax Regimes: SEZs often offer tax incentives, such as reduced corporate tax rates, to encourage investment.
Streamlined Regulations: SEZs often have fewer regulations and a more streamlined process for starting a business.
Improved Infrastructure: SEZs typically have better infrastructure, such as transportation, communication and energy networks, to support economic activity.
Access to Markets: SEZs often provide access to regional and international markets, making it easier for businesses to export their products.
Zone Management: SEZs are often managed by a dedicated authority or agency with the mandate to promote and facilitate economic activity within the zone.
(viii) State the main functions of World Bank.
Ans:- The World Bank is a global financial institution whose main functions are:
Providing loans and financial assistance to developing countries for projects and programs aimed at reducing poverty and promoting sustainable economic growth.
Providing policy advice, technical assistance, and capacity building to help countries improve their economic management and institutions.
Promoting international trade and investment by providing financing and risk management services to private sector companies and governments.
Collecting, analyzing and sharing development data and knowledge to support decision-making and help drive economic growth in developing countries.
Supporting the development of human capital, particularly in the areas of education, health, and social protection, to help people improve their lives and escape poverty.
4. Answer any four questions from the following in about 600 words : 10×4=40
(i) Explain the business environments that influence the international business.
Ans:- Business environments that influence international business:
Economic environment: This includes factors such as exchange rates, inflation rates, interest rates, and government policies that affect trade and investment.
Political environment: This refers to the stability of a country’s government, political ideology, and trade policies, as well as the ease of doing business.
Legal environment: This encompasses a country’s legal system, intellectual property laws, and regulations affecting international trade and investment.
Cultural environment: Cultural differences can affect the way business is conducted, such as communication, negotiation styles, and business practices.
Technological environment: This includes the availability and use of technology and its impact on international trade and investment.
Natural environment: Natural resources and the availability of raw materials, energy sources, and environmental regulations can impact international business.
Infrastructure: The quality of a country’s transportation and communication systems, as well as its port and airport facilities, can greatly impact international trade.
(ii) Explain the product life cycle theory of international trade.
Ans,:- Product life cycle theory of international trade:
The product life cycle theory of international trade explains how a product’s sales and profits change over time in different markets. The theory has four stages:
Introduction: In this stage, the product is introduced to a new market, and sales are low as the product gains recognition.
Growth: In this stage, the product gains acceptance and sales increase rapidly.
Maturity: Sales growth slows down as the product reaches its peak, and competition increases.
Decline: Sales decline as the product reaches the end of its life cycle, and the product may be discontinued or replaced by a new product.
International trade is influenced by the product life cycle theory because companies may move production to other countries as the product reaches different stages of the life cycle. For example, companies may initially produce a product in a high-wage country where research and development costs are high, but then move production to a low-wage country as the product reaches the maturity stage.
(iii) Discuss the determinants of national competitive advantage.
Ans:- Determinants of national competitive advantage:
National competitive advantage refers to a country’s ability to produce goods and services at a lower cost and/or of higher quality than its competitors. The determinants of national competitive advantage include:
Factor conditions: This includes the availability of skilled labor, capital, and natural resources.
Related and supporting industries: A strong network of suppliers and supporting industries can enhance a country’s competitiveness.
Firm strategy, structure, and rivalry: The competitiveness of a country’s firms is influenced by their strategies, structures, and level of competition.
Related and supporting institutions: This includes the legal and regulatory framework, financial institutions, and educational and training systems.
Chance events: Political and economic events, natural disasters, and technological innovations can have a significant impact on a country’s competitiveness.
Understanding these determinants can help a country identify its strengths and weaknesses and take steps to enhance its competitiveness in the global market
(iv) What are the objectives of GATT ? State the important proposals included in Uruguay round of GATT. 3+7=10
Ans:- The General Agreement on Tariffs and Trade (GATT) was established in 1947 with the objectives of promoting international trade by reducing trade barriers such as tariffs, quotas and other restrictions, as well as promoting fair trade practices.
The important proposals included in the Uruguay Round of GATT were:
The creation of the World Trade Organization (WTO) to oversee and enforce the rules of international trade.
The reduction of trade barriers in agriculture and textiles, making these sectors more open to international competition.
The introduction of new rules on intellectual property rights, including protection for trademarks, copyrights and patents.
The strengthening of dispute settlement mechanisms to ensure that trade disputes are resolved quickly and effectively.
The liberalization of services trade, including the financial and telecommunications sectors.
The opening up of trade in environmental goods and services.
The expansion of trade in information technology products.
(v) Write a brief note on major regional trading groups.
Ans:- Major regional trading groups are trade organizations made up of countries in a specific geographic region, who come together to promote and facilitate trade among its members. Examples include:
North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico.
European Union (EU) between 28 European countries.
Association of Southeast Asian Nations (ASEAN) between 10 Southeast Asian countries.
Mercosur between Argentina, Brazil, Paraguay, and Uruguay.
(vi) Write the important steps undertaken by the Government of India in order to give boost to flow of foreign direct investment in the country. 10
Ans:- The Government of India has taken several important steps to boost the flow of foreign direct investment (FDI) in the country:
Liberalization of FDI policies: The government has opened up various sectors to foreign investment, removed caps on FDI, and streamlined the approval process for FDI proposals.
