Unit 11: International Business
1. **What is the main reason for international business according to the content?**
- A) Similar economic systems across countries
- B) Desire to maintain self-reliance
- C) Unequal distribution of resources among countries
- D) High domestic productivity in all sectors
- **Answer: C) Unequal distribution of resources among countries**
2. **Which document is required to verify the quality of goods before shipment?**
- A) Certificate of Origin
- B) Letter of Credit
- C) Export Invoice
- D) Certificate of Inspection
- **Answer: D) Certificate of Inspection**
3. **In international trade, what does the term ‘licensing’ refer to?**
- A) Selling goods directly to foreign customers
- B) Allowing a foreign firm to produce goods under a trademark for a fee
- C) Exporting goods through intermediaries
- D) Setting up a subsidiary in a foreign country
- **Answer: B) Allowing a foreign firm to produce goods under a trademark for a fee**
4. **Which of the following is an advantage of exporting as an entry mode in international business?**
- A) Low investment risk
- B) High initial investment required
- C) Full control over foreign operations
- D) Ease of accessing foreign funds
- **Answer: A) Low investment risk**
5. **What is a ‘Letter of Credit’ in the context of international trade?**
- A) A certificate proving the origin of goods
- B) A bank's guarantee to pay the exporter on behalf of the importer
- C) A document listing details of shipped goods
- D) An insurance policy for goods in transit
- **Answer: B) A bank's guarantee to pay the exporter on behalf of the importer**
6. **Which type of international business involves local manufacturers in a foreign country producing goods as per the specifications of a foreign firm?**
- A) Licensing
- B) Joint Venture
- C) Contract Manufacturing
- D) Wholly Owned Subsidiary
- **Answer: C) Contract Manufacturing**
7. **What is the purpose of the ‘Certificate of Origin’ in international trade?**
- A) To certify the quality of goods
- B) To ensure that goods meet export quality standards
- C) To confirm the country where the goods were manufactured
- D) To verify the payment guarantee from the importer
- **Answer: C) To confirm the country where the goods were manufactured**
8. **In which entry mode does a company gain full control over its overseas operations by owning 100% of the equity?**
- A) Exporting
- B) Contract Manufacturing
- C) Licensing
- D) Wholly Owned Subsidiary
- **Answer: D) Wholly Owned Subsidiary**
9. **What does the ‘Bill of Lading’ represent in export transactions?**
- A) Ownership of the goods being shipped
- B) A contract between the importer and exporter
- C) An insurance policy for goods in transit
- D) A tax invoice for customs duty
- **Answer: A) Ownership of the goods being shipped**
10. **Which of the following is NOT considered a major benefit of international business for firms?**
- A) Access to new markets
- B) Higher risks and complexities
- C) Improved business vision
- D) Prospects for higher profits
- **Answer: B) Higher risks and complexities**
11. **Which international business strategy is particularly beneficial when the domestic market is highly competitive?**
- A) Joint Ventures
- B) Exporting
- C) Contract Manufacturing
- D) Wholly Owned Subsidiary
- **Answer: B) Exporting**
12. **What is the primary advantage of contract manufacturing for international firms?**
- A) Higher control over manufacturing quality
- B) Lower costs due to local production
- C) Complete freedom to set prices
- D) Direct access to customers in foreign markets
- **Answer: B) Lower costs due to local production**
13. **Which document is essential for securing payment in international trade and is often issued by the importer’s bank?**
- A) Bill of Exchange
- B) Shipping Bill
- C) Letter of Credit
- D) Marine Insurance Policy
- **Answer: C) Letter of Credit**
14. **Why do companies engage in portfolio investment in foreign countries?**
- A) To gain full control over foreign operations
- B) To earn income through dividends or interest
- C) To avoid foreign exchange risks
- D) To obtain local production advantages
- **Answer: B) To earn income through dividends or interest**
15. **In which mode of international business does a foreign investor buy an interest in a local company?**
- A) Contract Manufacturing
- B) Exporting
- C) Joint Venture
- D) Wholly Owned Subsidiary
- **Answer: C) Joint Venture**
16. **What is a major limitation of exporting as an entry mode into international business?**
- A) Low transportation costs
- B) High investment requirements
- C) Limited contact with foreign markets
- D) Limited government regulation
- **Answer: C) Limited contact with foreign markets**
17. **Which of the following is an example of invisible trade in international business?**
- A) Exporting machinery
- B) Importing raw materials
- C) Tourism services
