Assignment

On
“An Overview of International Business”
(Chapter-1)

Submitted to:
Mrs. Shameema Ferdausy
Professor
Department of Management
University of Chittagong

Submitted By:
Team Fireflies
First Semester, MBA
Department of Management
University of Chittagong

Date of Submission: 11th September, 2019

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 Team Fireflies

Name ID
Md. Lutfur Rahman 14302078
Dipa Das
Farhin Rahman 14302127
Rasheda Akhter
Md. Shaha Jalal 14302102

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 Table of Contents

SL Contents Page No.

1 Define International Business 4
2 What are the differences between international business and domestic 4
business? / Home market Vs host market?
3 Discuss about the CAGE model 6
4 Why we study IB? / What are the reasons to study IB? 8
5 Discuss the different forms of international business activities 9
6 Discuss the contemporary causes of globalization? Why companies 11
engage in IB?
7 What are the differences between visible and invisible trade? 14
8 Merchandise export & import Vs Service export & import 15
9 What is the Impact of Globalization on the Business and its growth? 16
10 What are the driving forces behind globalization? 19
11 What is an Investment Portfolio? 23
12 Define Just- In- Time (JIT) 24
13 Reference 24

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Question 01: Define International Business.

Answer:
International business refers to an organization that engages in cross- border commercial
transactions with individuals, private firms, or public sector organizations. Basically the term
International Business mean cross border commercial transactions.

International business consists of business transactions between parties from more than
one country. Occasionally the mandates of legal systems of international business may be
incompatible and creating major headaches for international managers. Examples of international
business transactions include buying materials in one country and shipping them to another for
processing or assembly, shipping finished goods from one country to another.

Question 02: What are the differences between international business and
domestic business? / Home market Vs host market?

Answer:
Domestic business involves transactions occurring within the boundaries of a single country,
whereas international business transactions cross national boundaries. International business
can differ from domestic business for a number of other reasons, including the following:

 The countries involved may use different currencies, forcing at least one party to convert
its currency into another.
 The legal systems of the countries may differ, forcing one or more parties to adjust their
practices to comply with local law. Occasionally, the mandates of the legal systems may
be incompatible, creating major headaches for international managers.
 The cultures of the countries may differ, forcing each party to adjust its behavior to meet
the expectations of the other.
 The availability of resources differs by country. One country may be rich in natural
resources but poor in skilled labor, whereas another may enjoy a productive, well-trained
workforce but lack natural resources. Thus, the way products are produced and the types
of products that are produced vary among countries.

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  In most cases, the basic skills and knowledge needed to be successful are conceptually
similar whether one is conducting business domestically or internationally.
 For example, the need for marketing managers to analyze the wants and desires of target
audiences is the same regardless of whether the managers are engaged in international
business or domestic business. However, although the concepts may be the same, there is
little doubt that the complexity of skills and knowledge needed for success is far greater
for international business than for domestic business.

International business people must be knowledgeable about cultural, legal, political, and social
differences among countries. They must choose the countries in which to sell their goods and
from which to buy inputs. International businesses also must coordinate the activities of their
foreign subsidiaries, while dealing with the taxing and regulatory authorities of their home
country and all the other countries in which they do business.

The differences between domestic and international business are given below:

Domestic Business Point of Difference International Business

Business does not cross the National boundaries No national boundaries.

national boundaries.
Within the country Business functions Within and also outside of the country

Only one country (home Country involves Two or more country are involved
country)
Local currency is used Currency Currency must be changed of one country

Only country legal system Legal system Not only country’s own legal system but
needs to followed also other country’s legal system should
be followed

No cultural difference Cultural difference Cultural difference occurs country to

exists. country that effect the business directly.

Resources may not be Availability of Various countries possess various

sufficient within the resources resources, so no lack of resources.
country

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Question 03: Discuss about the CAGE model.

Answer:
The CAGE model developed by Pankaj Ghemawat, of IESE Business School in Barcelona, is a
useful framework for understanding the operating challenges facing international businesses
because of national differences among the nations. In the present boundary less global economy,
national borders are superfluous and irrelevant. Nations, defined by those boundaries, having
different legal systems, different laws, different political systems and social structures.
Requirements for establishing a business vary across nations we need to understand the nation’s
different aspects. The CAGE model helps us to understand the difference among the nations and
give us way to deal with it. (Griffin, 2015)

Cultural Administrative
distance distance

Geografic Economic
distance distance

● Cultural distance (the “C” in CAGE) refers to differences in cultural, linguistic, religious, and
social values that can affect the way firms do business within a country for cultural distance
Product features, size of the product, standards or packaging vary from nation to nation.
Different ethnicities, lack of connective ethnic or social networks are seen also.

