"Understanding Business Environment and International Business: Key Concepts, Factors & Global Impact"

 📚 Commerce

🌐 Business Environment and IB

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❓ Q1. According to mercantilists, what did they believe increased a nation's power?

🔘 (A) Military strength

🔘(B) Accumulation of gold from abroad

🔘(C) Promotion of domestic production

🔘(D) Expansion of diplomatic relations

✅ Answer: (B) Accumulation of gold from abroad

🧠 Explanation:

Mercantilism के अनुसार किसी राष्ट्र की शक्ति उसकी सोनें और चांदी की मात्रा (Bullion) पर निर्भर करती थी। उनका मानना था कि देश को जितना अधिक सोना मिलेगा, उतना ही वह शक्तिशाली होगा।

इसलिए, वे exports को बढ़ावा देते थे और imports को घटाते, ताकि सोना देश में आए और बाहर न जाए।

➡️ Example: जैसे कोई व्यापारी केवल बेचे लेकिन खरीदे नहीं, तो पैसा उसी के पास जमा रहेगा। यही सिद्धांत उन्होंने देश पर लागू किया।

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🔁 Q2. Match List I with List II:

🧠 List I (Expounders)

(a) David Ricardo (1817)

(b) Michael Porter (1900)

(c) Adam Smith (1776)

(d) Heckscher (1919) – Ohlin (1933)

🔎 List II (International Trade Theories)

(i) Theory of absolute advantage

(ii) Factor endowment theory

(iii) Theory of comparative advantage

(iv) Theory of competitive advantage

✅ Choose the most appropriate answer:

🅐 (a)-(i), (b)-(ii), (c)-(iii), (d)-(iv)

🅑 (a)-(iii), (b)-(iv), (c)-(i), (d)-(ii)

🅒 (a)-(iv), (b)-(ii), (c)-(iii), (d)-(i)

🅓 (a)-(iii), (b)-(iv), (c)-(ii), (d)-(i)

✅ Answer: (C) (a)-(iii), (b)-(iv), (c)-(i), (d)-(ii)

🧠 Explanation:

David Ricardo ➤ Comparative Advantage (कम लागत में जो उत्पाद efficiently बना सके वही बनाना चाहिए)

Michael Porter ➤ Competitive Advantage (देश अपनी Unique चीजों से प्रतियोगिता में आगे निकल सकता है)

Adam Smith ➤ Absolute Advantage (जो देश किसी वस्तु को कम लागत में सबसे अच्छा बना सके)

Heckscher-Ohlin ➤ Factor Endowment Theory (देश जिन संसाधनों में समृद्ध हैं, वही वस्तुएँ बनाएं)

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🧾 Q3. Choose the correct code for the following statements being correct or incorrect:

📜 Statement I: Absolute advantage is solely based on providing a good or service in greater quantity for the same cost, and cost considerations are not relevant in cases where the quantity is the same.

📜 Statement II: Comparative advantage is the concept developed by Adam Smith, and it forms the basis for large gains from trade between producers of different goods with different absolute advantages.

✅ Choose the correct Code:

🅐 Statement I is correct, but II is incorrect.

🅑 Statement II is correct, but I is incorrect.

🅒 Both the statements I and II are correct.

🅓 Both the statements I and II are incorrect.

✅ Answer: (A) Statement I is correct, but II is incorrect.

🧠 Explanation:

Statement I सही है क्योंकि Absolute Advantage का मतलब होता है – कम लागत में ज्यादा उत्पादन।

Statement II गलत है क्योंकि Comparative Advantage की theory David Ricardo ने दी थी, Adam Smith नहीं।

➡️ याद रखें:

Adam Smith → Absolute Advantage

David Ricardo → Comparative Advantage

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🌍 Q4. What is the distinction between internationalization and internalization in the context of business expansion?

🅐 Internationalization focuses on the decision to acquire or retain control of value chain activities, while internalization is the process of expanding operations beyond the domestic market.

🅑 Internationalization is the decision to stick within its own confines for a transaction, while internalization is the process of how companies become international.

🅒 Internationalization is the process of how companies become international, and internalization is a company’s decision to expand its sources into the wider market.

