International Business Solved Question Paper 2025 [Gauhati University BCom 6th Semester]

4 (Sem–6/CBCS) HE 4 (IB)
2025

COMMERCE
(Honours Elective)
(International Business)

Full Marks : 80
Time : Three hours

The figures in the margin indicate full marks for the questions.

1. Answer the following questions : 1×10 = 10

(a) Which of the following countries is not a founder member of SAARC?
(i) Sri Lanka (ii) Pakistan (iii) Afghanistan (iv) India
Answer: (iii) Afghanistan

(b) The World Bank started operation in —
(i) June, 1944 (ii) May, 1946 (iii) June, 1946 (iv) None of the above
Answer: (ii) May, 1946

(c) The UNCTAD was established in —
(i) 1967 (ii) 1965 (iii) 1964 (iv) 1976
Answer: (iii) 1964

(d) Which of the following is a feature of international business?
(i) Use of common currency (ii) Involvement of at least two countries (iii) Integration of economies (iv) All of the above
Answer: (ii) Involvement of at least two countries

(e) “Socio-economic background of the people influences international business.”
(i) True (ii) False
Answer: (i) True

(f) “Balance of payments includes only visible items of exports and import.”
(i) True (ii) False
Answer: (ii) False

(g) “Ricardian theory assumes that labour is the only factor of production.”
(i) True (ii) False
Answer: (i) True

(h) “Export duty is a tariff tool of international trade.”
(i) True (ii) False
Answer: (i) True

(i) Write the full form of OPEC.
Answer: Organization of the Petroleum Exporting Countries

(j) In which year product life cycle theory was developed?
Answer: 1966 (by Raymond Vernon)

2. Answer the following questions in about 50 words : 2×5 = 10

(a) What are the two types of international business environment?
Answer: The two types of international business environment are:
i) Internal environment – It includes factors within the organization such as management policies, organizational structure, resources, and employees which influence business decisions.
ii) External environment – It consists of factors outside the organization like economic, political, legal, social, cultural, and technological conditions of different countries, which affect international business operations.

(b) State two objectives of WTO.
Answer: The objectives of World Trade Organization (WTO) are:
i) To promote free and fair international trade by reducing trade barriers like tariffs and quotas.
ii) To ensure smooth flow of trade among member countries by providing a platform for negotiation and settlement of trade disputes.

(c) What do you mean by regional business?
Answer: Regional business refers to trade and commercial activities conducted within a specific geographical region or group of neighboring countries. It involves exchange of goods, services, and investments among countries that are part of regional agreements or organizations, such as SAARC or ASEAN. This type of business promotes economic cooperation, reduces trade barriers, and strengthens regional integration.

(d) What are the main purposes of special economic zones?
Answer: The main purposes of special economic zones (SEZs) are:
i) To promote exports by providing tax benefits and incentives to businesses.
ii) To attract foreign investment and boost industrial development.
iii) To generate employment opportunities.
iv) To improve infrastructure and increase economic growth in the region.

(e) Give the meaning of ‘tariff’ in international business.
Answer: A tariff in international business refers to a tax or duty imposed by a government on goods and services imported or exported between countries. It is used to regulate trade, protect domestic industries from foreign competition, and generate revenue for the government. Tariffs can be of different types such as import duty, export duty, and customs duty.

3. Answer any four questions from the following in about 150 words : 5×4 = 20

(a) What are the merits of international business for developing countries?
Answer: International business plays a vital role in the economic development of developing countries. It provides several advantages that contribute to growth and modernization.

i) It helps in earning foreign exchange, which is essential for importing capital goods, technology, and raw materials.
ii) It promotes industrial development by expanding markets beyond domestic boundaries, leading to increased production and economies of scale.
iii) It facilitates transfer of technology, skills, and managerial expertise from developed nations to developing countries.
iv) It generates employment opportunities by encouraging export-oriented industries and foreign investments.
v) It improves standard of living as consumers get access to a variety of goods and services at competitive prices.
vi) It encourages efficient use of resources by enabling countries to specialize according to their comparative advantage.
vii) It strengthens international relations and cooperation among countries.

Thus, international business acts as an engine of growth, helping developing countries integrate with the global economy and achieve sustainable development.