Simplification of tax regulations: The government has simplified tax regulations and made them more transparent, to reduce the time and cost of complying with tax laws.
Improving the ease of doing business: The government has launched several initiatives aimed at improving the ease of doing business, such as reducing red tape, streamlining regulatory processes, and improving the availability of infrastructure.
Promoting India as an investment destination: The government has taken steps to promote India as a favorable investment destination, such as participating in international trade fairs, organizing roadshows, and launching a "Make in India" campaign to attract investment in key sectors.
Providing support for infrastructure development: The government has made significant investments in infrastructure development, such as building ports, airports, and highways, to support the growth of trade and investment in the country.
Encouraging investment in the digital sector: The government has taken steps to encourage investment in the digital sector, such as setting up special economic zones for IT and IT-enabled services, and providing tax incentives for digital investments.
Fostering innovation and entrepreneurship: The government has launched several initiatives to support innovation and entrepreneurship, such as setting up incubation centers, providing seed funding, and promoting the development of start-up ecosystems.
(vii) Explain in briefly various sources of financing of international trade.
Ans:- Sources of financing of international trade:
Letters of credit (L/C): A financial instrument issued by a bank on behalf of the buyer.
Factoring: The transfer of a company's accounts receivable to a third party for a fee.
Trade financing: Financing provided by banks to support international trade transactions.
Export credit insurance: Insurance that covers the risk of non-payment for exports.
Government export financing: Government programs that provide financial support to businesses engaged in international trade.
Supplier credit: Credit extended by the supplier to the buyer to support the purchase of goods.
(viii) Define balance of payments. Explain in briefly various components of Balance of Payments Account.
Ans:- Balance of Payments (BOP) is a record of a country's transactions with the rest of the world over a specified period of time, usually a year. It is a summary of all transactions, including goods, services, investments, and transfers, that flow in and out of a country. The BOP measures a country's economic interactions with other countries.
The components of the BOP account are:
Current Account: This records a country's imports and exports of goods and services, as well as income from investments and transfers such as remittances.
Capital Account: This includes transactions in financial assets such as stocks, bonds, and bank deposits. It reflects the movement of capital in and out of a country.
Financial Account: This records a country's investments in foreign financial assets, such as stocks and bonds, as well as its liabilities to foreign investors.
Direct Investment: This refers to investments made by one company in another, such as through ownership of shares or establishment of a subsidiary.
Reserve Assets: This includes a country's holdings of foreign exchange reserves, gold, and the International Monetary Fund's special drawing rights.
(ix) Explain the objectives of forming of SAARC? Explain in briefly significance of SAARC for India.
Ans:- The South Asian Association for Regional Cooperation (SAARC) was formed in 1985 with the objective of promoting economic, social, and cultural cooperation among the countries of South Asia. The main objectives of SAARC are:
To promote the welfare of the people of South Asia and to improve their quality of life.
To accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realize their full potentials.
To promote and strengthen collective self-reliance among the countries of South Asia.
To contribute to mutual trust, understanding, and appreciation of one another's problems.
Significance of SAARC for India:
It provides a platform for regional cooperation and integration, which helps in promoting economic development, regional trade, and cultural exchange among the member countries.
SAARC has helped to resolve regional conflicts, promote regional stability and security, and reduce tensions among member countries.
India, being the largest and most populous country in the region, has a crucial role to play in the success of SAARC. Through SAARC, India can strengthen its economic and strategic ties with other South Asian countries.
India's participation in SAARC provides it with an opportunity to promote its cultural, political, and economic interests in the region, and to showcase its development achievements and growth potential.
In summary, SAARC is a significant platform for India to promote regional cooperation and integration, and to enhance its economic, political, and cultural ties with other South Asian countries.
(x) Explain in briefly various export promotion measures of Government of India.
Ans:- The Government of India has implemented several measures to promote exports from the country. Some of the key measures are:
Export Promotion Councils (EPCs): These are industry-specific organizations that provide information and support to exporters and help them in exploring new markets.
Foreign Trade Policy (FTP): The FTP outlines the government's policies and schemes for promoting exports, including duty exemptions, subsidies, and market access initiatives.
Duty Drawback Scheme: Under this scheme, exporters are eligible for a refund of certain duties and taxes paid on inputs used in the production of exported goods.
Merchandise Exports from India Scheme (MEIS): This is a reward scheme that provides duty scrips to eligible exporters, which can be used to pay customs duties on imported inputs.
Service Exports from India Scheme (SEIS): Similar to MEIS, this is a scheme to promote exports of services from India.
Export Credit Insurance: This scheme provides insurance cover to exporters against the risk of non-payment by foreign buyers.
Market Development Assistance (MDA): The MDA scheme provides financial assistance to EPCs for organizing exhibitions, buyer-seller meets, and other marketing events to promote exports.
Technology Upgradation Fund Scheme (TUFS): The TUFS provides financial assistance to the textile and clothing industries for upgrading their technology and increasing competitiveness in global markets.
Special Economic Zones (SEZs): SEZs are special areas designated by the government for export-oriented businesses, where they can enjoy tax and other incentives.
Focus Market Scheme (FMS): Under this scheme, the government provides financial assistance to exporters for promoting their products in specific target markets.
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