Itinerant retailers are those traders who do not have a fixed place of business

to operate from. They keep on moving with their wares from street to street or place to
place, in search of customers.
Main features of Itinerant Retailers are:
● They are small traders operating with limited resources.
● They normally deal in consumer products of daily use.
● They mostly sell goods on a cash basis.
● They operate with a very small amount of capital.
● They generally sell goods at prices lower than charged by fixed shop retailers.
● They provide greater service to customers by making the products
available to their doorsteps.

TYPES OF ITINERANT RETAILERS

(1) Hawkers and Pedlars

Hawkers and Pedlars move from street to street in search of customers. The
Hawkers carry their goods in a wheeled vehicle, while the pedlars carry the goods
on their head and back.
They generally deal in non -standardized and low value products such as
fruits vegetables, toys, fabrics, snacks and ice cream etc. The main advantage
of this form Retailing is convenient service to customers.
(2) Market Traders
Market traders are the small retailers who open their shops at different places
on fixed days. These retailers sell their goods at periodical markets such as weekly,
monthly or annually.
Generally they display their goods on temporary structures made outside the
shops which are closed for a weekly holiday. They are mainly catering to lower
income group of customers and deal in low priced consumer items of daily use.
(3) Street Traders (Pavement vendors)
These retailers arrange or display their goods at busy street corners,
pavements and other busy public places like bus stands, railway stations,
cinema halls etc.
They sell consumer items of common use, such as stationery items, eatables,
readymade garments, newspapers and magazines etc.
(4) Cheap Jacks
Cheap Jacks display their goods in hired shops or in tents for a temporary
period in different localities. They keep on changing their business from one
locality to another, depending upon the potentiality of the area. They generally
deal in house hold articles, readymade garments and other low priced goods.

FIXED SHOP RETAILERS

The retailers having a fixed place of sale are known as fixed shop retailers. They
do not move from one place to another in search of customers. Fixed shop retailers
can be further classified into two categories.
(1) Small-scale fixed retail shops
(2) Large scale fixed retail shops

(1) Small-scale fixed retail shops

Small scale fixed retailers are the most common form of retailers. They are mostly
situated in localities to fulfill the needs of people residing in local areas.

TYPES OF SMALL SCALE FIXED RETAIL SHOPS

(a) General Stores
General stores are small shops located in residential areas deals with items of
daily use such as grocery items, soft drinks, toiletry products, stationary and
confectionery. They have a large variety in each line of product. They also provide free
home delivery credit facility and other services to regular customers.
(b) Specialty Shops
These retail shops specialize in sale of a specific line of products. For ex. Men’s
wear shops, stationery shops, medical shops etc.
(c )Street Stall holders
These small vendors are commonly found at street crossing or other places
where the flow of traffic is heavy. They attract floating customers and deal mainly
in goods of cheap variety like hosiery products, toys, magazines, soft drinks etc.

(c) Second hand goods shops

These shops deals in second hand or used goods like books, cloths,
furniture and other household goods. The goods are sold at lower prices.
Generally persons with modest means purchase goods from such shops.

(2) Large scale fixed retail shops

Large scale fixed retailers operate on large scale as they maintain large stock of
goods and purchase of goods in bulk. Two important types of large scale fixed shop
retailers are:
(a) Departmental Stores
(b) Chain Stores or Multiple Shops.

(a) Departmental Stores : A departmental store is a large establishment, which sells a

wide variety of products and aims to satisfy all needs of the customers under one roof.
The store is divided into a number of departments and each department deals in a
particular variety of goods. They satisfy diverse market segments with a wide variety
of goods and services.
Important features of a departmental store:
(i) Central Location: It is generally located at a central place in the city so that
people living in different areas may reach there easily.
(ii) Large variety of goods: These stores maintain a large variety of
goods and customers can purchase almost all their requirements
from these stores.
(iii) Large Size: As the size of these store is very large, they are generally
formed as a joint stock company managed by a board of directors.
(iv) Centralised Purchasing: All the purchases in a departmental store
are made centrally by the purchase department.
(v) Elimination of middlemen: A departmental store purchase goods directly
from the manufacturers, which sells them to the ultimate consumers and
eliminates middlemen.
(vi) Services: A departmental store provide a number of services and facilitates to
the customers such as restaurant, travel and information bureau, rest rooms,
telephone booth etc.

(b) Chain Stores or Multiple shops Chain stores or multiple shops are networks
of retail shops, which are owned and operated by manufacturers or
intermediaries. All the retail shops deal in similar line of standardized and
 branded consumer products. They all have identical merchandising strategies,
with identical products and displays. Bata, Pizza hut, Raymonds etc. are
examples of multiple shops.
Important features of Multiple shops are:
(i) Large Size: Chain stores operate on a large scale. Huge investment is
required to to set up identical shops in different parts of the country.
(ii) Location: These shops are located in fairly populous localities where sufficient
number of customers can be approached.
(iii) Centralised Purchases: The head office makes all the purchases for
all these multiple shops. Thereafter goods are dispatched to different
shops as per their requirements.
(iv) Centralised control: All stores are controlled by the head office, which
formulates policies and get them implemented in different shops.
(v) Specialised in one line: Generally chain stores specialize in one line of
product and variety in that line only is available at all the shops located in
different areas.
(vi) Uniform Prices: The prices of the product charged by chain stores
located in different parts of the country are the same and they sell goods
at a fixed price.
(vii) Elimination of middlemen: Chain stores are generally owned by
manufacturers who sell their goods directly to consumers, so middlemen are
eliminated.
(viii) Cash Sales: In chain stores no credit is given. Goods are sold on cash basis only.

MAIL ORDER BUSINESS: Mail Order Houses are the retail outlets
that sell their merchandise through mail usually without any direct personal
contact between buyers. For obtaining orders, potential customers are
approached through advertisements in newspapers or magazines, circulars,
catalogues, samples and bills and price lists sent to them by post. On receiving
the orders, the items are carefully scrutinized with respect to the specifications
asked for by the buyers and are compiled with through the post office.

