C HAPTER 11

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INTERNATIONAL BUSINESS - I

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

explain the meaning of international business;

state as to why international business takes place and how does

it differ from domestic business;

describe the scope of international business and its benefits to

the nation and business firms;

identify and evaluate various modes of entry into international

business; and

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analyse trends in Indias involvement in international business.

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BUSINESS STUDIES

Mr. Sudhir Manchanda is a small manufacturer of automobile components. His

factory is located in Gurgaon and employs about 55 workers with an investment
of Rs. 9.2 million in plant and machinery. Due to recession in the domestic
market, he foresees prospects of his sales going up in the next few years in the
domestic market. He is exploring the possibility of going international. Some of
his competitors are already in export business. A casual talk with one of his
close friends in the tyre business reveals that there is a substantial market for
automobile components and accessories in South-East Asia and Middle East.
But his friend also tells him, Doing business internationally is not the same as
carrying out business within the home country. International business is more
complex as one has to operate under market conditions that are different from
those that one faces in domestic business. Mr. Manchanda is, moreover, not
sure as to how he should go about setting up international business. Should he
himself identify and contact some overseas customers and start exporting directly
to them or else route his products through export houses which specialise in
exporting products made by others?

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Mr. Manchandas son who has just retur ned after an MBA in USA suggests that
they should set up a fully owned factory in Bangkok for supplying to customers
in South-East Asia and Middle East. Setting up a manufacturing plant there
will help them save costs of transporting goods from India. This would also help
them coming closer to the overseas customers. Mr. Manchanda is in a fix as to
what to do. In the face of difficulties involved in overseas ventures as pointed out
by his friend, he is wondering about the desirability of entering into global
business. He is also not sure as to what the different ways of entering into
international market are and which one will best suit his purpose.

11.1

I NTRODUCTION

Countries all over the world are

undergoing a fundamental shift in the
way they produce and market various
products and services. The national
economies which so far were pursuing
the goal of self-reliance are now
becoming increasingly dependent upon
others for procuring as well as
supplying various kinds of goods and
services. Due to increased cross border
trade and investments, countries are
no more isolated.

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The prime reason behind this

radical change is the development
of communication, technology,
infrastructure etc. Emergence of newer
modes of communication and
development of faster and more efficient
means of transportation have brought
nations closer to one another.
Countries that were cut-off from one
another due to geographical distances
and socio-economic differences have
now started increasingly interacting
with others. World Trade Organisation
(WTO) and reforms carried out by the

INTERNATIONAL BUSINESS - I

governments of different countries

have also been a major contributory
factor to the increased interactions and
business relations amongst the
nations.
We are today living in a world
where the obstacles to cross-border
movement of goods and persons have
substantially come down. The national
economies are increasingly becoming
borderless and getting integrated into
the world economy. Little wonder that
the world has today come to be known
as a global village. Business in the
present day is no longer restricted to
the boundaries of the domestic
country. More and more firms are
making forays into international
business which presents them with
numerous opportunities for growth
and increased profits.

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India has been trading with other

countries for a long time. But it has of
late considerably speeded up its
process of integrating with the world
economy and increasing its foreign
trade and investments (see Box A:
India Embarks on the Path to
Globalisation).
11.1.1

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Business transaction taking place

within the geographical boundaries of
a nation is known as domestic or
national business. It is also referred to
as internal business or home trade.
Manufacturing and trade beyond the
boundaries of ones own country is
known as international business.
International or external business can,
therefore, be defined as those business
activities that take place across the

Box A
India Embarks on the Path to Globalisation

International business has entered into a new era of reforms. India too did not
remain cut-off from these developments. India was under a severe debt trap and
was facing crippling balance of payment crisis. In 1991, it approached the
International Monetary Fund (IMF) for raising funds to tide over its balance of
payment deficits. IMF agreed to lend money to India subject to the condition that
India would undergo structural changes to be able to ensure repayment of
borrowed funds.
India had no alternative but to agree to the proposal. It was the very conditions
imposed by IMF which more or less forced India to liberalise its economic policies.
Since then a fairly large amount of liberalisation at the economic front has
taken place.
Though the process of reforms has somewhat slowed down, India is very much
on the path to globalisation and integrating with the world economy. While, on
the one hand, many multinational corporations (MNCs) have ventured into Indian
market for selling their products and services; many Indian companies too have
stepped out of the country to market their products and services to consumers
in foreign countries.

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Meaning of International
Business

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BUSINESS STUDIES

national frontiers. It involves not only

the international movements of goods
and services, but also of capital,
personnel, technology and intellectual
property like patents, trademarks,
know-how and copyrights.
It may be mentioned here that
mostly people think of international
business as international trade. But
this is not true. No doubt international
trade, comprising exports and imports
of goods, has historically been an
important component of international
business. But of late, the scope
of international business has
substantially expanded. International
trade in services such as international
travel and tourism, transportation,
communication, banking, warehousing, distribution and advertising
has considerably grown. The other
equally important developments are
increased foreign investments and
overseas production of goods and
services. Companies have started
increasingly making investments into
foreign countries and undertaking
production of goods and services in

foreign countries to come closer to

foreign customers and serve them
more effectively at lower costs. All these
activities form part of international
business. To conclude, we can say that
international business is a much
broader term and is comprised of both
the trade and production of goods and
services across frontiers.

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11.1.2

Reason for International

Business

The fundamental reason behind

international business is that the
countries cannot produce equally well
or cheaply all that they need. This is
because of the unequal distribution of
natural resources among them or
differences in their productivity levels.
Availability of various factors of
production such as labour, capital and
raw materials that are required for
producing different goods and services
differ among nations. Moreover, labour
productivity and production costs
differ among nations due to various
socio-economic, geographical and
political reasons.

International business involves commercial activities that cross national frontiers.

