International Business

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COMPILED
International Business

BY: VISHAL KADAM

Q) What is International Business? What are its importance?
Q) Distinguish between International & Domestic Trade?
Distinction between internal and international trade
Distinction between internal and international trade in general involves transaction for mutual benefit For this reason both the trading parties will have equal interest. Trade is a case of geographic specific area. An area specialises in an activity and trade takes place.

Trade needs optimising activity. Profits are measured by minimising cost and increasing volume of trade. International trade has certain distinguishing factors as compared with ordinary trade.
1. International trade is the trade between two countries which are geographically and politically different. This gives rise to a conflict of interests in terms of benefit. 2.
International trade has more restriction than internal trade. The world has transformed from free trade to protection.
3. Under protection a country prevents trade to safeguard the interest of domestic industry.
4. The factors of production are perfectly mobile within a country and immobile within countries. This feature helps in retaining cost advantage in production. Different countries have different currencies. With this the problems of equating value and conversion of currencies arises. International liquidity is a major problem. Yet there is no mechanism to facilitate international payments. In 1930 IMF floated specialised instruments called Special Drawing Rights (SDR) as a common medium for international transaction. Due to disparities in economic development, SDR failed to provide adequate international liquidity.

Presently the world is divided into trading blocks and associations. The international trade is highly segmented international trade leads specialised institutions for promoting international co-operation, trade international payments and development assistance.

Q) What is FDI ?
Foreign capital which enters the country in the form of equity capital is termed as Foreign Direct investment (FDI).
It involves no interest payment, but only a share in the profit to the extent of shares owned by foreigners. In India equity participation by foreigners is permisible upto 51% of the capital of a project, with higher limits of investment in selected areas, such as technology, upgradation & exports.

Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. Maps below show net inflows of foreign It is always better to be “WIND” than the “OBJECT” carried away by it_ Vishal

COMPILED
International Business

BY: VISHAL KADAM

direct investment as a percentage of gross domestic product (GDP). The largest flows of foreign investment occur between the industrialized countries (North America, North West Europe and Japan). But flows to non-industrialized countries are increasing. The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an economy through any of the following methods:

* By incorporating a wholly owned [subsidiary] or [company]
* By acquiring shares in an associated enterprise
* Through a [[merger]] or an [Takeover| acquisition] of an unrelated enterprise * Participating in an equity [[joint venture]] with another investor or enterprise *Foreign direct investment incentives may take the following forms:{Fact|date=June 2009}

* Low [corporate tax]and [income tax] rates
* Tax Holidays
* Other types of tax concessions
* Preferential [tariffs]
* Special economic zones
* Investment financial subsidies
* [soft loan] or loan [guarantees]
* Free land or land subsidies
* Relocation & expatriation subsidies
* Job training & employment subsidies
* [[infrastructure]] subsidies
* R&D support
* Derogation from regulations (usually for very large...
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