GOODS AND SERVICES TAX (GST)

GST or Goods and Services Tax is a comprehensive indirect tax which has
replaced many indirect taxes in India. GST was introduced in India with effect from
1st July 2017. The Government of India, following the credo of ‘One Nation and One
Tax’, and wanting a unified market in order to ensure the smooth flow of goods
across the country implemented GST. GST is a destination based single tax on the
supply of goods and services from the manufacturer to the consumer, and has
replaced multiple indirect taxes levied by the Central and the State governments,
thereby converting the country into a unified market.

Key features of GST:

1. The territorial spread of GST is the whole country.

2. GST is applicable on the supply of goods or services as against the earlier
concept of tax on the manufacture or sale of goods or on the provision of
services.
3. It is based on the principle of destination based consumption tax against the
earlier principle of origin based taxation.
4. Import of goods and services is treated as Inter-state supplies and would be
subject to IGST in addition to the applicable customs duties.
 5. CGST, SGST and IGST are levied at rates mutually agreed upon by the Centre
and the states under the aegis of the GST council. There are four tax slabs
namely 5%, 12%, 18% and 28% for all goods or services.
6. Exports and supplies to SEZ are zero rated.
7. There are various modes of payment of tax available to the tax payer,
including internet banking, debit/credit card and National Electronic Funds
Transfer (NEFT) or Real Time Gross Settlement (RTGS)

*****************************************************************

MULTIPLE CHOICE QUESTIONS

1. Which of the following is not a type of Itinerant retailer?
(a) Hawkers (b) Market Traders
(c) Street Traders (d) Street Stalls

2........................... deal in similar line of standardized and branded consumer

products and have identical merchandising strategies, with identical
products and displays.
(a) Departmental Stores (b) Chain Stores
(c) General Stores (d) Speciality shops

3. Which among the following is not a feature of wholesalers ?

(a) Wholesalers acts as a link between producers and retailers
(b) Wholesalers maintain personal relations with the customers.
(c) Wholesalers deal with large quantities of goods.
(d) Wholesalers generally specialize in one line of product.

4. Gopakumar sells vegetables in a cycle rickshaw and moves from place to place.
He provides them at the doorstep of his customers. Which type of itinerant trader
he is?
a) Hawkers b)Pedlars c) Cheap jacks d) Market traders
5. Hameed is the proprietor of a Men’s wear shop located in the city. Which
type of Retail shop is it ?
(a) General Stores (b) Speciality shops
(c) Street Shops (d) Second hand goods shops

6. ‘Bata stores’ is an example for which type of retail shops ?

(a) Departmental Stores (b) General stores
(c) Multiple Shops (d) Speciality shops.

7. Read the following statements, Assertion and Reason and choose the
correct alternative from the given below.
Assertion (A) : The departmental Stores are generally formed as joint stock
company.
Reason (R): All the purchases in a departmental store are made centrally by the
Purchase department.
Alternatives:
(a) Both Assertion (A) and Reason (R) are true and Reason(R) is the
correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason(R) is not the
correct explanation of Assertion (A)
(c) Assertion(A) is true, but Reason (R) is false
 (d) Assertion (A) is false, but Reason (R) is true

8. Read the following statements carefully and choose the correct alternative from the
following.
Statement 1: Import of goods and services is treated as inter-state supplies
and would be subject to IGST under GST.
Statement 2: GST is a destination based consumption tax with facility of Input
Tax Credit in the supply chain.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 1 is false and Statement 2 is true.
9. Observe the image given below and name the type of itinerant trader

(a) Pedlars (b) Hawkers (c)Market trader (d) Street

trader

10. Government of India, following the credo of “One Nation and One Tax”,
and wanting a unified market in order to ensure the smooth flow of goods across the
country implemented the Goods and Service Tax (GST) from ………………..

(a) April 1, 2020 (b) November 15, 2018

(c) July 1, 2017 (d) August 15, 2016

ANSWER KEY –MULTIPLE CHOICE QUESTIONS

7. (d) 2.(b) 3.(b) 4.(a) 5.(b) 6.(c) 7.(b) 8.(a) 9.(a) 10. (c)

SHORT ANSWER QUESTIONS

1. Ajay is a small trader who sells items of daily use in the weekly market. He has fixed
different days for different places, like Monday, he set up his shop with
temporary Structure in ‘Som Bazar’. On Tuesday, he set up his shop in ‘Mangal
Bazar’ and so on.
(a) Ajay’s shop will be classified under which retail shop ?
(b) State any two
features of it Ans:
Market Traders
Important features of market traders:
● Market traders are the small retailers who open their shops at different
places on fixed days.
● These retailers sell their goods at periodical markets such as weekly,
monthly or annually.
● Generally they display their goods on temporary structures made
 outside the shops which are closed for a weekly holiday.
● They are mainly catering to lower income group of customers and deal
in low priced consumer items of daily use.

2. State any three features of Goods and Service

Tax (GST)
Ans: Key features of GST:
1. The territorial spread of GST is the whole country.
2. GST is applicable on the supply of goods or services as against the earlier
concept of tax on the manufacture or sale of goods or on the provision of
services.
3. It is based on the principle of destination based consumption tax against the
earlier principle of origin based taxation.
4. Import of goods and services is treated as Inter-state supplies and would be
subject to IGST in addition to the applicable customs duties.
5. CGST, SGST and IGST are levied at rates mutually agreed upon by the Centre
and the states under the aegis of the GST council. There are four tax slabs
namely 5%, 12%, 18% and 28% for all goods or services.

3. “These retailers are generally seen in areas having high population like bus
stands, Railway stations etc. They deal in common use products, like news
papers, magazines Toys, stationery items etc.”
(a) Identify the type of retailer and state any two features of it.