Roger Bennett

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International business consists of transactions that are devised and carried

out across national borders to satisfy the objectives of the individuals, companies
and organisations. These transactions take on various forms which are often
interrelated.
Michael R. Czinkota
International business is all business transactions private and
governmental that involve two or more countries. Private companies undertake
such transactions for profits; governments may or may not do the same in their
transactions.
John D. Daniels and Lee H. Radebaugh

INTERNATIONAL BUSINESS - I

Due to these differences, it is not

uncommon to find one particular
country being in a better position to
produce better quality products and/
or at lower costs than what other
nations can do. In other words, we can
say that some countries are in an
advantageous position in producing
select goods and services which other
countries cannot produce that
effectively and efficiently, and viceversa. As a result, each country finds it
advantageous to produce those select
goods and services that it can produce
more effectively and efficiently at home,
and procuring the rest through trade
with other countries which the other
countries can produce at lower costs.
This is precisely the reason as to why
countries trade with others and engage
in what is known as international
business.
The international business as it
exists today is to a great extent the
result of geographical specialisation as
pointed out above. Fundamentally, it
is for the same reason that domestic
trade between two states or regions
within a country takes place. Most
states or regions within a country tend
to specialise in the production of goods
and services for which they are best
suited. In India, for example, while
West Bengal specialises in jute
products; Mumbai and neighbouring
areas in Maharashtra are more involved
with the production of cotton textiles.
The same principle of territorial division
of labour is applicable at the
international level too. Most developing
countries which are labour abundant,

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for instance, specialise in producing and

exporting garments. Since they lack
capital and technology, they import
textile machinery from the developed
nations which the latter are in a position
to produce more efficiently.
What is true for the nation is more
or less true for firms. Firms too engage
in international business to import what
is available at lower prices in other
countries, and export goods to other
countries where they can fetch better
prices for their products. Besides price
considerations, there are several other
benefits which nations and firms derive
from international business. In a way,
these other benefits too provide an
impetus to nations and firms to engage
in international business. We shall turn
our attention to some of these benefits
accruing to nations and firms from
engaging in international business in a
later section.

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11.1.3

International Business vs.

Domestic Business

Conducting and managing international

business operations is more complex
than undertaking domestic business.
Because of variations in political, social,
cultural and economic environments
across countries, business firms find it
difficult to extend their domestic
business strategy to foreign markets. To
be successful in the overseas markets,
they need to adapt their product,
pricing, promotion and distribution
strategies and overall business plans to
suit the specific requirements of the
target foreign markets (see Box B on
Firms need to be Cognisant of

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BUSINESS STUDIES

Environmental Differences). Key aspects

in respect of which domestic and
international businesses differ from each
other are discussed below.
(i) Nationality of buyers and sellers:
Nationality of the key participants (i.e.,
buyers and sellers) to the business deals
differs between domestic and
international businesses. In the case of
domestic business, both the buyers and
sellers are from the same country. This
makes it easier for both the parties to
understand each other and enter into
business deals. But this is not the case
with international business where
buyers and sellers come from different
countries. Because of differences in their
languages, attitudes, social customs
and business goals and practices, it
becomes relatively more difficult for

them to interact with one another and

finalise business transactions.
(ii) Nationality of other stakeholders:
Domestic and international businesses
also differ in respect of the nationalities
of the other stakeholders such as
employees, suppliers, shareholders/
partners and general public who
interact with business firms. While in
the case of domestic business all such
factors belong to one country, and
therefore relatively speaking depict
more consistency in their value systems
and behaviours; decision making in
international business becomes much
more complex as the concerned
business firms have to take into
account a wider set of values and
aspirations of the stakeholders
belonging to different nations.

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Box B
Firms need to be Cognisant of Environmental Differences

It is to be kept in mind that conducting and managing international business is

not an easy venture. It is more difficult to manage international business operations
due to variations in the political, social, cultural and economic environments
that differ from country to country.
Simply being aware of these differences is not sufficient. One also needs to be
sensitive and responsive to these changes by way of introducing adaptations in
their marketing programmes and business strategies. It is, for instance, a well
known fact that because of poor lower per capita income, consumers in most of
the developing African and Asian countries are price sensitive and prefer to buy
less expensive products. But consumers in the developed countries like Japan,
United States, Canada, France, Germany and Switzerland have a marked
preference for high quality and high priced products due to their better ability to
pay. Business prudence, therefore, demands that the firms interested in marketing
to these countries are aware of such differences among the countries, and design
their strategies accordingly. It will be in the fitness of things if the firms interested
in exporting to these countries produce less expensive products for the consumers
in the African and Asian regions, and design and develop high quality products
for consumers in Japan and most of the European and North American countries.

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INTERNATIONAL BUSINESS - I

(iii) Mobility of factors of

production: The degree of mobility of
factors like labour and capital is
generally less between countries than
within a country. While these factors of
movement can move freely within the
country, there exist various restrictions
to their movement across nations.
Apart from legal restrictions, even the
variations
in
socio-cultural
environments, geographic influences
and economic conditions come in a big
way in their movement across
countries. This is especially true of the
labour which finds it difficult to adjust
to the climatic, economic and sociocultural conditions that differ from
country to country.
(iv) Customer heterogeneity across
markets: Since buyers in international
markets hail from different countries,
they differ in their socio-cultural
background. Differences in their tastes,
fashions, languages, beliefs and
customs, attitudes and product
preferences cause variations in not only
their demand for different products and
services, but also in variations in their
communication patterns and purchase
behaviours. It is precisely because of
the socio-cultural differences that while
people in China prefer bicycles, the
Japanese in contrast like to ride bikes.
Similarly, while people in India use
right-hand driven cars, Americans drive
cars fitted with steering, brakes, etc.,
on the left side. Moreover, while people
in the United States change their TV,
bike and other consumer durables very
frequently within two to three years
of their purchase, Indians mostly do not

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go in for such replacements until the

products currently with them have
totally worn out.
Such variations greatly complicate
the task of designing products and
evolving strategies appropriate for
customers in different countries.
Though to some extent customers
within a country too differ in their tastes
and preferences. These differences
become more striking when we
compare customers across nations.
(v) Differences in business systems
and practices: The differences in
business systems and practices are
considerably much more among
countries than within a country.
Countries differ from one another in
terms of their socio-economic
development, availability, cost and
efficiency of economic infrastructure
and market support services, and
business customs and practices due to
their socio-economic milieu and
historical coincidences. All such
differences make it necessary for firms
interested in entering into international
markets to adapt their production,
finance, human resource and
marketing plans as per the conditions
prevailing in the international markets.
(vi) Political system and risks:
Political factors such as the type of
government, political party system,
political ideology, political risks, etc.,
have a profound impact on business
operations. Since a business person is
familiar with the political environment
of his/her country, he/she can well
understand it and predict its impact on
business operations. But this is not the

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case with international business.

