1.

Define ‘International Business’

International business is a term used to collectively describe all commercial transactions (private and
governmental, sales, investments, logistics,and transportation) that take place between two or more
nations. Usually, private companies undertake such transactions for profit; governments undertake
them for profit and for political reasons.[1] It refers to all those business activities which involves cross
border transactions of goods, services, resources between two or more nations. Transaction of
economic resources include capital, skills, people etc. for international production of physical goods and
services such as finance, banking, insurance, construction etc

2. What is International Marketing?

International marketing (IM) or global marketing refers to marketing carried out by companies
overseas or across national borderlines. This strategy uses an extension of the techniques used in the
home country of a firm.[1] It refers to the firm-level marketing practices across the border including
market identification and targeting, entry mode selection, marketing mix, and strategic decisions to
compete in international markets.[2] According to the American Marketing Association (AMA)
"international marketing is the multinational process of planning and executing the conception, pricing,
promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and
organizational objectives."[3] In contrast to the definition of marketing only the word multinational has
been added.[3] In simple words international marketing is the application of marketing principles to
across national boundaries. However, there is a crossover between what is commonly expressed as
international marketing and global marketing, which is a similar term.

3. What is Exchange Rate? What is ‘Direct Quote’?

 Exchange Rate - The ratio between two currencies is known as exchange rate
 It indicates the number of units of currency A which equal one unit/hundred units of
currency B.
 Direct Quote indicates the number of units of home currency per unit /1 units of foreign
currency. Rs. 48.00/$1 (direct quote for $ in India). Indirect Quote expresses the number
 of units of foreign currency as equal to one/100 units of home currency. US$
0.02083/1INR (Indirect Quote for $ in India.)

Note:

 Pegged Exchange Rate System – under this system, each member country of the IMF
was required to define the value of its currency in terms of gold or the US dollar and to
maintain (to peg) the market value of its currency within + percent of the defined (par)
value.
 The flexible (floating) exchange rate system- The spot price of foreign currency is
market-driven, determined by the interaction of private demand and supply for that
currency. The market clears itself through the price mechanism.
 The Managed Float Exchange Rate System - Central banks intervene in the foreign
exchange markets to influence the exchange rate in a direction they consider desirable.
This system is sometimes referred to as a dirty float.

4. What do you mean by ‘spin-off  benefits’ in international business?

Spin-offs occur when a parent corporation distributes all or most of its holdings of stock
in a subsidiary to the parent's shareholders based on the proportion to their holdings in the
parent company, i.e. on a pro rata basis. As a result, the subsidiary company is no longer
owned or controlled by the parent company and there are two separate publicly traded
companies. Prior to the spin-off, shareholders only own the parent company's stock,
whereas after the spin-off they own shares in both the parent and the subsidiary. In these
transactions, no funds change hands, and the assets of the subsidiary are not revalued.
The transaction is considered to be a stock dividend and a tax-free exchange under
Internal Revenue Code Section 355.

Read more: Spin-Offs - benefits http://www.referenceforbusiness.com/encyclopedia/Sel-

Str/Spin-Offs.html#ixzz1FAB81Wmk

5. What is ‘Ethnocentric’ orientation?

 domestic market extension concept:

 Domestic strategies, techniques, and personnel are perceived as superior
 International customers, considered secondary
 International markets regarded as outlets for surplus domestic production
 International marketing plans developed in-house by international division
 6. Differentiate the “Bid-rate and Ask-rate”

Bid rate: The rate at which a trader is willing to buy a currency.

Ask Rate: The lowest price at which a financial instrument is offered for sale (as in bid/ask spread).

7. Explain leverages.

It means ability of a firm to use fixed cost assets or funds in order to increase the returns to its
shareholders. It may also be defined as relative change in profits due to a change in sales.

a. Financial leverages : if a firm use debt or preference capital or both, it is a leveraged firm
b. Operating leverage: it is simply the amount of fixed cost in the cost structure, it measures
the extend to which the fixed cost is used in operating the firm. If the fixed cost is more
than the var. cost, then the operating leverage is high.
c. Combined leverage: it is the combination og FL and OL. The relationship between
contribution and taxable income.