Ans:
Street Traders (Pavement Vendors)
● These retailers arrange or display their goods at busy street corners,
pavements and other busy public places like bus stands, railway stations,
cinema halls etc.
● They sell consumer items of common use, such as stationery items,
eatables, readymade garments, newspapers and magazines etc.
● They deal in low priced products of common use.
4. Prakash is a retailer, who runs a small retail shop in his locality dealing with a
variety of products required to satisfy the day to day needs of the people in his
locality. He sells on credit to trusted customers and free home delivery also.

(a) Which type of retail shop is run by Prakash ?

(b) Briefly explain any other three small scale fixed retail shops.

Ans: (a) General Stores

(b) (a) Speciality Shops
These retail shops specialize in the sale of a specific line of products. For
example, Men’s wear shops, stationery shops, medical shops etc. The speciality
shops are generally located in a central place in order to attract large number of
customers, and they provide a wide choice to the customers in the selection of
the goods.
(b) Street Stall holders
These small vendors are commonly found at street crossing or other places
where flow of traffic is heavy. They attract floating customers and deal mainly in
goods of cheap variety like hosiery products, toys, magazines, soft drinks etc.
(c) Second hand
goods shops
 These shops deals in second hand or used goods like books, cloths,
furniture and other household goods. The goods are sold at lower prices.
Generally persons with modest means purchase goods from such shops.
5. Briefly explain any four services provided by Retailers to
consumers
Ans: Retailers Services to Consumers

1. Regular availability of products.

Consumers are assured of continuous supply of goods and they need not
store the goods in large quantities. A retailer makes available to the customers
all types of commodities.
2. New product
information
By arranging for effective display of products and through their personal efforts,
retailer provide important information about the arrival, special features etc. of new
products to the consumers.
3. Convenience in buying
Retailers offer great convenience to the customers in buying small
quantities of products according to their requirements. Retail shops are
usually situated near to residential areas and remain open for long hours.
4. Wide Selection
Retailers generally keeps stock of a variety of products of different manufacturers.
This enables the consumers to make their choice out of a wide selection of goods.
5. After sale service
Retailers provide important after sale services in the form of home delivery
, repair of goods in the case of durable items, supply of spare parts and
attending to customers.
6. Provide credit facilities
The retailers sometimes provide credit facilities to their regular buyers. It
enables the customers to increase their consumption level and standard of living.

LONG ANSWER TYPE QUESTIONS

1. Rajesh has decided to launch an instant food range by the name of ‘Delicia’. He
has decided to initially launch instant idli mix, dosa mix, gulab jamun mix and
pakoda mix in the market at national level. However, he is not able to decide on
the distribution level. He has the following options available.

(i) Place his products at departmental stores all across the country.
(ii) Set up own retail outlets across the country
(iii) Start an e-portal
(iv) Appoint wholesalers across the country.
He has discussed the various options with his stakeholders and after discussion, he
decided to appoint
wholesalers all over India.
On the basis of the above case , answer the following.
(a) Briefly explain any three services availed by Rajesh by appointing wholesalers across the
country
(b) Briefly explain any three services provided by wholesalers to retailers.
Ans: (a) Services to Manufacturers

1. Facilitates large scale production

As the wholesalers purchase goods from the manufacturers in bulk quantities, producers
are able to undertake production on a large scale and take advantage of the economies of scale.
2. Bearing risk
The wholesalers deal in goods in their own name, take delivery of the goods and keep the
goods in large quantities in their warehouses. In this process they bear variety of risks such as
the risk of fall in prices, theft, spoilage, fire etc.
3. Financial Assistance
Wholesalers generally purchase goods from manufacturers on cash basis and sometimes
even give advance for bulk orders. In this way wholesalers provide financial help to the
manufacturers.
4. Expert Advice
As the wholesalers are in direct contact with the retailers, they are in a position to advice
the manufacturers about various aspects including customer’s taste and preferences, market
conditions, competitive activities and the features preferred by the buyers.

5. Help in marketing function

The wholesalers collects orders from large number of retailers and supply goods to them, who
in turn sells the goods to the consumers. As a result, wholesaler allows the manufacturer to
concentrate more on production activity and relieves him from marketing of goods.

6. Facilitates production continuity

The wholesalers purchases goods from producers as and when these are produced.
It helps the manufacturers in maintaining continuity of production activity.

7. Storage
The wholesaler takes delivery of goods when these are produced in the factory and store them in
their own warehouses. It relieves the manufacturers of the storing problems.

(b) Wholesalers Services to Retailers

(1) Availability of goods
The wholesalers provides the products of various manufacturers to the retailers and saves
them from keeping large quantity of each product.

(2) Marketing Support

The wholesalers perform various marketing functions and provide support to the Retailers.
They undertake advertising and other sales promotional activities to Induce customers to
purchase the goods.
 (3) Grant of credit
Wholesalers provide financial help to retailers by selling them goods on credit.
They can make payment after receiving the payment from the customers.
(4) Specialised knowledge
Wholesalers specialize in a particular line of products and have expert knowledge of the
market conditions relating to such products. They pass on the benefit of their specialized
knowledge to the retailers and inform them about new products, Their uses, quality, prices
etc.

(5) Risk Sharing

The wholesalers purchase in bulk and sell in relatively small quantities to the retailers. Being
able to purchase merchandise in smaller quantities, retailers are in a position to avoid the risk
of storage, pilferage, obsolescence, reduction in prices and demand fluctuations.

