GV Yeshwanth

MBA 1

International Business

1)

What is Joint Venture:-

A joint venture is a business arrangement in which two or more parties agree to pool their resources for the purpose
of accomplishing a specific task which can be new project or any other business activity.

Advantages of a Joint Venture

 New insights and expertise
 Better resources
 It is only temporary
 Both parties share the risks and costs
 There are ways to exit a joint venture
 You will know what’s yours and will be able to sell it
 You are more likely to succeed
 You will build relationships and networks
 Your potential will virtually be limitless
 You get to save money by sharing advertising and marketing costs
 International joint venture eradicates the risk of discrimination.

Disadvantages of a Joint Venture

 Vague objective
 Flexibility can be restricted
 There is no such thing as an equal involvement.
 Great imbalance
 Clash of cultures
 Limited outside opportunities
 A lot of research and planning are necessary
 It may be hard for you to exit the partnership as there is a contract involved
 You might be tempted to leave the joint venture
 Lack of clear communication
 Partners can be Unreliable

2)
International trade is important ASPECT OF ANY COUNTRY .It is the only way a country acquires
money .It includes goods and services.

International trade of any country with any country is affected by many factors like demand for particular
good, tax barriers,etc but most important of them is political environment.

Political environment refers to popular vote of the country .They vote and elect the government and it
decides and directs the political environment of a country which may either be favorable or against any
country or for international trade itself.

For example, US president when he was in power he implemented various policies which discouraged
international trade by imposing of Tariffs on imports.

Political Environment also includes the state of country. It means if the country is peaceful or in state of
war. These effects the international Trade to great extent.

Hence with these examples it is clear that proper Political environment is essential for International
Trade.

3)

In international trade, various instruments for payment are used by exporters and importers.

These payment instruments are the documents that are needed to fulfill the legal requirements of a
contract between the exporter and importer.

What Is a Letter of Credit?

A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the
correct amount. In the event that the buyer is unable to make a payment on the purchase, the bank will be required to cover
the full or remaining amount of the purchase. It may be offered as a facility.

How a Letter of Credit Works

Because a letter of credit is typically a negotiable instrument, the issuing bank pays the beneficiary or any bank nominated
by the beneficiary. If a letter of credit is transferable, the beneficiary may assign another entity, such as a corporate parent
or a third party, the right to draw.

 
Banks typically require a pledge of securities or cash as collateral for issuing a letter of credit.

Banks also collect a fee for service, typically a percentage of the size of the letter of credit. The International Chamber of
Commerce Uniform Customs and Practice for Documentary Credits oversees letters of credit used in international
transactions. There are several types of letters of credit available.
Types of Letters of Credit
Commercial Letter of Credit
This is a direct payment method in which the issuing bank makes the payments to the beneficiary

Revolving Letter of Credit

This kind of letter allows a customer to make any number of draws within a certain limit during a specific time period.

Traveler's Letter of Credit

For those going abroad, this letter will guarantee that issuing banks will honor drafts made at certain foreign banks.

Confirmed Letter of Credit

A confirmed letter of credit involves a bank other than the issuing bank guaranteeing the letter of credit. The second bank
is the confirming bank, typically the seller’s bank. The confirming bank ensures payment under the letter of credit if the
holder and the issuing bank default. The issuing bank in international transactions typically requests this arrangement.

 4)

Any commercial cargo, whether it is for import or export, requires customer clearance.

The type of documents required for customs clearance usually depends on the type of goods being shipped

List of Documents required for Exports Customs Clearance

 ProForma Invoice
 Customs Packing List
 Country of Origin or COO Certificate
 Customs Invoice
 Shipping Bill
 Bill of Lading
 Bill of Sight
 Letter of Credit
 Bill of Exchange
 Export License
 Warehouse Receipt
 Health Certificates