11th Class Business Studies International Trade Question Bank International Trade-I (Long)

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    Discuss the benefits of international business.


    Ans.     The benefits of international business to nations are as follows:
    (a) Earning of Foreign exchange: International business helps a country to earn foreign exchange. It can use it for meeting its payments abroad.
    (b) Better utilization of resources: It is based on the principle of comparative cost advantage. It implies that produces what your country can produce more efficiently, and trade the surplus production so generated with other countries to procure what they can produce more efficiently. When countries produce on these principles, it increases their resource utilization.
    (c) Improving Growth Prospects and Employment Potentials: Producing solely for the purpose of domestic consumption severely restricts a country's prospects for growth and employment.
    (d) Increased Standard of Living: In the absence of international trade of goods and services, it would not have been possible to enjoy the standard of living it is enjoying now.
    The benefits of international business to firms are as follows:
    (a) Prospects for higher profits: International business proves more profitable as compared to domestic business. When prices in domestic market are lower, business firms can earn higher profits by selling their products in foreign countries.
    (b) Increased Capacity Utilization: Many firms set up production capacities for their products which are in excess of demand in the domestic market by planning overseas expansion and procuring orders from foreign customers. It allows them to make better use of their surplus capacity.
    (c) Prospects for growth: Business firms find it very irritating when there is fall in demand or saturation point comes in domestic market. Such firms can grow considerable prospects of their growth by entering into international business.
    (d) Way out to intense competition in domestic market: When competition in domestic market is very intense, internationalization seems to be the only way for significant growth. Highly competitive domestic market motivates many firms to enter into international business.
    (e) Improved Business Vision: The growth of international business of many companies is important for their survival and goodwill. Vision to become international is expression of urge to grow and the need to diversify and to take benefit of strategic advantages of internationalisation.

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