In finance, leverage is a general term for any technique to multiply gains and losses.[1] Common
ways to attain leverage are borrowing money, buying fixed assets and using derivatives.[2]
Important examples are:

 A public corporation may leverage its equity by borrowing money. The more it borrows,
the less equity capital it needs, so any profits or losses are shared among a smaller base
and are proportionately larger as a result.[3]
 A business entity can leverage its revenue by buying fixed assets. This will increase the
proportion of fixed, as opposed to variable, costs, meaning that a change in revenue will
result in a larger change in operating income.[4][5]
 Hedge funds often leverage their assets by using derivatives. A fund might get any gains
or losses on $20 million worth of crude oil by posting $1 million of cash as margin.[6]
 8. What is ‘Gold Standard’?

The gold standard is a monetary system in which the standard economic unit of account is a fixed
weight of gold. There are distinct kinds of gold standard. First, the gold specie standard is a system in
which the monetary unit is associated with circulating gold coins, or with the unit of value defined in
terms of one particular circulating gold coin in conjunction with subsidiary coinage made from a lesser
valuable metal.

9. Explain the terms “EMS, ECU, EURO”

European Monetary System (EMS) was an arrangement established in 1979 under the Jenkins
European Commission where most nations of the European Economic Community (EEC) linked
their currencies to prevent large fluctuations relative to one another.

After the demise of the Bretton Woods system in 1971, most of the EEC countries agreed in
1972 to maintain stable exchange rates by preventing exchange rate fluctuations of more than
2.25% (the European "currency snake"). In March 1979, this system was replaced by the
European Monetary System, and the European Currency Unit (ECU) was defined.

The basic elements of the arrangement were:

1. The ECU: A basket of currencies, preventing movements above 2.25% (6% for Italy)
around parity in bilateral exchange rates with other member countries.
2. An Exchange Rate Mechanism (ERM)
3. An extension of European credit facilities.
4. The European Monetary Cooperation Fund: created in October 1972 and allocates ECUs
to members' central banks in exchange for gold and US dollar deposits.

The ECU: A basket of currencies, preventing movements above 2.25% (6% for Italy) around parity in
bilateral exchange rates with other member countries.

The euro (sign: €; code: EUR) is the official currency of the eurozone: 17 of the 27 member states of the
European Union (EU). It is also the currency used by the EU institutions. The eurozone consists of
Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta,
the Netherlands, Portugal, Slovakia, Slovenia and Spain.[2][3] The currency is also used in a further 5
European countries (Montenegro, Andorra, Monaco, San Marino and Vatican) with and without formal
agreements, one disputed territory (Kosovo) and is consequently used daily by some 327 million
Europeans.[4] Additionally, over 175 million people worldwide use currencies which are pegged to the
euro, including more than 150 million people in Africa.

10. Differentiate between ‘Swap Quote’ and ‘Outright Quote’

The quote for the forward market are also published in the newspaper and periodical. There are
two ways of quoting forward rates. While one is known as an outright quote, the other is known
as a swap quote.

The outright quote for the US dollar in terms of rupees can br written for different periods of a
forward contract.

Swap quote on the other hand only expresses the difference between the spot quote and the
forward quote.

For details check: http://books.google.co.in/books?

id=WCBlH0XDqqEC&pg=PT21&lpg=PT21&dq=Swap+Quote+and+Outright+Quote&source=
bl&ots=FO47Ra9OKC&sig=80dVtgNqZ-
ocKEZuGnOVVpZZjHU&hl=en&ei=0FRqTcGzLoXZcZa96Y0M&sa=X&oi=book_result&ct=r
esult&resnum=10&sqi=2&ved=0CFgQ6AEwCQ#v=onepage&q=Swap%20Quote%20and
%20Outright%20Quote&f=false

11. Differentiate between ‘spot and forward exchanges’

The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an
exchange rate that is quoted and traded today but for delivery and payment on a specific future date.

The rate of a foreign-exchange contract for immediate delivery. Also known as "benchmark rates",
"straightforward rates" or "outright rates", spot rates represent the price that a buyer expects to pay for
a foreign currency in another currency.
What Does Forward Rate Mean?
The amount that it will cost to deliver a currency, commodity, or some other asset some time in the
future.