Political environment differs from one
country to another. One needs to make
special efforts to understand the differing
political environments and their
business implications. Since political
environment keeps on changing, one
needs to monitor political changes on
an ongoing basis in the concerned
countries and devise strategies to deal
with diverse political risks.
A major problem with a foreign
countrys political environment is a
tendency among nations to favour
products and services originating in
their own countries to those coming
from other countries. While this is not
a problem for business firms operating
domestically, it quite often becomes a
severe problem for the firms interested
in exporting their goods and services to
other nations or setting up their plants
in the overseas markets.
(vii) Business regulations and
policies: Coupled with its socioeconomic environment and political
philosophy, each country evolves its
own set of business laws and
regulations. Though these laws,
regulations and economic policies are
more or less uniformly applicable within
a country, they differ widely among
nations. Tariff and taxation policies,
import quota system, subsidies and
other controls adopted by a nation are
not the same as in other countries and
often discriminate against foreign
products, services and capital.
(viii) Currency used in business
transactions: Another important
difference between domestic and

international business is that the latter

involves the use of different currencies.
Since the exchange rate, i.e., the price of
one currency expressed in relation to
that of another countrys currency,
keeps on fluctuating, it adds to the
problems of international business firms
in fixing prices of their products and
hedging against foreign exchange risks.

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11.1.4

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Scope of International
Business

As pointed out earlier, international

business is much broader than
international trade. It includes not only
international trade (i.e., export and
import of goods and services), but also
a wide variety of other ways in which
the firms operate internationally. Major
forms of business operations that
constitute international business are as
follows.
(i) Merchandise exports and imports:
Merchandise means goods that are
tangible, i.e., those that can be seen and
touched. When viewed from this
perceptive, it is clear that while
merchandise exports means sending
tangible goods abroad, merchandise
imports means bringing tangible goods
from a foreign country to ones own
country. Merchandise exports and
imports, also known as trade in goods,
include only tangible goods and
exclude trade in services.
(ii) Service exports and imports:
Service exports and imports involve
trade in intangibles. It is because of the
intangible aspect of services that trade
in services is also known as invisible
trade. A wide variety of services are

INTERNATIONAL BUSINESS - I

Table 11.1
Basis

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Major Difference between Domestic

and International Business

Domestic business

International business

1.

Nationality of
buyers and
sellers

People or organisations
from one nation participate
in
domestic
business transactions.

People or organisations of
different countries participate
in international business
transactions.

2.

Nationality of
other
stakeholders

Various other stake holders such as suppliers,

employees, middlemen,
shareholders and partners
are usually citizens of the
same country.

Various other stakeholders

such as suppliers, employees,
middlemen, shareholders and
partners are from different
nations.

3.

Mobility of
factors of
prod uction

The degree of mobility of

factors of production like
labour and capital is
relatively more within a
country.

The degree of mobility of factors

of production like labour and
capital across nations is
relatively less.

4.

Customer
heterogeneity
across markets

Domestic markets are

relatively more homo geneous in nature.

International markets lack

homogeneity due to differences
in language, preferences,
customs, etc., across markets.

5.

Differences
in business
systems and
practices

Business systems and

practices are relatively
more homogeneous within
a country.

Business
systems
and
practices vary considerably
across countries.

6.

Political
system and
risks

Domestic business is
subject to political system
and risks of one single
country.

Different countries have different

forms of political systems and
different degrees of risks which
often become a barrier to
international business.

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7.

Business
regulations
and policies

Domestic business is
subject to rules, laws and
policies, taxation system,
etc. , of a single country.

International business transactions are subject to rules, laws

and policies, tariffs and quotas,
etc. of multiple countries.

8.

Currency
used in
business
transactions

Currency of domestic
country is used.

International business transactions

involve
use
of
currencies of more than one
country.

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BUSINESS STUDIES

traded internationally and these

include: tourism and travel, boarding
and lodging (hotel and restaurants),
entertainment and recreation,
transportation, professional services
(such as training, recruitment,
consultancy
and
research),
communication (postal, telephone, fax,
courier and other audio-visual
services), construction and engineering,
marketing (e.g., wholesaling, retailing,
advertising, marketing research
and warehousing), educational and
financial services (such as banking
and insurance). Of these, tourism,
transportation and business services
are major constituents of world trade
in services (see Box C).
(iii) Licensing and franchising:
Permitting another party in a foreign
country to produce and sell goods
under your trademarks, patents or

copy rights in lieu of some fee is

another way of entering into
international business. It is under the
licensing system that Pepsi and Coca
Cola are produced and sold all over the
world by local bottlers in foreign
countries. Franchising is similar to
licensing, but it is a term used in
connection with the provision of
services. McDonalds, for instance,
operates fast food restaurants the world
over through its franchising system.
(iv) Foreign investments: Foreign
investment is another important form
of international business. Foreign
investment involves investments of
funds abroad in exchange for financial
return. Foreign investment can be of
two types: direct and portfolio
investments.
Direct investment takes place when
a company directly invests in properties

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Box C
Tourism, Transportation and Business Services dominate
International Trade in Services

Tourism and transportation have emerged as major components of

international trade in services. Most of the airlines, shipping companies, travel
agencies and hotels get their major share of revenues from their overseas
customers and operations abroad. Several countries have come to heavily depend
on services as an important source of foreign exchange earnings and
employment. India, for example, earns a sizeable amount of foreign exchange
from exports of services related to travel and tourism.
Business services: When one country provides services to other country and in
the process earns foreign exchange, this is also treated as a form of international
business activity. Fee received for services like banking, insurance, rentals,
engineering and management services form part of countrys foreign exchange
earnings. Undertaking of construction projects in foreign countries is also an
example of export of business services. The other examples of such services
include overseas management contracts where arrangements are made by one
company of a country which provides personnel to perform general or specialised
management functions for another company in a foreign country in lieu of the
other country.

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INTERNATIONAL BUSINESS - I

such as plant and machinery in foreign

countries with a view to undertaking
production and marketing of goods
and services in those countries. Direct
investment provides the investor a
controlling interest in a foreign
company. This is otherwise known as
Foreign Direct Investment, i.e., FDI.
When investments in production and
marketing facilities are made jointly
with one or more foreign parties, such
an operation is known as a joint
venture. A company, if it so desires, can
also set up a wholly owned subsidiary
abroad by making 100 per cent
investment in foreign ventures, and
thus acquiring full control over
subsidiarys operations in the foreign
market.
A portfolio investment, on the other
hand, is an investment that a company
makes into another company by the
way of acquiring shares or providing
loans to the latter, and earns income
by way of dividends or interest on
loans. Unlike foreign direct investments,
the investor under portfolio investment
does not get directly involved into
production and marketing operations.
It simply earns an income by investing
in shares, bonds, bills, or notes in a
foreign country or providing loans to
foreign business firms.