(b) Explain the basic differences between international business and domestic business.
Answer: International business and domestic business differ in several important aspects.

i) Area of operation: Domestic business operates within a single country, whereas international business involves transactions between two or more countries.
ii) Currency: Domestic business uses a single national currency, while international business deals with multiple currencies and exchange rates.
iii) Legal environment: Domestic business is governed by one set of laws, whereas international business must comply with different legal systems of various countries.
iv) Risk: International business faces higher risks such as political instability, exchange rate fluctuations, and cultural differences, while domestic business has relatively lower risk.
v) Mobility of factors: Factors of production like labour and capital move freely within a country but are restricted across international borders.
vi) Market conditions: Domestic markets are more uniform, whereas international markets vary widely in terms of demand, culture, and economic conditions.
vii) Transportation and communication: International business involves higher costs and complexities in transportation and communication compared to domestic business.

Therefore, international business is more complex and challenging than domestic business due to its global nature.

(c) What is non-tariff barriers to trade (NTB)? Explain in brief.
Answer: Non-tariff barriers to trade (NTBs) refer to restrictions other than tariffs that countries impose to control imports and protect domestic industries. Unlike tariffs, these do not involve direct taxes but limit trade through regulations and policies.

i) Quotas: These restrict the quantity of goods that can be imported or exported during a specific period.
ii) Licensing requirements: Importers must obtain permission from authorities to bring goods into a country.
iii) Subsidies: Governments provide financial assistance to domestic producers to make them more competitive than foreign firms.
iv) Technical standards: Strict quality, safety, and health standards are imposed on imported goods.
v) Embargoes: Complete ban on trade with a particular country.
vi) Administrative delays: Complex customs procedures that discourage imports.

NTBs are often used to protect local industries, maintain quality standards, and safeguard national interests. However, excessive use of NTBs can hinder free trade and create conflicts among trading nations.

(d) Distinguish between balance of trade and balance of payments.
Answer:

Basis	Balance of Trade (BOT)	Balance of Payments (BOP)
Meaning	Difference between exports and imports of goods only	Record of all economic transactions between a country and the rest of the world
Scope	Narrow concept	Broad concept
Items included	Only visible items (goods)	Both visible (goods) and invisible items (services, income, transfers)
Nature	Part of BOP	Includes BOT as a component
Balance	May be favourable or unfavourable	Always balances due to accounting adjustments
Importance	Indicates trade position of a country	Shows overall economic position and financial stability

(e) Discuss the functions of UNCTAD.
Answer: The United Nations Conference on Trade and Development (UNCTAD) was established to promote the interests of developing countries in international trade and development.

i) It promotes international trade, especially for developing nations, by creating fair trade opportunities.
ii) It provides a platform for intergovernmental discussions and negotiations on trade and development issues.
iii) It conducts research and analysis on global economic trends and offers policy recommendations.
iv) It assists developing countries in formulating trade policies and improving their participation in world trade.
v) It supports capacity building by providing technical assistance and training programs.
vi) It works towards reducing trade barriers and improving market access for exports of developing countries.
vii) It encourages sustainable development by addressing issues like poverty, inequality, and globalization.

Thus, UNCTAD plays a crucial role in integrating developing countries into the global economy.

(f) Write a short note on NAFTA.
Answer: The North American Free Trade Agreement (NAFTA) was a regional trade agreement signed in 1994 between the United States, Canada, and Mexico.

i) Its main objective was to eliminate trade barriers and promote free trade among member countries.
ii) It reduced tariffs on goods and services, encouraging cross-border trade and investment.
iii) It facilitated the movement of goods, services, and capital across borders.
iv) It helped in increasing economic cooperation and integration among member nations.
v) It boosted industrial growth, employment, and competitiveness in the region.
vi) It also included provisions related to intellectual property rights and dispute settlement.

In recent years, NAFTA has been replaced by the USMCA, but it remains an important example of regional economic integration.

4. Answer any four questions from the following in about 600 words :10×4 = 40

(a) Discuss the various modes of entry into international business.
Answer: Entering international markets is a crucial strategic decision for firms seeking growth beyond domestic boundaries. The choice of entry mode depends on factors such as risk, investment, control, market conditions, and government regulations. The major modes of entry into international business are as follows:

i) Exporting: It is the simplest and most common mode of entry. Goods are produced in the home country and sold abroad. It may be direct (through company’s own network) or indirect (through intermediaries). It involves low risk but limited control over foreign markets.

ii) Licensing: Under this arrangement, a firm (licensor) permits a foreign company (licensee) to use its patents, trademarks, or technology in return for royalty. It requires low investment and risk but reduces control over production and quality.