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●Administrative distance (the ‘A’ in CAGE) refers to differences in the public administration
of countries. It can be affected by past colonial ties, common legal heritages, use of a common
currency, political alliances, or attitudes toward the proper balancing between the role of the
private sector and the role of the public sector.

● Geographic distance (the ‘G’ in CAGE) refers to the physical, communications, and
transportation links between countries and how the geographic connectedness of countries
affects their economic integration. Physical remoteness, Lack of a common border, Lack of sea
or river access, Size of country Weak transportations are considered here. Communications and
connectivity are important to remove the global distance. Local supervision and operational
requirements are highly required here.

● Economic distance the ‘E’ in CAG) E refers to the differences in the economic resource bases
of countries. Although natural resources are a component of economic distance, human resources,
infrastructure, creation of new knowledge, and promotion of technological innovation are in fact
much more important causes of economic distance. These economic differences affect the nature
and level of countries’ participation in the global marketplace.

One of the primary challenges facing international business practitioners is formulating and
implementing strategies that recognize and then use these differences to create competitive
advantages for their firms. This may be as simple as purchasing labor-intensive inputs from
countries where wages are low to reduce the costs of necessary components. It may be as
complex as restructuring how the firm is organized or how it does business to benefit from global
efficiencies while respecting and responding to local culture, laws, and social norms.

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Question 04: Why we study IB? / What are the reasons to study IB?

Answer:
There are many different reasons why we need to learn more about international business. The
reasons are given below:

 First, to understand the increasingly important area to better assess career opportunities
and to interact effectively with managers. Almost all large organization has international
operations or be affected by the global economy. So to conduct with the changing
business environment
 A basic grasp of international business would help to understand more fully why the team
is formed, what the company expects to accomplish, and how to effectively interact with
colleagues.
 Secondly, Small businesses also are becoming more involved in international business.
For using foreign-made materials or equipment, competing with foreign firms, and
perhaps even selling in foreign markets it will be necessary to know the international
business. The growth of e-commerce has also opened up new opportunities for small
businesses.
 Another reason to study international business is to keep pace with future competitors.
We need to ensure that our global skills and knowledge will aid our career, rather than
allow their absence to hinder it. We also need to study international business to stay
abreast of the latest business techniques and tools because no single country has a
monopoly on good ideas.
 Finally, you need to study international business to obtain cultural literacy. As global
cultures and political systems become even more intertwined than they are now,
understanding and appreciating the similarities and differences of the world’s peoples
will become increasingly important.

For example, Japanese firms pioneered inventory management techniques such as just-in-time
(JIT) systems. Under JIT, suppliers are expected to deliver necessary inputs just as they are
needed. Similarly, European firms such as Volvo and Japanese firms such as Honda were among
the first to experiment with such labor practices as empowerment, quality circles, autonomous

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work groups, and cross-functional teams to raise the productivity and satisfaction of their
workforces.

Managers who remain ignorant of the innovations of their international competitors are bound to
fail in the global marketplace. We will more often encounter colleagues, customers, suppliers,
and competitors from different countries and cultural backgrounds. Knowing something about
how and where their countries and companies fit into the global economy can help earning their
respect and confidence as well as give a competitive edge in dealing with them. Conversely, if
we know little or nothing about the rest of the world, we may come across as provincial,
arrogant, or simply inept.

Question 05: Discuss the different forms of international business activities.

Answer:
In today’s complex world of international commerce, different forms of international business
activity are occurred and numerous forms of international business activity are also common.
These forms are discussed below –

 Exporting and importing:

Exporting is the selling of products made in one country for use or resale in other
countries. Importing is the buying of products made in other countries for use or resale
in ones country. Exporting and importing are divided into two groups. These are-
 One group of activities is trade in goods (tangible goods) such as clothing,
computers etc.
 The other group of activities is trade in services (intangible products) such as
banking, travel, accounting activities.
 International investments :
The second major form of international business activity is international investments in
which capital is supplied by residents of one country to residents of another. Such
investments are divided into two categories. These are
 Foreign Direct Investment (FDI): FDI are investments made for the purpose of
actively controlling property, assets, or companies located in host countries.