Growing realisation of these benefits

over time has in fact been a contributory
factor to the expansion of trade and
investment amongst nations, resulting
in the phenomenon of globalisation.
Some of the benefits of international
business to the nations and business
firms are discussed below.
Benefits to Nations

Benefits of International
Business

Notwithstanding greater complexities

and risks, international business is
important to both nations and business
firms. It offers them several benefits.

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11.1.5

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(i) Earning of foreign exchange:

International business helps a country
to earn foreign exchange which it can
later use for meeting its imports of
capital goods, technology, petroleum
products and fertilisers, pharmaceutical products and a host of other
consumer products which otherwise
might not be available domestically.
(ii) More efficient use of resources:
As stated earlier, international business
operates on a simple principle
produce 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 trade on this principle, they
end up producing much more than
what they can when each of them
attempts to produce all the goods and
services on its own. If such an enhanced
pool of goods and services is distributed
equitably amongst nations, it benefits
all the trading nations.
(iii) Improving growth prospects and
employment potentials: Producing
solely for the purposes of domestic
consumption severely restricts a
countrys prospects for growth and

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employment. Many countries, especially the developing ones, could not

execute their plans to produce on a
larger scale, and thus create
employment for people because their
domestic market was not large enough
to absorb all that extra production.
Later on a few countries such as
Singapore, South Korea and China
which saw markets for their products
in the foreign countries embarked upon
the strategy export and flourish, and
soon became the star performers on the
world map. This helped them not only
in improving their growth prospects,
but also created opportunities for
employment of people living in these
countries.
(iv) Increased standard of living: In
the absence of international trade of goods
and services, it would not have been
possible for the world community to
consume goods and services produced
in other countries that the people in these
countries are able to consume and enjoy
a higher standard of living.

expansion and procuring orders from

foreign customers, they can think of
making use of their surplus production
capacities and also improving the
profitability of their operations.
Production on a larger scale often leads
to economies of scale, which in turn
lowers production cost and improves
per unit profit margin.
(iii) Prospects for growth: Business
firms find it quite frustrating when
demand for their products starts
getting saturated in the domestic
market. Such firms can considerably
improve prospects of their growth by
plunging into overseas markets. This
is precisely what has prompted many
of the multinationals from the
developed countries to enter into
markets of developing countries. While
demand in their home countries has got
almost saturated, they realised their
products were in demand in the
developing countries and demand was
picking up quite fast.
(iv) Way out to intense competition in domestic market: When
competition in the domestic market is
very intense, internationalisation seems
to be the only way to achieve significant
growth. Highly competitive domestic
market drives many companies to go
international in search of markets for
their products. International business
thus acts as a catalyst of growth for
firms facing tough market conditions
on the domestic turf.
(v) Improved business vision: The
growth of international business of
many companies is essentially a part
of their business policies or strategic

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Benefits to Firms

(i) Prospects for higher profits:

International business can be more
profitable than the domestic business.
When the domestic prices are lower,
business firms can earn more profits
by selling their products in countries
where prices are high.
(ii) Increased capacity utilisation:
Many firms setup production
capacities for their products which
are in excess of demand in the
domestic market. By planning overseas

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INTERNATIONAL BUSINESS - I

management. The vision to become

international comes from the urge to
grow, the need to become more
competitive, the need to diversify and
to gain strategic advantages of
internationalisation.

11.2

M ODES OF ENTRY INTO

I NTERNATIONAL BUSINESS

Simply speaking, the term mode means

the manner or way. The phrase modes
of entry into international business,
therefore, means various ways in which
a company can enter into international
business. While discussing the
meaning and scope of international
business, we have already familiarised
you with some of the modes of entry
into international business. In the
following sections, we shall discuss in
detail important ways of entering into
international business along with their
advantages and limitations. Such a
discussion will enable you to know as
to which mode is more suitable under
what conditions.
11.2.1

263

formalities related to exporting/

importing activities including those
related to shipment and financing of
goods and services. Indirect exporting/
importing, on the other hand, is one
where the firms participation in
the export/import operations is
minimum, and most of the tasks
relating to export/import of the goods
are carried out by some middle men
such as export houses or buying
offices of overseas customers located
in the home country or wholesale
importers in the case of import
operations. Such firms do not directly
deal with overseas customers in the
case of exports and suppliers in the
case of imports.

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Exporting and Importing

Exporting refers to sending of goods

and services from the home country to
a foreign country. In a similar vein,
importing is purchase of foreign
products and bringing them into ones
home country. There are two important
ways in which a firm can export or
import products: direct and indirect
exporting/importing. In the case of
direct exporting/importing, a firm
itself approaches the overseas buyers/
suppliers and looks after all the

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Advantages

Major advantages of exporting include:

As compared to other modes of
entry, exporting/importing is the
easiest way of gaining entry into
international markets. It is less
complex an activity than setting
up and managing joint-ventures
or wholly owned subsidiaries
abroad.
Exporting/importing is less
involving in the sense that
business firms are not required to
invest that much time and money
as is needed when they desire to
enter into joint ventures or set up
manufacturing plants and
facilities in host countries.
Since exporting/importing does
not require much of investment in
foreign countries, exposure to

264

BUSINESS STUDIES

foreign investment risks is nil or

much lower than that is present
when firms opt for other modes of
entry into international business.
Limitations
Major limitations of exporting/
importing as an entry mode of
international business are as follows:
Since the goods physically move
from one country to another,
exporting/importing involves
additional packaging, transportation and insurance costs.
Especially in the case of heavy
items, transportation costs alone
become an inhibiting factor to
their exports and imports. On
reaching the shores of foreign
countries, such products are
subject to custom duty and a
variety of other levies and charges.
Taken together, all these expenses
and payments substantially
increase product costs and make
them less competitive.
Exporting is not a feasible option
when import restrictions exist in
a foreign country. In such a
situation, firms have no alternative
but to opt for other entry modes
such as licensing/franchising or
joint venture which makes it
feasible to make the product
available by way of producing and
marketing it locally in foreign
countries.
Export firms basically operate
from their home country. They
produce in the home country and
then ship the goods to foreign

countries. Except a few visits made

by the executives of export firms
to foreign countries to promote
their products, the export firms in
general do not have much contact
with the foreign markets. This puts
the export firms in a disadvantageous position vis--vis the local
firms which are very near the
customers and are able to better
understand and serve them.
Despite the above mentioned
limitations, exporting/importing is the
most preferred way for business firms
when they are getting initially involved
with international business. As usually
is the case, firms start their overseas
operations with exports and imports,
and later having gained familiarity with
the foreign market operations switch
over to other forms of international
business operations.