2. “Steps Footwear (P) Ltd.” deals in manufacturing of footwear. This company had opened 10 new
branches to sell its products directly to its customers in different parts of the country. The speciality
of these shops is that all its shops the goods available are of the same type and their price is also
same. The layout of the shop is also same for all these shops. The people are happy to buy quality
products directly from producer or manufacturer.
(a) Identify the type of retail shop opened by “Steps footwear (P) Ltd.”
(a) Briefly explain its important features.
Ans: a) Multiple Shops/Chain Stores

Important features of Multiple shops are:

(i) Large Size: Chain stores operate on a large scale. Huge investment is required to to set up
identical shops in different parts of the country.
(ii) Location : These shops are located in fairly populous localities where sufficient number
of customers can be approached.
(iii) Centralised Purchases: The head office makes all the purchases for all these multiple
shops. Thereafter goods are dispatched to different shops as per their requirements.
(iv) Centralised control: All stores are controlled by the head office, which formulates policies
and get them implemented in different shops.
(v) Specialised in one line: Generally chain stores specialize in one line of product and variety
in that line only is available at all the shops located in different areas.
(vi) Uniform Prices: The prices of the product charged by chain stores located in different
parts of the country are the same and they sell goods at a fixed price.
(vii) Elimination of middlemen: Chain stores are generally owned by manufacturers who
sell their goods directly to consumers, so middlemen are eliminated.
(viii) Cash Sales: In chain stores no credit is given. Goods are sold on cash basis only.

3. Ganesh Kumar owns a large scale retail outlet at a central location in Mumbai. The outlet is
divided into a number of sections and each section deals in a particular variety of goods. They
provide number of facilities and services to their consumers such as restaurant, telephone
booth, kids play area etc.
(a) Identify the type of retail outlet being highlighted in the above case.
(b) State the important features of it
Ans: (a) Departmental Stores
Important features of a departmental store:

(i) Central Location: It is generally located at a central place in the city so that people living in
different areas may reach there easily.
(ii) Large variety of goods: These stores maintain a large variety of goods and
customers can purchase almost all their requirements from these stores.
(iii) Large Size: As the size of these store is very large, they are generally formed as a joint
stock company managed by a board of directors.
(iv) Centralised Purchasing: All the purchases in a departmental store are made centrally
by the purchase department.
(v) Elimination of middlemen: A departmental store purchase goods directly from the
manufacturers, which sells them to the ultimate consumers and eliminates middlemen.
(vi) Services: A departmental store provide a number of services and facilitates to the customers
such as restaurant, travel and information bureau, rest rooms, telephone booth etc.

***************************
 CHAPTER 10
INTERNATIONAL TRADE

International Business:
Manufacturing and trade beyond the boundaries of one’s own
country is known as international business. International or
external business can, therefore, be defined as those business
activities that take place across the 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.

Scope of International Business – Major areas of operations of

international business are briefly discussed below:

1. Merchandise exports and imports – Merchandise means goods

which are tangible, ie, those that can be seen and touched.

2. Service exports and imports – It means trade in intangibles,

i.e., those that cannot be seen or touched. It is also known as
invisible trade. Eg. Tourism and travel, transportation,
entertainment, communication, educational service etc.

3. Licensing and franchising – Permitting a person/firm in a

foreign country to produce and sell goods under your trademarks,
patents or copyrights for a fee is another way of operating
international business. Eg. Pepsi, Coca-Cola etc. Franchising is
somewhat similar to licensing with the difference that it is
connected with provision of services. Eg. Mc Donald (fast food
restaurants), KFC etc

4. Foreign Investments – It means investment abroad in exchange

for financial return. It can be in FDI (Foreign Direct Investment)-
directly invested in properties, and FPI (Foreign Portfolio
Investment)- investing by way of acquiring shares or granting
loans.
 Difference between International business vs. Domestic business
Basis International Business Domestic Business
1. Nationality of Buyers & sellers come from Buyers & sellers are from the
buyers & Sellers different countries. same country.
2. Nationality of Belong from various Belong to one country &
other stakeholders countries & hence have hence consistency in their
wider set of values and value system and behaviour.
aspirations.
3. Mobility of Mobility with various Free mobility.
factors restrictions.
of production.

4. Customer Difference in taste and Difference in taste and

heterogeneity across preference complicate the task preference does not
markets of designing product in complicate the task of
international market. designing product in
domestic market.

5. Differences in The differences in business The differences in business

business systems & systems and practices are systems and practices are
practices considerably much more considerably less within a
among different countries. country.

6. Political system Political environment differs Predict the impact of political

& risk from one country to another. environment on business
Special efforts are needed. operations.
7. Business Business laws, regulations Business laws, regulations ,
regulations & policies and economic policies differ economic policies are less
among different countries. uniformly applicable within a
country.
8. Currency used The price of one currency No such problem is faced as
in Business expressed in relation to that only home currency is used.
transactions of another country’s currency,
keeps on fluctuating.
Benefits of International Business:-
Benefits to Nations:-
a) International business helps a country to earn foreign exchange
which it can later use for meeting its imports of other goods.
b) 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.
c) Exporting and flourishing in International trade helped in
improving their growth prospects and created opportunities for
employment of people.
d) Due to International business people in the world community are
able to consume and enjoy a higher standard of living.

Benefits to Firms:-
a) When the domestic prices are lower, business firms can earn more
profits by selling their products in countries where prices are
high.
b) Making use of surplus production capacities & thereby
improving the profitability of operations.
c) When demand in home country gets saturated, the company can
think of growth prospects in developing countries.
d) When competition in the domestic market is very intense,
internationalization seems to be the only way to achieve
significant growth.
e) 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 internationalization.

Export Trade
Exporting refers to selling of goods and services from the home
country to a foreign country. Export trade is a function of
international trade whereby
goods produced in one country are shipped to another country for
sale or trade.

EXPORT PROCEDURE:

1. Receipt of enquiry and sending quotation – The exporter gets an enquiry

from prospective buyers from a foreign country and sending quotation in
the form of a proforma invoice, which is a document containing all
description about the product such as price, quality, grade, size, weight,
mode of delivery, type of packing, payment terms etc.

2. Receipt of order or indent – If the buyer is satisfied with the conditions in

the proforma invoice, an order will be placed. This order is also called indent.
It contains the description of goods, price, quality etc.
 3. Assessing importer’s creditworthiness and securing a guarantee for
payments – After receiving indent, the exporter conducts an enquiry about
the financial capacity of the importer to ensure the promptness in
settlement. Usually, exporters may demand a letter of credit in this regard.