iii) Franchising: Similar to licensing but more comprehensive. The franchisor provides brand name, business model, and support to the franchisee. It is widely used in service industries like food chains and retail.

iv) Joint Ventures: It involves collaboration between domestic and foreign firms to establish a new business entity. Both parties share capital, risks, and profits. It helps in accessing local knowledge but may lead to conflicts in management.

v) Strategic Alliances: Firms cooperate for specific objectives like technology sharing or market access without forming a new entity. It is flexible and less risky but requires mutual trust.

vi) Foreign Direct Investment (FDI): It involves establishing production or business operations in a foreign country. It may be through wholly owned subsidiaries or acquisition. It offers full control and higher profits but involves high risk and investment.

vii) Turnkey Projects: A firm builds a project in a foreign country and hands it over to the owner after completion. It is common in infrastructure and engineering sectors.

Thus, firms select entry modes based on their resources, objectives, and the level of risk they are willing to bear.

(b) Critically discuss the product life cycle theory of international trade.
Answer: The Product Life Cycle (PLC) Theory of international trade was developed by Raymond Vernon in 1966. It explains how a product’s production location and trade pattern change over time.

The theory consists of three stages:

i) New Product Stage: The product is introduced in a developed country where there is high demand and advanced technology. Production is limited, and the firm focuses on innovation and domestic sales. Exports are minimal.

ii) Maturing Product Stage: As demand increases, the product becomes standardized. The firm starts exporting to other developed countries and may shift production to other nations to reduce costs. Competition begins to rise.

iii) Standardized Product Stage: The product becomes widely accepted and price competition dominates. Production shifts to developing countries where labour is cheaper. The original country may even start importing the product.

Critical Evaluation:
i) The theory highlights the dynamic nature of trade and explains the shifting patterns of production and exports.
ii) It emphasizes the role of innovation and technological advancement in international trade.
iii) However, it assumes that innovation occurs only in developed countries, which is not always true today.
iv) It does not fully consider the impact of globalization, multinational corporations, and rapid technological changes.
v) The model is less applicable in industries with short product life cycles like electronics.

In conclusion, while the PLC theory provides valuable insights into trade patterns, it has limitations in explaining modern global trade dynamics.

(c) Discuss the main objectives and functions of IMF.
Answer: The International Monetary Fund (IMF) was established in 1944 to promote global monetary cooperation and financial stability.

Objectives of IMF:
i) To promote international monetary cooperation among member countries.
ii) To ensure stability in exchange rates and avoid competitive devaluation.
iii) To facilitate balanced growth of international trade.
iv) To provide financial assistance to countries facing balance of payments difficulties.
v) To reduce poverty and promote economic stability worldwide.

Functions of IMF:
i) Financial Assistance: IMF provides short-term and medium-term loans to member countries to correct balance of payments deficits.
ii) Surveillance: It monitors the economic and financial policies of member countries to ensure stability.
iii) Technical Assistance: IMF offers guidance and training to countries in areas like fiscal policy, monetary policy, and exchange rate management.
iv) Exchange Rate Stability: It promotes orderly exchange arrangements and prevents currency crises.
v) Research and Policy Advice: IMF conducts economic research and provides policy recommendations to improve global financial stability.

Thus, IMF plays a vital role in maintaining global economic stability and supporting member nations in times of financial crisis.

(d) What is foreign investment? Discuss its various types in Indian perspective. (2+8=10)
Answer: Foreign investment refers to the investment made by individuals, companies, or governments of one country into business activities or assets in another country. It plays a crucial role in economic development by bringing capital, technology, and managerial expertise.

In the Indian perspective, foreign investment is mainly classified into the following types:

i) Foreign Direct Investment (FDI): It involves direct investment in production or business operations in India by foreign entities. Investors gain control or significant influence over management. FDI is allowed through automatic and government routes in sectors like manufacturing, telecom, and retail.

ii) Foreign Portfolio Investment (FPI): It refers to investment in financial assets such as shares, bonds, and securities in Indian markets without controlling interest. It is regulated by SEBI and is more volatile than FDI.

iii) External Commercial Borrowings (ECB): These are loans taken by Indian companies from foreign lenders. It helps firms access international capital at competitive rates.

iv) Non-Resident Indian (NRI) Investments: Investments made by NRIs in Indian businesses, real estate, and financial markets. These investments strengthen foreign exchange reserves.

v) Foreign Institutional Investment (FII): Investments made by foreign institutions like mutual funds and insurance companies in Indian capital markets.