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11.2.2

Contract Manufacturing

Contract manufacturing refers to a type

of international business where a firm
enters into a contract with one or a few
local manufacturers in foreign countries
to get certain components or goods
produced as per its specifications.
Contract manufacturing, also known as
outsourcing, can take three major forms:
Production of certain components
such as automobile components
or shoe uppers to be used later for
producing final products such as
cars and shoes;
Assembly of components into final
products such as assembly of hard
disk, mother board, floppy disk
drive and modem chip into
computers; and

INTERNATIONAL BUSINESS - I

Complete manufacture of the

products such as garments.
The goods are produced or assembled
by the local manufacturers as per the
technology and management guidance
provided to them by the foreign
company. The goods so manufactured
or assembled by the local producers
are delivered to the international firm
for use in its final products or out
rightly sold as finished products by the
international firm under its brand
names in various countries including
the home, host and other countries. All
the major international companies such
as Nike, Reebok, Levis and Wrangler
today get their products or components
produced in the developing countries
under contract manufacturing.

265

manufactured or assembled at
lower costs especially if the local
producers happen to be situated
in countries which have lower
material and labour costs.
Local producers in foreign
countries also gain from contract
manufacturing. If they have any
idle production capacities,
manufacturing jobs obtained on
contract basis in a way provide a
ready market for their products
and ensure greater utilisation of
their production capacities. This is
how the Godrej group is benefitting
from contract manufacturing in
India. It is manufacturing soaps
under contract for many
multinationals including Dettol
soap for Reckitt and Colman. This
has considerably helped it in
making use of its excess soap
manufacturing capacity.
The local manufacturer also gets
the opportunity to get involved with
international business and avail
incentives, if any, available to the
export firms in case the international
firm desires goods so produced be
delivered to its home country or to
some other foreign countries.

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Advantages

Contract manufacturing offers several

advantages to both the international
company and local producers in the
foreign countries.
Contract manufacturing permits
the international firms to get the
goods produced on a large scale
without requiring investment in
setting up production facilities.
These firms make use of the
production facilities already
existing in the foreign countries.
Since there is no or little
investment in the foreign
countries, there is hardly any
investment risk involved in the
foreign countries.
Contract manufacturing also gives
an advantage to the international
company of getting products

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Limitations

The major disadvantages of contract

manufacturing to international firm
and local producer in foreign countries
are as follows:
Local firms might not adhere to
production design and quality
standards, thus causing serious
product quality problems to the
international firm.

266

BUSINESS STUDIES

Local manufacturer in the foreign

country loses his control over the
manufacturing process because
goods are produced strictly as per
the terms and specifications of the
contract.
The local firm producing under
contract manufacturing is not free
to sell the contracted output as
per its will. It has to sell the goods
to the international company at
predetermined prices. This results
in lower profits for the local firm if
the open market prices for such
goods happen to be higher than
the prices agreed upon under the
contract.
11.2.3

technology that is licensed. In the

fashion industry, a number of
designers license the use of their
names. In some cases, there is
exchange of technology between the
two firms. Sometimes there is mutual
exchange of knowledge, technology
and/or patents between the firms
which is known as cross-licensing.
Franchising is a term very similar
to licensing. One major distinction
between the two is that while the former
is used in connection with production
and marketing of goods, the term
franchising applies to service business.
The other point of difference between
the two is that franchising is relatively
more stringent than licensing.
Franchisers usually set strict rules and
regulations as to how the franchisees
should operate while running their
business. Barring these two differences,
franchising is pretty much the same as
licensing. Like in the case of licensing,
a franchising agreement too involves
grant of rights by one party to another
for use of technology, trademark and
patents in return of the agreed
payment for a certain period of time.
The parent company is called the
franchiser and the other party to the

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Licensing and Franchising

Licensing is a contractual arrangement

in which one firm grants access to its
patents, trade secrets or technology to
another firm in a foreign country for a
fee called royalty. The firm that grants
such permission to the other firm is
known as licensor and the other firm
in the foreign country that acquires
such rights to use technology or
patents is called the licensee. It may
be mentioned here that it is not only

Franchising is basically a specialised form of licensing in which the franchisor

not only sells intangible property (normally a trademark) to the franchisee, but
also insists that the franchisee agrees to abide by strict rules as to how it does
business.
Charles W.L. Hill

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Franchising is a form of licensing in which a parent company (the franchisor)

grants another independent entity (the franchisee) the right to do business in a
pr escribed manner. This right can take the for m of selling the franchisers
products, using its name, production and marketing technique, or general
business approach.
Donald W. Hackett

INTERNATIONAL BUSINESS - I

agreement is called franchisee. The

franchiser can be any service provider
be it a restaurant, hotel, travel agency,
bank wholesaler or even a retailer - who
has developed a unique technique for
creating and marketing of services
under its own name and trade mark. It
is the uniqueness of the technique that
gives the franchiser an edge over its
competitors in the field, and makes the
would-be-service providers interested
in joining the franchising system.
McDonald, Pizza Hut and Wal-Mart are
examples of some of the leading
franchisers operating worldwide.

267

licensee/franchisee by way of fees

fixed in advance as a percentage of
production or sales turnover. This
royalty or fee keeps accruing to the
licensor/franchiser so long as the
production and sales keep on taking
place in the licensees/franchisees
business unit.
Since the business in the foreign
country is managed by the
licensee/franchisee who is a local
person, there are lower risks of
business takeovers or government
interventions.
Licensee/franchisee being a local
person has greater market
knowledge and contacts which
can prove quite helpful to the
licensor/franchiser in successfully
conducting its marketing
operations.
As per the terms of the licensing/
franchising agreement, only the
parties to the licensing/franchising
agreement are legally entitled to
make use of the licens ors/
franchisers copyrights, patents
and brand names in foreign
countries. As a result, other firms
in the foreign market cannot make
use of such trademarks and
patents.