- D) Exporting automobiles
- **Answer: C) Tourism services**
18. **Which type of risk is especially high when a company sets up a wholly owned subsidiary in a foreign country?**
- A) Contract risk
- B) Political risk
- C) Supply chain risk
- D) Customer risk
- **Answer: B) Political risk**
19. **What is the primary purpose of registering with an Export Promotion Council?**
- A) To secure a bank loan
- B) To receive a shipping order
- C) To avail government incentives and benefits
- D) To acquire an Import Export Code (IEC)
- **Answer: C) To avail government incentives and benefits**
20. **What is the term for the practice where a firm grants access to its patents and trade secrets to another firm in a foreign country?**
- A) Contract Manufacturing
- B) Exporting
- C) Licensing
- D) Joint Venture
- **Answer: C) Licensing**
21. **Which of the following documents proves that the goods have been insured for transit in international trade?**
- A) Bill of Lading
- B) Commercial Invoice
- C) Letter of Credit
- D) Marine Insurance Policy
- **Answer: D) Marine Insurance Policy**
22. **Which form of international business is characterized by strict guidelines from the parent company on how the business should operate?**
- A) Licensing
- B) Joint Venture
- C) Franchising
- D) Exporting
- **Answer: C) Franchising**
23. **What is the advantage of a joint venture for an international firm?**
- A) 100% control over business operations
- B) Access to local market knowledge and contacts
- C) Complete independence in decision-making
- D) Lower currency exchange risk
- **Answer: B) Access to local market knowledge and contacts**
24. **In the context of export transactions, what is a ‘proforma invoice’?**
- A) A document that confirms shipment
- B) A quote with details about the price, terms, and conditions of the goods
- C) An insurance certificate
- D) A document showing the import license
- **Answer: B) A quote with details about the price, terms, and conditions of the goods**
25. **What is the purpose of a ‘duty drawback’ in export transactions?**
- A) To increase the export price of goods
- B) To ensure a payment guarantee from the importer
- C) To refund the excise duty on exported goods
- D) To ensure the goods reach the destination on time
- **Answer: C) To refund the excise duty on exported goods**
26. **What type of international business arrangement is McDonald's known to use to operate globally?**
- A) Licensing
- B) Joint Venture
- C) Franchising
- D) Contract Manufacturing
- **Answer: C) Franchising**
27. **Which export document is needed to instruct port staff to allow cargo entry into the dock?**
- A) Shipping Bill
- B) Bill of Lading
- C) Cart Ticket
- D) Mate’s Receipt
- **Answer: C) Cart Ticket**
28. **What is one of the primary benefits for a country engaging in international business?**
- A) Limited use of resources
- B) Reduced foreign exchange reserves
- C) Employment potential and economic growth
- D) Increase in import restrictions
- **Answer: C) Employment potential and economic growth**
29. **Which term refers to the direct investment by a foreign firm in the assets and operations of a local company?**
- A) Portfolio Investment
- B) Licensing
- C) Contract Manufacturing
- D) Foreign Direct Investment (FDI)
- **Answer: D) Foreign Direct Investment (FDI)**
30. **What is the key difference between a ‘sight draft’ and a ‘usance draft’ in export transactions?**
- A) Sight draft requires immediate payment; usance draft allows deferred payment
- B) Usance draft is required for insurance; sight draft is not
- C) Sight draft is used in domestic trade; usance draft is used in international trade
- D) Usance draft is paid in local currency; sight draft in foreign currency
- **Answer: A) Sight draft requires immediate payment; usance draft allows deferred payment**
31. **What is the primary objective of the Export Inspection Council of India (EICI)?**
- A) To issue export licenses
- B) To inspect export quality and issue certificates
- C) To provide loans to exporters
- D) To grant exemptions on import duties
- **Answer: B) To inspect export quality and issue certificates**
32. **Which of the following documents is necessary to apply for an Import Export Code (IEC) number?**
- A) Commercial Invoice
- B) Export Order
- C) Banker’s Certificate
- D) Shipping Bill
- **Answer: C) Banker’s Certificate**
33. **Which of these is a major component of trade in services?**
- A) Machinery exports
- B) Raw material imports
- C) International travel and tourism
- D) Textile manufacturing
- **Answer: C) International travel and tourism**
34. **What is the primary purpose of pre-shipment finance for exporters?**
- A) To cover import duties
- B) To fund the production and packing of goods for export
- C) To insure goods during shipment
- D) To provide financing to foreign buyers
- **Answer: B) To fund the production and packing of goods for export**