4. Obtaining export license – In order to get the export license from the
Import-Export Licensing Authority, the exporter has to fulfill the following
formalities:

a. Open a bank account.

b. Obtaining Import Export Code (IEC) number from the Directorate General of
Foreign Trade or Regional Import Export Licensing Authority.
c. Registering with appropriate export promotion council. Eg: Apparel Export
Promotion Council, Council for Leather Exports etc.
d. Registering with Export Credit and Guarantee Corporation (ECGC) to cover the
risk of non-payment

5. Obtaining pre-shipment finance – After the confirmation of order the

exporter may approach his bank for getting pre-shipment finance to carry
out export production.

6. Production or procurement of goods – The exporter makes ready the

goods as per specification either by production or by purchasing it from the
market.

7. Pre-shipment inspection – In foreign trade the quality of goods must

conform to international standards. For this compulsory inspection by
Export Inspection Agency – EIA (Govt. of India undertaking) should be done.

8. Excise Clearance – All goods produced are subject to excise duty under
Central Excise and Tariff Act, but exported goods are either exempted or if
paid, it is later refunded. So the exporter has to apply to the Excise
Commissioner for export clearance. If the authority is satisfied, the excise
clearance is given or the claim for refund is allowed. Such refund of duty is
called duty drawback.

9. Obtaining certificate of origin – Some importing countries provide tariff

concession or other exemptions for goods imported from certain countries.
To avail such benefits the exporter has to obtain and submit certificate of
origin along with other export documents. Certificate of Origin is a proof
that the goods are actually been produced in the country from where it is
exported.

10. Reservation of shipping space – The exporter has to apply for this by
 furnishing complete information about the goods, probable date of shipment
and port of destination. On acceptance, the shipping company issues a
shipping order

11. Packing and forwarding – Goods are packed and marked with details
such as name and address of importer, gross and net weight, destination
port, country of origin etc. A packing list is attached herewith all other
documents.

12. Insurance of goods – The exporter has to insure the goods with an
insurance company to cover the risk due to sea perils in transit.

13. Customs clearance – Before loading the goods on the ship, customs clearance
should be obtained by the exporter. For this the exporter prepares a shipping
bill.

14. Obtaining mates receipt – After the goods are loaded on the ship, the captain
or mate of the ship issues a certificate called mate’s receipt.

15. Payment of freight and insurance of bill of lading – The C&F agent
(Clearing and Forwarding agent) submits the mate’s receipt to the shipping
company for computation of freight. After the payment of freight, the shipping
company issues a bill of lading.

16. Bill of lading – It is document issued by the shipping company after the cargo
is loaded on the ship. It is prepared on the basis of Mates Receipt. The shipping
company undertakes the delivery of goods to the buyer by producing this
document.

17. Preparation of invoice – The exporter has to prepare an invoice of the goods,
which contains the details such as quantity and the amount to be paid by the
importer.

18. Securing payment – After shipment of goods, the exporter sends the relevant
documents like Bill of lading, bill of exchange, letter of credit, invoice, etc. to the
bank for completing the formalities to receive payment from the importer

IMPORT TRADE:
Import trade refers to buying goods and services from another country.
Countries are most likely to import goods that domestic industries
cannot produce as efficiently or cheaply.
Import trade procedure:
1. Trade enquiry – The importer has to collect information about the
exporters of the products he needs from various sources like trade
directories, trade associations, websites etc. After identifying the
 exporter, he sends the trade enquiry. Trade enquiry is a written request
by the importer to the overseas supplier for getting information such
as price, quality and other terms and conditions for export.
2. Obtain the import license – Certain goods can be imported freely,
while others require license. He has to apply for the import license at DGFT
and obtain IEC number.
3. Obtaining foreign exchange – In import trade, payment is made in
foreign currency, all foreign exchange transactions are regulated by RBI
in India. So that the importer has to get prior sanction for foreign
exchange.
4. Placing order or indent – The importer has to place an order or indent
for the supply of goods. It should contain price, quality, quantity, size,
grade and instructions relating to packing, shipping, delivery schedule,
insurance and mode of payment etc.
5. Obtaining letter of credit – The importer should obtain the letter of
credit from his bank and forward it to the exporter.
6. Arranging finance – Importer should arrange fund in advance to pay
to the exporter on arrival of goods.
7. Receipt of shipment advice – It is a document sent by the exporter to
the importer containing information about the shipment of goods after it
is being loaded on the ship.
8. Retirement of import documents – After the goods are shipped, the
exporter submits all the necessary documents with his banker for getting
payment. Here the importer has to retire (receive) the documents either by
ready payment or by accepting a bill of exchange.
9. Arrival of goods – On arrival of goods the person in charge of the ship
informs the officer at the dock through a document called import general
manifest. Import General Manifest is a document contains the details of
imported goods and on the basis of which the cargo is unloaded.

10. Customs clearance and release of goods – After fulfilling all the
formalities at the dock and payment of dock dues, freight if any and the
customs duty, the importer can release the goods from the port.

Documents involved in International Trade

1. Shipping Bill: It is the main document on the basis of which

 permission is granted for the export of goods by the custom office. It
contains full details regarding the goods being exported, name of the
vessel, exporters name & address, country of final destination etc.
2. Mate’s Receipt: This receipt is issued by the captain or mate of the ship
to the exporter after the goods are loaded on board of the ship. It
contains the name of the vessel, description of packages, marks,
conditions of the cargo at the time of receipt onboard the ship etc.
3. Letter to credit: It is a guarantee letter issued by the importer bank stating
that it will honour the export bills to the bank of the exporter up to a certain
amount

4. Indent: It is a document in which the importer orders for supply of requisite

goods to the supplier. The order contains the information such as quantity
& quality of goods, price, method of forwarding the goods, nature of packing,
mode of payment etc.
5. Shipping Order: The exporting firm applies to the shipping company for
provision of the shipping space. It is an instruction to the captain of the ship
that the specified goods, after customs clearance at a designated port, be
received on board
World Trade Organization (WTO)
It came into existence on 1st January 1995. The headquarters of
WTO is situated at Geneva, Switzerland. It is a permanent
organization created by an international treaty rectified by the
Governments and legislatures of member states. It is concerned
with solving trade problems between countries and providing a
forum for multilateral trade negotiations.
Objectives of WTO:
1. To reduce the trade tariffs and barriers imported by
different countries in the smooth flow of international
trade.
2. To improve the standard of living, create employment, increase
income and effective demand and facilitate higher production
and trade.
3. To maintain sustainable development by optionally using the
world's resources.
4. To promote an integrated, more viable and durable trading
system among nations.