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 International franchising :

It is a specialized form of international licensing that occurs when a firm in one

country ( franchisor) authorizes a firm in a second country ( franchisee) to use its
operating system as well as its brand names, trademark, and logos in return for a royalty
payment. For example: McDonald’s Corporation franchises its fast food restaurants
worldwide.

 International management contract:

International management contract is an arrangement wherein a firm in one

country agrees to operate facilities or provide other management services to a
firm in another country for an agreed on fee. Management contract are common, for
example, in the upper end of the international hotel industry.

 Multinational corporation (MNC):

MNC is used to identify firms that have extensive involvement in international

business. MNC is a firm that engages in FDI and owns or controls value-adding
activities in more than one country. In addition to owning and controlling foreign assets,
MNCs typically buy resources in a variety of countries, create goods and services in a
variety of countries and sell those good in variety of countries. MNC coordinate their
activities from a central headquarters but may also allow their affiliates in foreign
markets considerable latitude in adjusting their operations to local circumstances.

The above are the different forms of international business activities that are
occurred in new international trade era.

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Question 06: Discuss the contemporary causes of globalization? Why
companies engage in IB?

Answer:

International business has grown so rapidly in the past decade that many experts believe we are
living in the era of globalization. Globalization can be defined as “the inexorable integration of
markets, nation-states, and technologies in a way that is enabling individuals, corporations and
nation-states to reach around the world farther, faster, deeper, and cheaper way. There are two
broad reasons: strategic imperatives, which motivate globalization, and environmental changes,
which facilitate it. (Griffin, 2015)

Globalization

Strategic
Imperatives

Environmental
Changes

Strategic Imperatives:

Several basic motives have compelled firms to become more global in both their orientation and
actions. These strategic imperatives include leveraging a firm’s core competencies, acquiring
resources at low cost, expanding into new markets, and competing with industry rivals.

To Leverage Core Competencies:

One major motive for globalization is the opportunity to leverage a core competency that a firm
has developed in its home market. A core competency is a distinctive strength or advantage that
is central to a firm’s operations. By using its core competency in new markets, the firm is able to
increase its revenues and profits. Samsung, for example, developed cutting-edge cellular phone
technology that was eagerly adopted by domestic consumers in South Korea. Samsung’s

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managers quickly recognized that the firm could increase its revenues and profits by expanding
its operations and sales in other countries.

To Acquire Resources and Supplies:

Another important reason for going international business is to acquire resources such as
materials, labor, capital, or technology. In some cases organizations must go to foreign sources
because certain products or services are either scarce or unavailable locally. Sometimes
companies go global for cheaper raw materials, labor and capital.

For example, North American grocery wholesalers buy coffee and bananas from South America
for cheaper raw materials.

To Seek New Markets:

Seeking new markets is also a common motive for international expansion. When a firm’s
domestic market matures, it becomes increasingly difficult to generate high revenue and profit
growth. Expansion into new markets carries with it two other benefits. First, a firm may be able
to achieve economies of scale, lowering its average costs as its production increases. Second,
such expansion diversifies a firm’s revenue stream. As it serves more countries, the firm
becomes less dependent on its sales in any one country; thereby protecting itself should that
country’s economy turn sour. Thus, firms like Procter & Gamble, Unilever, and Colgate-
Palmolive don’t need to search market or depend on one country.

To Better Compete with Rivals:

Finally, businesses sometimes enter foreign markets to better compete with industry rivals. The
leading firms continually attack and counterattack each other in every region of the world to
prevent their rivals from getting a stranglehold in any country. For example, as Coca-Cola
expands aggressively around the world, rival Pepsi-Cola has little choice but to follow and try to
keep up.

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Environmental Changes:

These strategic imperatives provide firms with the motivation to internationalize their operations.
However, firms would not have been able to expand their international activities without
significant changes in two key areas: the political environment and the technological
environment.

Changes in the Political Environment:

Government actions which affects the operations of a company or business is called political
environment. These actions may be on local, regional, national or international level. Business
owners and managers pay close attention to the political environment to gauge how government
actions will affect their company. If one country posses tariffs and taxes in FDI or in import and
export it may affect the business of a company.

Changes in the Technological Environment:

Changes in governmental policies encouraged international business activity. Improvements in

technology—particularly in communication, transportation, and information processing—made
international business more feasible and more profitable. Advances in transportation also have
stimulated growth in international tourism, which is the largest component of international trade
in services. The increasing ability of computers to rapidly process vast quantities of information
allows firms to manage offices and factories located in every corner of the globe.

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Question 07: What are the differences between visible and invisible trade?