Thus, foreign investment is essential for India’s economic growth, infrastructure development, and global integration.

(e) Explain the role of IT (Information Technology) in international business.
Answer: Information Technology (IT) has transformed the nature and scope of international business by improving efficiency, communication, and global connectivity.

i) IT facilitates fast and effective communication through emails, video conferencing, and digital platforms, reducing geographical barriers.
ii) It enables e-commerce, allowing firms to buy and sell goods and services globally through online platforms.
iii) IT supports efficient supply chain management by tracking inventory, logistics, and delivery systems in real time.
iv) It helps in data analysis and decision-making by providing accurate and timely information about global markets.
v) IT reduces operational costs by automating business processes and minimizing manual work.
vi) It enhances customer service through online support, digital payments, and personalized services.
vii) IT promotes global integration by connecting businesses, customers, and suppliers worldwide.

Therefore, IT acts as a backbone of modern international business, making global trade faster, easier, and more efficient.

(f) Discuss the role of FDI in promoting international business in India.
Answer: Foreign Direct Investment (FDI) plays a significant role in promoting international business in India by contributing to economic growth and globalization.

i) FDI brings in foreign capital, which helps in developing industries and infrastructure in India.
ii) It facilitates transfer of advanced technology and modern management practices, improving productivity and efficiency.
iii) It generates employment opportunities by establishing new enterprises and expanding existing ones.
iv) FDI promotes export growth by increasing production capacity and improving quality standards.
v) It enhances competition in the domestic market, leading to better products and services for consumers.
vi) It strengthens India’s position in global trade by integrating it with international markets.
vii) It contributes to the development of backward regions by encouraging investments in less developed areas.

In conclusion, FDI acts as a catalyst for economic development and plays a vital role in expanding India’s participation in international business.

(g) What are the objectives of World Bank? How has it assisted the developing countries?
Answer: The World Bank is an international financial institution established to promote economic development and reduce poverty across the world, especially in developing countries.

Objectives of World Bank:
i) To provide financial assistance for reconstruction and development of member countries.
ii) To reduce poverty and improve living standards in developing nations.
iii) To promote long-term economic growth through investment in infrastructure and productive sectors.
iv) To encourage private foreign investment by providing guarantees and support.
v) To promote sustainable development and environmental protection.
vi) To support education, healthcare, and social development programs.

Assistance to Developing Countries:
i) The World Bank provides long-term loans and credits at low interest rates for development projects like roads, dams, power, and irrigation.
ii) It offers technical assistance and expert advice for planning and implementing development programs.
iii) It supports poverty alleviation programs, improving education, healthcare, and rural development.
iv) It encourages institutional reforms and capacity building in governance and financial systems.
v) It promotes sustainable development by funding environmental and climate-related projects.
vi) It facilitates knowledge sharing and research to help countries adopt best practices.

Thus, the World Bank plays a key role in accelerating economic development and improving the quality of life in developing countries.

(h) Discuss the major types of international business structure. How can the barriers to international business be overcome? Explain. (6+4=10)
Answer:

Major types of international business structure:

i) Sole Proprietorship: It is owned and managed by a single individual. It is simple and easy to form but has limited resources and high risk in international operations.

ii) Partnership: It involves two or more persons sharing profits and risks. It provides more capital than sole proprietorship but may face conflicts among partners.

iii) Joint Stock Company: A company registered under law with separate legal identity. It can raise large capital and is suitable for international expansion but involves complex procedures.

iv) Multinational Corporation (MNC): Large companies operating in multiple countries with centralized management. They have vast resources, advanced technology, and global reach.

v) Joint Ventures: Collaboration between domestic and foreign firms to operate a business together. It helps share risks and local expertise.

vi) Holding and Subsidiary Companies: A parent company controls one or more subsidiaries in foreign countries, enabling effective global operations.

Measures to overcome barriers to international business:

i) Reduction of trade barriers: Governments should reduce tariffs and non-tariff barriers to promote free trade.
ii) Improvement in infrastructure: Better transport, communication, and logistics facilities facilitate smooth international operations.
iii) Use of technology: Adoption of IT and digital platforms reduces communication gaps and transaction costs.
iv) International cooperation: Agreements and organizations like World Trade Organization help in resolving disputes and promoting fair trade.

In conclusion, appropriate business structures and supportive policies can help firms successfully operate in international markets despite various challenges.

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