Role/ Functions of WTO:

1. To remove barriers of International trade.
2. To Act as a dispute settlement body by settling trade related
disputes among member nations.
3. To ensure that all the rules and regulations prescribed in the Act
are duly followed by the member countries for settling their
disputes.
4. Laying down a commonly accepted code of conduct for international
trade aiming at reducing tariff and non-tariff barriers in
international trade.
5. To consult other agencies to bring better understanding
cooperation in global economic policy making.
6. Providing technical assistance and guidance related to
management of foreign trade and fiscal policy to its member
nations.
7. Taking special steps for the development of the poorest nations.
8. Reviewing trade related economic policies of member countries
with the help of its Trade Policy Review Body.
9. Co-operating with IMF and World Bank and its associates for
establishing coordination in global trade policy making.
10. Acting as a forum for trade liberalization.
MULTIPLE CHOICE QUESTIONS (MCQs)

1. Certificate of Inspection is issued by:

(a) Captain of the ship (b) Exporter’s Bank
(c ) Insurance Company (d) Export Inspection Council of
India
2. Which of the following is not an objective of import trade?
(a) (a) To overcome famine (b) To improve standard of living (c
) To earn foreign exchange (d) To speed up industrialization

3. Cart ticket is also known as:

(a) Cart chit (b) Gate Pass
(b) (c ) Vehicle Pass (d) All of these
 4. The exporter has to open a bank account in any
bank authorised by to deal in foreign
exchange.
(a) State Bank of India (b) Reserve Bank of India
(c ) Central Government (d) State Government
5. Pre-shipment Inspection is not compulsory for:
(a) Export Houses (b) 100% Export Oriented Units
(c ) Star Trading Houses (d) All of these

6 _________ is subject to rules, laws or taxation policies of various

countries.
(a) International business (b) Domestic Business
(c ) both (a) and (b) (d) None of these

7. Which of the following documents are not required for

obtaining an
export licence?
(a) IEC number
(b) Letter of credit
(c ) Registration cum membership certificate
(d) Bank account number

8.Which of the following documents is not

required in connection with an import transaction?
(a) Bill of lading (b) Shipping bill
(c ) Certificate of origin (d) Shipment advice
9. Which of the following do not form part of the duty drawback
scheme?
(a) Refund of excise duties
(b) Refund of customs duties
(c) Refund of export duties
(d) Refund of income dock charges at the port of shipment.

10. Which one of the following is not a part of export documents?

(a)Commercial invoice (b) Certificate of origin
(c ) Bill of entry (d) Mate’s receipt

Answers:

1 2 3 4 5 6 7 8 9 10

d c d b d a b b d c

ASSERTION REASON QUESTIONS (ARQs)

 Read the following statements: Assertion and Reason.
Choose one of the correct alternatives given below:
Alternatives:

(a) Both Assertion (A) and Reason (R) are True and
Reason (R) is the correct explanation of Assertion
(A).
(b) Both Assertion (A) and Reason (R) are True and
Reason (R) is not the correct explanation of Assertion
(A).
(c) Assertion (A) is True but Reason (R) is False.
(d) Assertion (A) is False but Reason (R) is True.

1.
Assertion (A) : International Business and
International Trade are one and the
same thing.
Reason (R) : International Business involves the international
movements of goods and services,
capita" personnel, technology and
intellectual property.

2. Assertion (A) : International business is subject to rules,

laws
or taxation policies of various countries.
Reason (R) : Business systems and practices are less homogeneous
in the case of International business.

3.
Assertion (A) : Letter of Credit is the most appropriate
and secure method of payment to
settle international transactions.
Reason (R) : Letter of credit is a guarantee issued by the
exporter's
bank.
Answers

1 2 3

d b c

Short Answer Type Questions

1. Differentiate between international trade and international
 business.

Ans: International Business is a much broader concept as

compared to International Trade. International Business
involves not only international movements of goods and services
(ie. international trade), but also of capital, personnel, technology
and intellectual property like patents, trademarks, knowhow
and copyrights.
2. What is the major reason underlying trade between nations?
Ans: Uneven distribution of natural resources and factors of
production.
3. What is bill of lading? How does it differ from bill of entry?
Ans: Bill of Lading is a document prepared by the shipping company
to
acknowledge the receipt of goods on board the ship and
gives an undertaking to carry them to the port of
destination.
On the other hand, bill of entry is a document prepared
by the importer to show the details of goods imported
and is used by custom authorities determine import
duty.
4. Explain the meaning of mate’s receipt.
Ans: Mates receipt is the receipt issued by the
commanding officer of the ship to the exporter after the
cargo is loaded on the ship.
5. What is a letter of credit? Why does an exporter need this document?
Ans: Letter of credit is a guarantee issued by the importer's bank
that it will honour payment up to a certain amount of export bills
to the bank of the exporter. Exporter needs this document to
minimise the risk of non-payment.