35. **Which of the following is true about 'portfolio investment'?**
- A) It provides direct control over foreign operations
- B) It involves investment in assets like plant and machinery
- C) It is used primarily for short-term financial returns
- D) It requires joint ventures with local firms
- **Answer: C) It is used primarily for short-term financial returns**
36. **Which type of international business model allows firms to operate abroad by sharing ownership and risks with a local partner?**
- A) Contract Manufacturing
- B) Wholly Owned Subsidiary
- C) Joint Venture
- D) Licensing
- **Answer: C) Joint Venture**
37. **In export-import documentation, what is the ‘Commercial Invoice’?**
- A) A document confirming goods have been insured
- B) A document detailing quantity, price, and value of goods
- C) A certificate of origin
- D) A bill for customs duties
- **Answer: B) A document detailing quantity, price, and value of goods**
38. **Which of the following is NOT a benefit for firms engaging in international business?**
- A) Increased risk exposure
- B) Higher profit potential
- C) Access to larger markets
- D) Greater capacity utilization
- **Answer: A) Increased risk exposure**
39. **What does the ‘Mate’s Receipt’ indicate in the export process?**
- A) Customs clearance has been obtained
- B) The cargo has been loaded on the ship
- C) The goods have reached the importer
- D) The goods are insured for transit
- **Answer: B) The cargo has been loaded on the ship**
40. **What is a 'Greenfield Venture' in international business?**
- A) Partnering with a foreign company
- B) Exporting goods through third-party agents
- C) Setting up a new operation from scratch in a foreign country
- D) Acquiring an existing foreign company
- **Answer: C) Setting up a new operation from scratch in a foreign country**
41. **Which agency in India is responsible for administering the Duty Drawback scheme?**
- A) Reserve Bank of India
- B) Directorate of Drawback
- C) Export Promotion Council
- D) Directorate General of Foreign Trade (DGFT)
- **Answer: B) Directorate of Drawback**
42. **What is a primary reason for a firm to choose franchising as an entry mode?**
- A) To retain complete control over international operations
- B) To minimize investment and risk by granting business rights to a franchisee
- C) To eliminate the need for foreign investment
- D) To secure exclusive rights over foreign resources
- **Answer: B) To minimize investment and risk by granting business rights to a franchisee**
43. **Which of the following is a major difference between domestic and international business?**
- A) Greater product standardization in international business
- B) Use of multiple currencies in international business
- C) Uniform customer preferences in international markets
- D) Fewer regulations in international business
- **Answer: B) Use of multiple currencies in international business**
44. **In the context of export procedures, what is the 'Shipping Bill' used for?**
- A) Document to release insurance payments
- B) Main document for customs to authorize export
- C) Confirmation of the importer's payment
- D) An agreement between exporter and importer
- **Answer: B) Main document for customs to authorize export**
45. **What is a major disadvantage of setting up a wholly owned subsidiary abroad?**
- A) Lack of product control
- B) High investment costs and risks
- C) Limited control over the brand
- D) Shared ownership with local partners
- **Answer: B) High investment costs and risks**
46. **Which document serves as the exporter’s bill for merchandise and includes details like quantity, total value, and terms of delivery?**
- A) Bill of Lading
- B) Commercial Invoice
- C) Letter of Credit
- D) Certificate of Origin
- **Answer: B) Commercial Invoice**
47. **The ‘Airway Bill’ is issued when goods are transported by which mode?**
- A) Sea
- B) Road
- C) Air
- D) Rail
- **Answer: C) Air**
48. **Which of the following is essential for foreign companies entering highly regulated markets to adapt successfully?**
- A) Ignoring socio-cultural differences
- B) Extensive investment in domestic businesses only
- C) Adapting marketing and business strategies
- D) Retaining standard business practices
- **Answer: C) Adapting marketing and business strategies**
49. **What does a ‘Letter of Indemnity’ ensure in the export process?**
- A) Guaranteed product quality
- B) Secured payment for the exporter even if the importer defaults
- C) Direct shipping of goods without customs checks
- D) Reduced transportation costs
- **Answer: B) Secured payment for the exporter even if the importer defaults**
50. **What type of international business is characterized by low-risk and low-investment entry through the sale of rights to a foreign entity?**
- A) Wholly Owned Subsidiary
- B) Contract Manufacturing
- C) Licensing
- D) Joint Venture
- **Answer: C) Licensing**