Answer:

Visible trade: in economics means exchange of physically tangible goods between countries,
involving the export, import, and re-export of goods at various stages of production.

Invisible trade: is which involves the export and import of physically intangible items such as
services.

 Visible trade involves trading in goods, such as wheat. Invisible trade involves trading in
services, something which cannot be seen such as tourism, education services and the
like.
 In tangible trade the ownership is transferred the customers but in intangible trade
ownership is not transferred to the customer. For example buying a ticket for an airline
does not mean to buy the airline company.
 The product of intangible trade (service) is no measurable whereas the product of
tangible trade is easily measurable.
 There is time difference between production and consumption of tangible trade. But in
the intangible trade production and consumption is at the same time.

Cultural Administrative
Distance Distance

Geographic Economic
Distance Distance

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Question 08: Merchandise export & import Vs Service export & import.

Answer:

Merchandise is physical goods (TV’s, toaster, air plans, furniture etc). When physical goods are
made in one country & exported in another country is called Merchandise export or import.

Service is intangible goods (Travel agency, hotel, hospitals, web hosting etc). When a company
hires a service center from another country to do certain work is called service export or import.
(https://www.quora.com)

There are some major differences between Merchandise and Service export & import. They are:

Customs and payment statistics:

Merchandise exports and imports are based on customs statistics while service exports and
imports are based on balance of payment statistics.

Trade:

Merchandise exports and exports refer to trade in goods while service export and import refers to
trade in intangible products. The former sometimes referred as visible trade and invisible trade.

Buying and selling:

Merchandise trade is the buying and selling of tangible goods where service trade is buying and
selling of intangible service. A nation that is more efficient than any other else in the production
of any goods and service is said to have a competitive advantage in the production of goods and
service.

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Importance of Merchandise and service export:

Export merchandising is a process of offering retail goods for sale in a foreign country market.
Many large companies across the world maintain entire division to find better ways to enter in
foreign market to increase profit. On the other hand, service exports are an important emerging
trend in global trade. Many traditional manufactured companies increasingly contain technology
that requires extra benefit to do a foreign business well.

Export goods or services are provided to foreign country by domestic producers is a good that is
bought by another country. Import goods or services are provided to domestic consumer by
foreign producers. An import receiving country is an export to the sending country. Both are
most important in this current world.

Question 09: What is the Impact of Globalization on the Business and its
growth?

Answer:
The global changes in the world, changes in political, economic and business activities as well as
the development of technology, transport and communications, impose the need for enterprises
in its struggle for survival, to change their strategies and go out from the borders of their own
country. Limited market, competitive pressure, demand for cheaper resources and the dynamics
of the postmodern era, forcing business leaders to change their focus from traditional targets to
alternative measures for successful business and the entrance on global markets, with the purpose
of making competitive advantage.

The reasons why a company becomes a multinational, and off separates the two categories:

 Operational needs: providing materials, equipment, technology and release of surplus

production;
 Strategic needs: ensuring the inviolability of future changes in the external environment,
steady growth (maintaining historic patterns of growth, avoiding stagnation caused by
saturation, increasing the volume of business, increasing the rate of growth) and better
profitability.

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The development of international business activities coincided with widespread phenomenon of
globalization of markets. The globalization of markets refers to the growing economic
integration and the growing interdependence of countries worldwide. Internationalization of the
companies refers to the tendency of the companies to systematically increase the international
scope of their business activities, while globalization refers to macro trend intensive economic
relations between the countries in the world. Globalization encourages companies to
internationalize and to substantially increase the volume and types of cross-border transactions in
goods, services and capital. Also, the globalization leads to rapid dissemination and diffusion of
products, technology and knowledge in the world, regardless of the origin.

The process of globalization is a natural process that is a result of the growing and accelerated
process of generalizing of the character and process of production. The development of science,
engineering and technology and the expansion of markets for goods, worldwide, lead to
internationalization of economic and financial developments and their global deployment. If
globalization is understood as a process that leads to greater

• Political changes: The globalization trend of unifying and socializing the global
community, as well as, forming preferential trade agreements and groupings such as NAFTA and
the European Union, which united more nations in a single market, allow the companies
significant market opportunities. Two aspects of this trend, which contribute to the globalization
of business operations are: progressive reduction of barriers for trade and foreign investment by
most governments, which leads to intense opening new markets by international companies,
which also exported them and build production facilities in them, and the privatization of most of
the industry in the former communist countries, as well as opening up their economies to global
competition.