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Advantages

As compared to joint ventures and

wholly owned subsidiaries, licensing/
franchising is relatively a much easier
mode of entering into foreign markets
with proven product/technology
without much business risks and
investments. Some of the specific
advantages of licensing are as follows:
Under the licensing/franchising
system, it is the licensor/
franchiser who sets up the
business unit and invests his/her
own money in the business. As
such, the licensor/franchiser has
to virtually make no investments
abroad. Licensing/franchising is,
therefore, considered a less
expensive mode of entering into
international business.
Since no or very little foreign
investment is involved, licensor/
franchiser is not a party to the losses,
if any, that occur to foreign business.
Licensor/franchiser is paid by the

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Limitations

Licensing/franchising as a mode of
international business suffers from the
following weaknesses.
When a licensee/franchisee
becomes skilled in the manufacture and marketing of the
licensed/franchised products,

268

BUSINESS STUDIES

there is a danger that the licensee

can start marketing an identical
product under a slightly different
brand name. This can cause
severe competition to the licenser/
franchiser.
If not maintained properly, trade
secrets can get divulged to others
in the foreign markets. Such
lapses on the part of the licensee/
franchisee can cause severe losses
to the licensor/franchiser.
Over time, conflicts often develop
between the licensor/franchiser
and licensee/franchisee over
issues such as maintenance of
accounts, payment of royalty and
non-adherence to norms relating
to production of quality products.
These differences often result in
costly litigations, causing harm to
both the parties.
11.2.4

(iii) Both the foreign and local

entrepreneurs jointly forming a
new enterprise.
Advantages

Since the local partner also

contributes to the equity capital
of such a venture, the
international firm finds it
financially less burdensome to
expand globally.
Joint ventures make it possible
to execute large projects
requiring huge capital outlays
and manpower.
The foreign business firm
benefits from a local partners
knowledge of the host countries
regarding the c o m p e t i t i v e
conditions, culture, language,
political systems and business
systems.
In many cases entering into a
foreign market is very costly and
risky. This can be avoided by
sharing costs and/or risks with
a local partner under joint
venture agreements.

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Joint Ventures

Joint venture is a very common

strategy for entering into foreign
markets. A joint venture means
establishing a firm that is jointly
owned by two or more otherwise
independent firms. In the widest sense
of the term, it can also be described
as any form of association which
implies collaboration for more than a
transitory period. A joint ownership
venture may be brought about in
three major ways:
(i) Foreign investor buying an
interest in a local company
(ii) Local firm acquiring an interest in
an existing foreign firm

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Major advantages of joint venture

include:

Limitations

Major limitations of a joint venture are

discussed below:
Foreign firms entering into joint
ventures share the technology and
trade secrets with local firms in
foreign countries, thus always
running the risks of such a

INTERNATIONAL BUSINESS - I

technology and secrets being

disclosed to others.
The dual ownership arrangement
may lead to conflicts, resulting in
battle for control between the
investing firms.
11.2.5 Wholly Owned Subsidiaries
This entry mode of international
business is preferred by companies
which want to exercise full control over
their overseas operations. The parent
company acquires full control over the
foreign company by making 100 per
cent investment in its equity capital. A
wholly owned subsidiary in a foreign
market can be established in either of
the two ways:
(i) Setting up a new firm altogether
to start operations in a foreign
country also referred to as a
green field venture, or
(ii) Acquiring an established firm in
the foreign country and using that
firm to manufacture and/or
promote its products in the host
nation.

269

Limitations
The limitations of setting up a wholly
owned subsidiary abroad include:
The parent company has to make
100 per cent equity investments
in the foreign subsidiaries. This
form of international business is,
therefore, not suitable for small
and medium size firms which do
not have enough funds with them
to invest abroad.
Since the parent company owns
100 per cent equity in the foreign
company, it alone has to bear the
entire losses resulting from failure
of its foreign operations.
Some countries are averse to
setting up of 100 per cent wholly
owned subsidiaries by foreigners
in their countries. This form of
international business operations,
therefore, becomes subject to
higher political risks.

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Advantages

Major advantages of a wholly owned

subsidiary in a foreign country are as
follows:

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The parent firm is able to exercise

full control over its operations in
foreign countries.
Since the parent company on its
own looks after the entire operations
of foreign subsidiary, it is not
required to disclose its technology
or trade secrets to others.

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11.3

INDIAS INVOLVEMENT IN WORLD

B USINESS

India is now the 10th largest economy

in the world and the fastest growing
economy, next only to China. As per
the Goldman Sach Report 2004, India
is poised to be the second largest
economy by 2050. Despite these
features, Indias involvement with
international business is not very
impressive. Indias share in world trade
in 2003 was abysmally low i.e., just 0.8
per cent as compared to those of other
developing countries such as China
(5.9 per cent), Hong Kong (3.0 per cent),
South Korea (2.6 per cent), Malaysia

270

BUSINESS STUDIES

(1.3 per cent), Singapore (1.9 per cent),

and Thailand (1.1 per cent). Even in
respect of foreign investments, India
has been considerably lagging behind
other countries. The following sections
provide an overview of the major trends
and developments in Indias foreign
trade and investments.
11.3.1

Indias Foreign Trade in

Goods

Rs. 606 crores in 1950-51 which

increased to Rs. 2,93,367 crores in
2003-04, representing an increase of
over 480 times over the last five decades
or so (see Table 11.2). The countrys
imports too depict a similarly
phenomenal growth. Total imports which
stood at Rs. 608 crores in 1950-51
increased to Rs. 3,59,108 crores in
2003-04, thus registering a growth of
about 590 times during the same period.
Compostion wise, textiles and
garments, gems and jewellery,

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India accounts for a small share in

world trade, its exports and imports
Table 11.2
Year
1950-51
1960-61
1970-71
1980-81
1990-91
1995-96
2000-01
2001-02
2002-03
2003-04

Indias Exports and Imports: 1950-51 to 2003-04

(Value: Rs. cr ores)
Exports*
Imports
606
642
1535
6711
32553
106353
203571
209018
255137
293367

608
1122
1634
12549
43198
122678
230873
245200
297206
359108

Trade balance
-2
-480
-99
-5838
-10645
-16325
-27302
-36182
-42069
-65741

Source: DGCIS
* Including re-exports.