12. Why do Business firms go international?  Explain the Push factors and the pull factors?

Some of the reactive or defensive reasons for going global are:

(1) Trade Barriers

(2) Customer Demands

(3) Globalization of Competitors

(4) Regulations and Restrictions

The proactive or aggressive reasons for going global are:

(a) Growth opportunities

(b) Economies of Scale

(c) Incentives

(d) Resource assess and Cost Savings

Whereas push factors usually drive migrants out of their countries of origin, pull factors generally decide where
these travelers end up. The positive aspects of some receiving countries serve to attract more migrants than others.
Following are three examples of the pull factors attracting migrants to receiving countries.

Higher standards of living/Higher wages: Economics provide the both biggest push and pull factor for potential
migrants. People moving to more developed countries will often find that the same work they were doing at home is
rewarded abroad with higher wages. They will also find a greater safety net of welfare benefits should they be
unable to work. Aware of this situation, migrants are drawn to those countries where they can maximize benefits.

For example, Mexican migrants coming to America do not move in order to escape unemployment at home. Rather,
it has been estimated that 80 percent of those who leave Mexico have jobs before they go. But, the wage gap
between American and Mexican workers has widened since the creation of the North American Free Trade
Agreement. U.S. wages are in fact an estimated 13 times that of Mexico. Thus, Mexican migrants come to America
because they are attracted by the higher hourly wages, not simply to find any work at all.
Labor Demand: Almost all developed countries have found that they need migrants' labor. Rich economies create
millions of jobs that domestic workers refuse to fill but migrant workers will cross borders to take. In 2001, the
British minister of foreign affairs, Robin Cook, gave a speech in which he argued that the country needed to
continue taking in foreign workers to meet labor demand. He said, "Legitimate immigration is the necessary and
unavoidable result of economic success, which generates a demand for labor faster than can be met by the birth-
rate of a modern developed country." The speech was unpopular, however, because many British citizens are
concerned about immigration changing the national culture.

Former UK Prime Minister Gordon Brown sought to reconcile this concern regarding threatened national heritage
with Britain’s need for immigrant labor by, on the one hand, refusing to put a limit on immigration, as “most British
businesses who have faced labour shortages had benefited from being able to recruit more widely for skilled
labour”, while on the other hand backing policies that emphasize immigrant assimilation through British cultural
education and required involvement in community work by potential immigrants. 20

Likewise, Ireland has recently seen a surge of immigration because its economy prospered during the 1990s.
Ironically, Ireland, which had sent so much of its population abroad over the last two centuries, started receiving
immigrants seeking work. This has caused conflict among native Irish and the newcomers, including discrimination
not unlike that faced by Irish who had previously immigrated to other countries.

Political and Religious Freedom: Throughout history, Jews have faced persecution or discrimination in most parts
of the world. Especially in the late 19th century, long-standing hatred against Jews in the Russian Empire exploded
in "pograms," attacks on Jews that led to murders, rapes, and arson against Jewish homes and stores, often
encouraged and assisted by the government.

Hundreds of thousands of Jews from across Eastern Europe fled to the United States, Canada, and South America,
while others joined the old Jewish community in the Holy Land, then controlled by the Turkish Ottoman Empire, to
help reestablish the independent Jewish state the Roman Empire had destroyed almost 2,000 years before.

Hundreds of thousands more Jews moved to Israel in the late 1940s in the aftermath of the Holocaust and after being
expelled from Arab countries as a result of the war over Israel's creation. At the same time, hundreds of thousands of
Arabs fled from Israel, and they and their descendants live in neighboring Arab countries.

With the expansion of telecommunications technology that has accompanied globalization, migrants have found it
drastically easier to stay connected with the religious community that they left behind in their home country, thus
making the decision to move away from home an easier one. In places where this “transnational religion” is
promoted through financial institutions, sister congregations, community organizations, telecommunications
infrastructure, and governmental tolerance, migration by religiously devout persons has followed. For example, a
large Muslim community with strong ties to religious leaders and congregations in Pakistan and Bangladesh has
sprung up in Britain; they have used their freedom of religious association to press local authorities for changes in
religious rights and education.21

Other pull factors include superior medical care or education, family links or simply a personal fondness of a certain
place, whether it may be linked to culture, language, weather conditions or other influencing factors.