🅓 Internationalization is the process of expanding operations beyond the domestic market, while internalization is the decision to acquire or retain control of value chain activities.

✅ Answer: (A) Internationalization = value chain expansion, Internalization = control of value chain

🧠 Explanation:

Internationalization का मतलब है: दूसरे देशों में अपने business को फैलाना (Go Global)

Internalization का मतलब है: अपनी ही कंपनी के अंदर value chain का control बनाए रखना (No outsourcing)

➡️ Example:

जब Tata विदेश में कंपनी खोलती है → Internationalization

जब Tata खुद ही raw material से product तक सब कुछ खुद करती है → Internalization

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🌐 Q5. Under the given assumptions, which of the following statements is true regarding absolute advantage international trade between the two countries?

🅐 The factors of production are not mobile between countries.

🅑 Transportation costs play a significant role in international trade.

🅒 There are trade barriers for international trade.

🅓 Resources within a country vary significantly in terms of skills, qualifications, productivity, and motivation.

✅ Answer: (D) Resources within a country vary in skills, qualifications, productivity

🧠 Explanation:

Absolute Advantage theory यह मानती है कि देशों के पास अलग-अलग क्षमताएँ होती हैं – कोई skilled labor में अच्छा है, कोई technology में।

➡️ Example:

India → IT services में skilled manpower

China → Mass manufacturing में efficiency

इसलिए दोनों एक-दूसरे से trade करते हैं।

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🔍 Q6. Given below are two statements: One is labeled as Assertion A and the other is labeled as Reason R.

📌 Assertion (A): Comparative advantage is an important theory of international trade.

📌 Reason (R): It explains how countries benefit from producing goods in which they have lower opportunity cost.

✅ Choose the correct code:

🅐 Both A and R are true, and R is the correct explanation of A.

🅑 Both A and R are true, but R is not the correct explanation of A.

🅒 A is true, but R is false.

🅓 A is false, but R is true.

✅ Answer: (A) Both A and R are true, and R is the correct explanation of A.

🧠 Explanation:

Comparative advantage बताता है कि यदि हर देश वही वस्तु बनाए जो वह सबसे अच्छे तरीके से बना सकता है, तो सभी देश लाभ में रहते हैं।

Reason इसका सही explanation है – specialization से efficiency और mutual benefit दोनों बढ़ते हैं।

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🚀 Q7. Which of the following best describes the Uppsala Model of Internationalization?

🅐 Firms prioritize entering distant markets with high market commitment.

🅑 Firms choose to enter nearby markets with low market commitment.

🅒 Firms immediately commit heavily to international markets.

🅓 Firms primarily focus on global market knowledge before any market entry.

✅ Answer: (B) Firms choose to enter nearby markets with low market commitment.

🧠 Explanation:

Uppsala Model कहता है कि कंपनियाँ धीरे-धीरे international market में जाती हैं:

1. पहले पास के देशों में

2. फिर दूर के देशों में

3. पहले कम निवेश (low risk)

4. बाद में high investment

➡️ जैसे एक बच्चा पहले shallow पानी में जाता है, फिर deep water में।

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📘 Q8. Which of the following statements is/are correct regarding the international trade theories?

I. The Heckscher–Ohlin (H.O. Trade Model) assumes that countries have uniform factor endowments, leading to no differences in factor endowments causing trade.

II. Adam Smith and Ricardo’s trade models considered only capital as the factor input in determining trade.

III. The H.O. Trade Model suggests that countries will specialize in the production of goods that use their abundant resources intensively.

✅ Select the correct option:

🅐 Only III

🅑 II and III

🅒 I and II

🅓 I, II and III

✅ Answer: (A) Only III

यह Heckscher-Ohlin theory का मुख्य सिद्धांत है:

> "एक देश उन वस्तुओं का निर्यात करेगा, जिनके उत्पादन में उन कारकों की अधिक आवश्यकता होती है, जो उसके पास प्रचुर मात्रा में उपलब्ध हैं।"

➡️ Example:

भारत (Labor-rich) → Handicrafts, Textile, BPO export

अमेरिका (Capital-rich) → Machinery, Software, Pharmaceuticals export

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