constitute major economic activities for

the country. Due to faster growth
achieved at the external front, share of
foreign trade in the countrys Gross
Domestic Product (GDP) has
considerably increased from 14.6 per
cent in 1990-91 to 24.1 per cent in
2003-04.
In absolute terms, both the
exports and imports have witnessed
phenomenal growth over the years.
Indias total merchandise exports were

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engineering products and chemicals

and related products and agricultural
and allied products are Indias
major items of Indias exports (see
Table 11.3). Although in overall terms
India accounts for just 0.8 per cent
of world exports, in many individual
product items such as tea, pearls,
precious and semi-precious stones,
medicinal and pharmaceutical
products, rice, spices, iron ore and
concentrates, leather and leather

INTERNATIONAL BUSINESS - I

Table 11.3

271

Commodity Composition of Indias Exports

Product
I Primary products
Agricultural and allied
Ores and minerals
II Manufactured goods
Textiles including garments
Gems and jewellery
Engineering goods
Chemicals and related products
Leather and manufactures
III Petroleum, crude and related products
IV Others
Total exports

Percentage share
2002-03 2003-04
16.6
15.5
12.8
11.8
3.8
3.7
76.6
76.0
21.1
19.0
17.2
16.6
17.2
19.4
14.2
14.8
3.5
3.4
4.9
5.6
1.9
2.9
100.0 100.0

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Source: DGCIS, Calcutta as reported in Government of India, Economic Survey:

2004-2005, New Delhi.

manufactures, textile yarns fabrics,

garments and tobacco, its share is
much higher and ranges between 3
per cent to13 per cent. India even
holds the distinct position of being the
largest exporter in the world in select
commodities such as basmati rice,
tea, and ayurvedic products.
Table 11.4

So far as imports are concerned,

products likes crude oil and petroleum
products, capital goods (i.e.,
machinery), electronic goods, pearl,
precious and semi-precious stones,
gold, silver and chemicals constitute
major items of Indias imports
(Table 11.4).

Commodity Composition of Indias Imports

Product
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

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Petroleum, oil and lubricants (POL)

Pearl, precious and semi-precious stones
Capital goods
Electronic goods
Gold and silver
Chemicals
Edible oils
Coke, coal and briquettes
Metal ferrous ores and metal scrap
Professional equipments and optical goods
Others
Total imports

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Percentage share
2002-03
2003-04
28.7
26.3
9.9
9.1
12.1
13.3
9.1
9.6
7.0
8.8
6.9
7.4
3.0
3.3
2.0
1.8
1.7
1.7
1.8
1.6
17.8
17.1
100.0
100.0

Source: DGCIS, Calcutta as reported in Government of India, Economic Survey:

2004-2005, New Delhi.

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Table 11.5

Indias Major Trading Partners

Country

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

Percentage share in Indias

total trade (exports + imports)
2002-03
2003-04

USA
UK
Belgium
Germany
Japan
Switzerland
Hong Kong
UAE
China
Singapore
Malaysia
Sub total (1 to 11)
Others
Total imports

13.4
4.6
4.7
4.0
3.2
2.4
3.1
3.8
4.2
2.5
1.9
47.9
52.1
100.0

11.6
4.4
4.1
3.9
3.1
2.7
3.4
5.1
5.0
3.0
2.1
47.6
52.4
100.0

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Source: DGCIS, Calcutta as reported in Government of India, Economic Survey:

2004-2005, New Delhi.

Indias eleven major trading

partners include USA, UK, Belgium,
Germany, Japan, Switzerland, Hong
Kong, UAE, China, Singapore and
Malaysia. While USA has been Indias
leading trade partner with a share of
11.6 per cent in Indias total trade
(including both exports and imports),
shares of other ten countries have been
in the range of 2.1 per cent to 4.4 per
cent in 2003-04 (see Table 11.5).

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Exports
Foreign travel
Transportation
Insurance
Imports
Foreign travel
Transportation
Insurance

Table 11.6

11.3.2

Indias Trade in Services

Indias trade in services have also

grown manifold over the years.
Table 11.6 contains data on exports
and imports of Indias three services
which have been historically important
to India. It is obvious from the table that
both the exports and imports of services
relating to foreign travel, transportation
and insurance have increased

Indias Trade in Services

1960-61 1970-71 1980-81 1990-91 2000-01

2002-03

2004-05

15
45
8

36
109
12

964
361
51

2613
1765
199

16064
9364
1234

15991
12261
1783

18873
14958
1927

12
25
6

18
78
12

90
355
34

703
1961
159

12741
16172
1004

16155
15826
1687

16111
10703
1672

INTERNATIONAL BUSINESS - I

Table 11.7

273

Percentage Shares of Major Services to Total Services Exports

Year
1995-96
2000-01
2001-02
2002-03
2003-04

Travel
36.9
21.5
18.3
16.0
16.5

Transportation
27.4
12.6
12.6
12.2
13.1

spectacularly during the last four

decades. What is more remarkable is
the change in the composition of
services exports. Software and other
miscellaneous services (including
professional technical and business
services) have emerged as the main
categories of Indias exports of services.
While the relative share of travel and
transportation has declined from 64.3
per cent in 1995-96 to 29.6 per cent in
2003-2004, the share of software
exports has gone up from 10.2 per cent
to around 49 per cent in the
corresponding period (see Table 11.7).

Software
10.2
39.0
44.1
46.2
48.9

Miscellaneous
22.9
21.3
20.3
22.4
18.7

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Table 11.8

Data relating to Indias foreign

investments both inward and
outward are provided in Table 11.8.
It can be seen that there has been a
phenomenal increase in foreign
investments flow into and from India.
While the inward foreign investments
have grown more than 750 times from
just Rs. 201 crores in 1990-91 to Rs.
1,51,406 crores in 2003-04, Indias
investments abroad have increased much
more exponentially around 4,927
times from Rs. 19 crores in 1990-91
to Rs. 8,3,616 crores in 2003-04.