LONG ANSWER QUESTIONS/CASE STUDIES

Q.1. Ram is a successful businessman who is engaged in

manufacturing of auto spare parts. The products manufactured by him
are sold not only in India, but are also exported to various countries like
Singapore, Switzerland, Belgium, etc. On the basis of given case, answer
 the following questions:
(a) Identify the two kinds of business in which Ramakant is engaged.
(b) Differentiate between the two types of business as
identified in part (a) of the question.
Ans: a) The two kinds of business in which Ram is engaged are:
(i) Domestic Business; (ii) Inter-national Business.
(b)For differences between the two, refer ' Domestic Business
Vs International Business.
Q.2. International business encompasses all commercial activities
that take place to promote the transfer of goods, services, resources,
people, ideas, and technologies across national boundaries. The
Internet and technology have made it much easier for businesses of
all sizes to profit from the international business. Going
international provides access to a world of opportunities to the
business: Do you think that domestic business firms can derive any
benefit from International Business. Give reasons to justify your
answer.
Ans: Yes, according to me, domestic business firms can derive
many benefits from International Business. Discuss Benefits
to business.
Q3. Prateek wants to export auto spare parts to Mr. Dev in Switzerland.
Mr. Dev has asked for an enquiry to seek information about availability
of goods, price, quality and terms and conditions for export of goods. In
response to the enquiry, Pradeep sends a reply in the form of Proforma
Invoice. Mr.Dev found the price and terms and conditions acceptable.
So, he placed the order for goods. After verifying the creditworthiness of
Mr.Dev, Pradeep obtains an export license and arranges the pre-shipment
finance. On the basis of given case study, state the next steps to be
followed by Prateek related to the procedure of export trade.

Ans: The next steps to be followed by Prateek in the export trade are:
(i) Production or Procurement of Goods
(ii) Pre-shipment Inspection
(iii) Excise Clearance
(iv) Obtaining Certificate of Origin
(v) Reservation of Shipping Space
(vi) Packing and Forwarding
(vii) Insurance of Goods
(viii) Customs Clearance
(ix) Obtaining Mates Receipt
(x) Payment of Freight and Issuance of Bill of Lading
(xi) Preparation of Invoice
(xii) Securing Payment.

Q.4. Identify the document highlighted in the following statements:

i. This certificate specifies the origin of goods exported.
ii. This document is issued by the commanding officer
of the ship to the exporter after the cargo is loaded on
the ship.
iii. This document is prepared by shipping company
to acknowledge the receipt of goods on ship and gives
an undertaking to carry them to port of destination.
iv. This document is the most appropriate and secure
method of payment to settle international transactions.
v. On the basis of this document, customs office grants
permission for the export.
vi. This document is prepared by the importer and it
shows the details of goods imported and is used by
custom authorities to determine import duty.
vii. On the basis of this document, imported goods are
unloaded from the carrier.
Ans:
(i) Certificate of Origin; (ii) Mates Receipt; (iii) Bill of Lading; (iv) Letter
of Credit; (v) Shipping Bill; (vi) Bill of Entry; (vii) Import General
Manifest.

Q.5. It is an international organisation established to

supervise and liberalize world trade. It is the successor to the
General Agreement on Tariffs and Trade (GATT). Although
GATT proved remarkably successful in liberalizing world
trade over the next five decades, but by late 1980s, there were
calls for a stronger multilateral organisation to monitor trade
and resolve trade disputes. Following the completion of the
Uruguay Round (1986-94) of multilateral trade negotiations,
this Organisation began operations on January 1 st , 1995.
(i) Identify the Organisation highlighted in the given case.
(ii) How many countries are members of the organisation
identified in (i) above.
(iii) State any three objectives of the organisation
identified in (i) above. Ans:
1. (i) The Organisation is World Trade Organization (WTO):
(ii) 164 Members.
(iii) Discuss Objectives of WTO:

………………………………
 Kendriya Vidyalaya Sangathan
SAMPLE PAPER SET1 (Solved)
Class XI Business studies (054) Max Mark 80
Time:3 Hrs
1. This question paper contains 34 questions.
2. Marks are indicated against each question.
3. Answer should be brief and to the point
4. Answers to the questions carrying 3 marks may be from 50 to 75 words.
5. Answers to the questions carrying 4 Marks maybe about 150words.
6. Answers to the questions 6 marks maybe about 200 words.
7. Attempt all parts of the questions together

1 Identify the activity which is not an auxiliary to trade? 1

(a) Banking (b) Warehousing (c) Insurance (d) Mining
2 Mr. Naresh Batra a businessman, incurred some financial Loss due 1
to the dishonesty of his workers. This loss is caused due to--
(a) natural (b) financial (c) human (d) economic
OR
Which of the following is not a true statement?
a) The scope of commerce is narrower than business.
b) Commerce includes trade and auxiliaries to trade.
c) Foreign trade is purchase and sale by the traders of the same
country.
d) Traders serve as a link between producers and consumers.
3 Assertion (A): Every profession restricts the entry on the basis of 1
examination or education.
Reason (R): A strict code of conduct exists in every profession.
a) Both the Assertion (A) and Reason (R) are true and Reason (R)
is the correct explanation of Assertion (A)
b) Both the Assertion (A) and Reason (R) are true, but Reason (R)
is not the correct explanation of Assertion (A)
c) Assertion (A) is true, but Reason (R) is false
d) Assertion (A) is false, but Reason (R) is true
4 Read the following statements carefully and choose the correct 1
alternative from the following:
Statement 1: Primary industries can be further classified as
manufacturing industry and construction industry
Statement 2: Tertiary industry tries to remove various hindrances
which arises during production and distribution of goods and services
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.
5 It can continue as long as the partners want and is terminated when 1
any partner gives a notice of withdrawal from partnership to the firm
a) Partnership at will b) Particular partnership
c) General partnership d) Limited partnership
6 Sending quotation of supplying raw material by one businessman to 1
another is called ----
a) B2B commerce b) B2C commerce
c) C2C commerce d) Intra-B