• Development of technology: The development of computing and communication

technologies has enabled increased flow of ideas and information across the borders of the
countries, providing introduction of the consumers with the goods worldwide. Internet and
networking have enabled smaller companies to compete globally, as a result of the rapid flow of
information, regardless of the physical location of the seller or buyer. Also, allows international

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companies to hold corporate meetings among managers from headquarters and branches, without
wasting unnecessary time for travel.

• International business climate: The development of communication and information

technologies have contributed to the process of globalization, but also provided instruments that
facilitated the processes of globalization. Newly emerging markets also recognize the economic
benefits, technological development and growth opportunities that globalization provides them.

• Development of markets: Information and communication technologies, the rapid

development of international tourism, widespread cultural exchange and improved the living
standards, in many developing countries have contributed to the emergence of a group of
consumers in different countries and regions of the world with similar educational profiles,
lifestyle, purchasing power and for good products, as well as, aspirations for high quality. This
scenario, in combination with the liberalization of international trade and the availability of
global distribution channels, opens great opportunities for companies that want to offer their
products to global markets. Large market potential exist outside of the domestic market, that is
why the companies go out on the foreign markets, generate sales and have opportunities for
profit that cannot be achieved at home.

• Expenses: The liberalization of trade and investment flows, which emerged in the 80sof
the last century, which inexorably moved forward, is a stimulus for globalization of the
businesses. Trade liberalization, global consumer habits, rising development costs and the need
for economies of scale, pressure from foreign competitors in the domestic market as well as the
development of information and communication technologies, are considered drivers of the
globalization. Because of the need to introduce new products and investment in research,
development and innovation, achieving economies of scale, reduce costs and access to cheaper
raw materials; companies are forced to plan activities, taking into consideration the global
market. Economies of scale and cost reduction are the main goal of management. That is why
companies decide to locate production in countries where the cost of developing and producing
are smaller.

• Competition: One of the reasons that the companies join global strategies is the need of
maintaining or gaining a competitive advantage in foreign markets and avoiding competition in
the domestic market. Competition in international markets is huge and growing, with more

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multinational competitors who win markets worldwide. The companies improve their
competitive position by opposing competitors in international markets or premature intrusion
into the domestic market of the competitor in order to destabilize or to suppress its development.
Competition in the domestic market. Competition in international markets is huge and growing,
with more multinational competitors who win markets worldwide. The companies improve their
competitive position by opposing competitors in international markets or premature intrusion
into the domestic market of the competitor in order to destabilize or to suppress its development.

Question 10: What are the driving forces behind globalization?

Answer:
Globalization is driven by various new development and gradual changes in the world economy.
Generally, organizations go global for expanding their markets and increasing their sales and
profits. One of the major forces of globalization is the expansion of communication systems. In
the present era, it has become easy to distribute information to any part of the world through the
Internet.
Some of the important forces behind globalization are shown in Figure-1:

The different forces (as shown in Figure-1) are explained as follows:

(a) Advancement of Technologies:

Refers to one of the crucial factors of globalization. Since 1990s, enhancement in

telecommunications and Information Technology (IT) has marked remarkable improvements in
access of information and increase in economic activities. This advancement in technologies has
led to the growth of various sectors of economies throughout the world.

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Apart from this, the advancement in technology and improved communication network has
facilitated the exchange of goods and services, resources, and ideas, irrespective of geographical
location. In this way, advanced technologies have led to economic globalization.

(b) Reduction in Cross-trade Barriers:

Refer to one of the critical forces of globalization. Every- country restricts the movement of
goods and services across its border. It imposes tariffs and quotas on the goods and services
imported in its country. In addition, the random changes in the regulations create a chaos in
global business environment.

Such practices impose limits on international business activities. However, gradual relief in the
cross-border trade restrictions by most governments induces free trade, which, in turn, increases
the growth rate of an economy.

(C) Increase in Consumer Demand:

Acts as a main driver to facilitate globalization. Over the years, with increase in the level of
income and standard of living, the demand of consumers for various products has also increased.
Apart from this, nowadays, consumers are well aware about products and services available in
other countries, which impel many organizations to work in association with foreign players for
catering to the needs of the domestic market.

(d) High Competition:

Constitutes an important driver for bringing about globalization. An organization generally

strives hard to grain competitive edge in the market. The frequent increase in competition in the
domestic market compels organizations to go global. Thus, various organizations enter other
countries (for selling goods and services) to expand their market share.

They export goods in foreign markets where the price of goods and services are relatively high.
Many organizations have achieved larger global market shares through mergers and acquisitions,
strategic alliances, and joint ventures. So, these are the major factors that have contributed a lot
in globalization and the growth of global economy.