Foreign Investment flows into and out of India

1990-91
Inflows
201
Outflows
19

Value: Rs. crores

2002-03
2003-04
67756
151406
47658
83616

2000-01
80824
54080

2001-02
73907
41987

182

26744

31920

International business

FDI

Licensing

International trade

Portfolio investment

Franchising

Merchandise trade
Invisible trade

Exporting
Importing

Outsourcing
Joint ventures

Foreign investment

Contractmanufacturing

Wholly owned subsidiaries

Net

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11.3.3 Indias Foreign Investments

22098

67592

Key Terms

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SUMMARY
International Business: International business refers to business activities
that take place across national frontiers. Though many people use the terms
international business and international trade synonymously, the former
is a much broader term. International business involves not only trade in
goods and services, but also other operations such as production and
marketing of goods and services in foreign countries.
Reasons: The primary reason for international business is that nations
cannot efficiently produce all that they require. Due to differences in resource
endowments and labour productivity, countries find it much more
advantageous to produce goods and services in which they have cost
advantage and trade the surplus in such goods and services with other
nations in exchange of goods and services which others can produce more
efficiently.

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International vs Domestic business: Conducting and managing

international business operations is more complex than undertaking
domestic business. Differences in the nationality of parties involved,
relatively less mobility of factors of production, customer heterogeneity across
markets, variations in business practises and political systems, varied
business regulations and policies, use of different currencies are the key
aspects that differentiate international businesses from domestic business.
These, moreover, are the factors that make inter national business much
more complex and a difficult activity.
Scope: Scope of international business is quite wide. It includes not only
merchandise exports, but also trade in services, licensing and franchising
as well as foreign investments.

Benefits: International business benefits both the nations and firms. Nations
gain by way of earning foreign exchange, more efficient use of domestic
resources, greater prospects of growth and creation of employment
opportunities. The advantages to the business firms include: prospects for
higher profits, greater utilisation of production capacities, way out to intense
competition in domestic market and improved business vision.
Modes of entry: A firm desirous of entering into international business has
several options available to it. These range from exporting/importing to
contract manufacturing abroad, licensing and franchising, joint ventures
and setting up wholly owned subsidiaries abroad. Each entry mode has its
own advantages and disadvantages which the firm needs to take into
account while deciding as to which mode of entry it should prefer.

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Indias involvement in world business: Since time immemorial, India has

been trading with foreign countries. Over the years, Indias trade has
registered spectacular growth. Currently, foreign trade accounts for about
24 per of the countrys Gross Domestic Product (GDP). Textiles and garments,
gems and jewellery, engineering products and chemicals and related

INTERNATIONAL BUSINESS - I

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products and agricultural and allied products are Indias major items of
exports. Important items of its imports include: crude oil and petroleum
products, capital goods (i.e., machinery), electronic goods, pearls, precious
and semi-precious stones, gold, silver and chemicals.
USA, UK, Belgium, Germany, Japan, Switzerland, Hong Kong, UAE, China,
Singapore and Malaysia are the major trading partners. These eleven
countries together accounted for about 48 per cent of Indias total trade
(comprising of both the exports and imports) in 2003-04.
Trade in Services: Indias trade in services have also undergone significant
changes over the years in terms of both the volume and composition of
trade. The most conspicuous change relates to emergence of software
exports which of late have to account for about 49 per cent of Indias total
services exports.

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Data relating to Indias foreign investments (both inward and outward) too
show remarkable growth. While the inward foreign investments have grown
more than 750 times, from just Rs. 201 crores in 1990-91 to Rs. 1,51,406
in 2003-04, Indias investments abroad have increased much more
exponentially, around 4,927 times, from Rs. 19 crores in 1990-91 to
Rs. 83,616 crores in 2003-04.

Indias per formance, however, does not appear very satisfactory in ter ms of
international comparison. Indias share in world trade is a mere 0.8 per
cent. Its position in r espect of foreign investments too is poor. India continues
to lag considerably behind other developing countries which have emerged
as major destinations for foreign investments.

EXERCISES

Multiple Choice Questions

1. In which of the following modes of entry, does the domestic manufacturer

give the right to use intellectual property such as patent and trademark
to a manufacturer in a foreign country for a fee

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c.

Licensing

b.

Joint venture

d.

Contract
manufacturing
None of these

2. Outsourcing a part of or entire production and concentrating on

marketing operations in international business is known as
a.
c.

Licensing
Contract manufacturing

b.
d.

Franchising
Joint venture

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BUSINESS STUDIES

3. When two or more firms come together to create a new business entity
that is legally separate and distinct from its parents it is known as
a.
c.

Contract manufacturing
Joint ventures

b.
d.

Franchising
Licensing

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4. Which of the following is not an advantage of exporting?

a.
c.

Easier way to enter into

international markets
Limited presence in
foreign markets

b.
d.

Comparatively lower
risks
Less investment
requirements

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5. Which one of the following modes of entry requires higher level of risks?
a.
c.

Licensing
Contract manufacturing

b.
d.

Franchising
Joint venture

6. Which one of the following modes of entry permits greatest degree of

control over overseas operations?
a.
c.

Licensing/franchising

b.

Contract manufacturing

d.

Wholly owned
subsidiary
Joint venture

7. Which one of the following modes of entry brings the firm closer to
international markets?
a.
c.

Licensing
Contract manufacturing

b.
d.

Franchising
Joint venture

8. Which one of the following is not amongst Indias major export items?
a.
c.

Textiles and garments

Oil and petroleum products

b.
d.

Gems and jewellery

Basmati rice

9. Which one of the following is not amongst Indias major import items?

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a.
c.

Ayurvedic medicines

b.

Pearls and precious stones

d.

Oil and petroleum

products
Machinery

10. Which one of the following is not amongst Indias major trading partners?
a.
c.

USA
Germany

b.
d.

UK
New Zealand

INTERNATIONAL BUSINESS - I

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Short Answer Questions

1. Differentiate between international trade and international business.
2. Discuss any three advantages of international business.
3. What is the major reason underlying trade between nations?

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4. Discuss as to why nations trade.

5. Enumerate limitations of contract manufacturing.

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6. Why is it said that licensing is an easier way to expand globally?

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7. Differentiate between contract manufacturing and setting up wholly

owned production subsidiary abroad.
8. Distinguish between licensing and franchising.
9. List major items of Indias exports.

10. What are the major items that are exported from India?
11. List the major countries with whom India trades.
Long Answer Questions

1. What is international business? How is it different from domestic

business?
2. International business is more than international trade. Comment.
3. What benefits do firms derive by entering into international business?
4. In what ways is exporting a better way of entering into international
markets than setting up wholly owned subsidiaries abroad.
5. Discuss briefly the factors that govern the choice of mode of entry into
international business.
6. Discuss the major trends in Indias foreign trade. Also list the major
products that India trades with other countries.

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7. What is invisible trade? Discuss salient aspects of Indias trade in

services.