7 ‘‘It has a wide reach as on one hand it allows the seller and access to 1
the global market and on the other hand, it offers to the buyer,
freedom to choose, products from almost any part of the world.’’
Which benefit of e-business is described in above lines?
(a) Speed (b) Ease of formation (c) Global reach (d) Convenience
8 Match the following: 1
Column A Column B
a) Formed by an agreement (i) Joint stock company

b) Not sharing profits (ii)co-operative society

c) One man one vote (iii)partnership business

d) Transferability of shares (iv)sole proprietorship
A. a-ii, b- iv, c- i , d-iii
B. a-iii, b-iv, c-ii, d-i
C. a-iv, b-i, c-ii, d-iii
D. a-iii, b-ii, c-iv, d-i
9 Star Ltd. uses rocks, trees, electric poles, walls of historical 1
monuments to advertise its products. This advertising policy has
made their product known to the public. Identify the group whose
responsibility is ignored by Star Ltd.
(a) Government (b) Consumer (c) Society (d) Investor
10 Which of the following is not an argument in favour of social 1
responsibility?
a) Lack of broad public support
b) Converting problems into opportunities
c) Better environment for doing business
d) Maintenance of society
11 'Performance and credit rating' scheme is implemented by: 1
a) District Industries Centers
b) National Small Industries Corporation
c) National Bank for Agriculture and Rural Development
d) Small Industries Development Bank of India
12 Retailer who sells the goods in weekly markets are known as: 1
a) Cheap Jacks
b) Hawkers
c) Market Traders
d) Pavement Vendors
OR
Which of the following comes under the fixed shop small retailers?
a) Single Line Stores b) Street Stall Holders
c)Specialty Shops d) All of these
13 Chairperson of the GST council is: 1
a) President b) Finance Minister
c) Prime Minister d) None of these
14 Letter of credit is a guarantee issued by: 1
a) Exporter's Bank b) Importer
c) Importer's Bank d) Exporter
15 Which of the following documents is not required in connection with 1
an import transaction?
a) Bill of lading b) Shipping bill
c)Certificate of origin d) Shipment advice
16 In a survey conducted by the Government of India, it was found that 1
many farmers of the country are unable to secure loan for their
agricultural needs. Keeping this in mind, the Government decided to
form a Public Enterprise under a special Act of the Parliament, which
will be free from government interference and will have financial and
operational autonomy. Which type of Public Enterprise would you
suggest to the government?
a) Departmental Undertaking
b) Statutory Company
c) Statutory Corporation
d) Government Company
Read the following text and answer question No.17-20 on the basis
of the same.
Isha is the finance manager of Vertigo Chemicals Ltd. The company
wants to expand its business activities, for which it requires funds
of Rs 25 crore. Isha is of the opinion that company should raise
funds by issue of share capital instead of raising funds through
borrowed funds like debentures, loans, etc. But, the shareholders of
the company do not want to go for issue of shares and are interested
in raising funds through borrowed funds. This matter was discussed
in the Annual General Meeting of the Company and Isha convinced
the shareholders to go for Share Capital.
17 The control of shareholders will get diluted if the company raises the 1
capital through:
(a) Equity Shares b) Debentures
(c) Loans from Financial Institutions d) Preference Shares
18 Payment of interest is a legal compulsion on the company when funds 1
are raised through issue of:
(a) Equity Shares b) Debentures
(c) Both (a) and (b) d) None of these
19 …………usually have a charge on the assets of the company, while do 1
not create any charge on assets of the company.
(a) Debentures, Shares b) Shares, Debentures
(c) Shares, Loans from Financial Institutions d) None of these
20 Which of the following is not a feature of Borrowed Funds? 1
(a) No Control over management of the Business
(b) Periodic Interest Payment
(c) Permanent Capital (d) All of the above
21 Subodh is a wholesaler of A4 Photocopy Paper. He purchases paper 3
in bulk quantities, which enables the manufacturer to take
advantage of economies of scale. Subodh purchases paper from
manufacturers on cash basis and sometimes even give advance
money for bulk orders. As Subodh is in direct contact with the
retailers, he keeps informing the manufacturer about the changes in
customers' preferences, market conditions, etc. Identify the 'Services
of Wholesalers to Manufacturers' being provided by Subodh by
quoting lines from the given case.
22 On the death of Mr. Kamal Gupta, his business is inherited by his 3
three sons, Karan, Arjun and Nakul who carry on the business
under the form of Joint Hindu Family Business. However, there is a
dispute between the three brothers as to who should become karta.
Karan, the eldest brother, want to exercise control over the business,
while Arjun and Nakul do not agree to that. Who amongst the three
brothers can become karta? Also, comment upon the liability of each
member.
OR
Prabhat and Ranjan are in the manufacturing business of leather
belts and wallets. Both of them share profits and losses in the ratio
of 3:2. Prabhat has invested a capital of Rs 10 lakhs, while Ranjan
has invested Rs 7 lakhs in the business. Identify the form of
business organisation in which both of them have promoted their
business. Also, state any two features of this form of business
organisation.
23 Describe any three elements of business ethics. 3
OR
Explain any three roles of business in environment protection
24 Namit established a snack (Namkeen, Chips, Biscuits, etc.) 3
manufacturing unit in Punjab. Namit invested Rs.7 crore in Plant and
Machinery. He has decided to allocate 10% profit for educational and
health needs of employees and their family members. On the basis of
given information, answer the following questions:
(i) Which Act of Industries is applicable to the above
manufacturing unit?
(ii) Identify the category in which Namit's business will be placed
as per the Act identified in part (i).
(iii) What is the maximum investment limit of the category in
which Namit's business has been placed?
25 These are the unsecured deposits invited by companies from the 4
public mainly to finance working capital needs. A company can use
this source of finance for a period of six months to three years.
Therefore, they are primarily a source of short-term finance. However,
they can be renewed from time-to-time. Renewal facility enables
companies to use them as medium-term finance. Amount raised from
this source of finance cannot exceed 25% of its share capital and free
reserves. Companies prefer this source of finance because they are
cheaper than bank loans and investors prefer it because rate of