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Driving forces of globalization are:

1. Liberalization:
Strong wave of liberalization induced by the World Trade Organization (WTO) as well as
unilateral negotiations and decisions undertaken by the countries world over. The term is heavily
used by different government like GATT/WTO, FDI (foreign direct investment) are the major
tools in it. Liberalization allow two any MNC’s to work Freely, Free to entering business market
etc.

2. Technology:
There is a drastic change in International business after technology advancement; some countries
have their monopolies in different segments only with the support of technology.
Faster and cheaper technology in the digital global economy of the Internet era has broken the
national barrier of time and space, thus, integration of national markets have been facilitated with
ease.

3. Economical Trends of the World:

Under-develop nations have to depend only on imports. Developed nation believe in exports, In
fact our economy tries to develop their economic status and this increases the chance of
International trade.

4. Consumer Needs:

Consumer is the king of present global market.Variety of products and services are demanded by
the consumers and sellers is supposed to satisfy their desires ultimately this develops an
opportunity for International business.

5. Revolution in Transportation System:

Cargo Transportation is the fastest way to export products beside this many other wages used for
save and bulk transportation.

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6. Product Development Cost:

It is a cost which is included to develop a product; every organisation tries to reduce to high
extent.

7. Communication Improvement:

Communication was the biggest obstacle, before some decades but now improvement taking
place in International business. E-mail, Fax, teleconferencing are some ways in it.

8. MNC’s:

Multi-National companies are one of the most powerful forces for globalization. The whole
economy nation can be fix by MNC’s, There are these organization which connect all of these
resource, skills, technology, objections with the Conjunction of the world market and it increases
the chances of revenue generation.

9. Trade Flows:

Removal of trade barriers time and again has facilitated a rising growth rate of the world trade
over the years. New technology under IT revolution has created distribution channel, which is
difficult to be blocked under the protectionist trade policy. For example, French government’s
restriction on American films tends to be futile when these are shown through satellite or Internet

10. Capital Flows:

In the Internet Age, capital has become internationally more mobile.

11. Factor Mobility:

Mobility of individuals, information and knowledge, as agents of production and countries has
smooth need the growth process of globalization. Several complex and sensitive issues are
inherent in the process and proliferation of globalization including the role of culture and
political/social acceptance and alternation of the required attitudes towards the change and
involvement of the people at large in the global arena.

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Question 11: What is an Investment Portfolio?

Answer:
In general, an investment portfolio is constructed based on the expected return, the risk that the
investor is willing to accept, and the level of liquidity.
The expected return represents the yield on an asset.

A portfolio investment is a hands-off or passive investment of securities in a portfolio, and it is

made with the expectation of earning a return. This expected return is directly correlated with the
investment's expected risk. Portfolio investment is distinct from direct investment, which
involves taking a sizable stake in a target company and possibly being involved with its day-to-
day management.

A portfolio investment is a strategic investment strategy while a tactical approach involves

actively buying and selling securities over short time periods.

Portfolio investments are passive investments, as they do not entail active management or control
of the issuing company.

The foreign investors have a relatively short-term interest in the ownership of these passive
investments such as bonds and stocks. Rather, the purpose of the investment is solely financial
gain, in contrast to foreign direct investment (FDI), which allows an investor to exercise a certain
degree of managerial control over a company.

For international transactions, equity investments where the owner holds less than 10% of a
company's shares are classified as portfolio investments.

These transactions are also referred to as "portfolio flows" and are recorded in the financial
account of a country's balance of payments.

For example a bank account that yields 2% increases the total amount by 2% annually. Or a
stock that is bought at $10 and currently trades at $15 has a yield of 50%. Obviously, any
investor seeks the highest possible return, but not all investors are willing to undertake the
maximum risk. The risk represents the uncertainty of investment. Usually, a high-risk investment

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portfolio has a higher probability of generating a higher return than expected. The liquidity of an
asset represents how quickly an asset can be converted into cash.

12. Short note:

Define Just- In- Time (JIT)

Answer:

Just-in-time is a manufacturing system whose goal is to optimize processes and

procedure by continuously pursuing waste reduction.

It is both a philosophy and a set of methods for manufacturing. Although it has no single,
agreed upon definition, JIT emphasizes waste reduction, total quality control, and devotion to the
customer. Thus it is a manufacturing system in which materials are delivered immediately before
they are required in order to minimize storage costs. (www.investopedia.com)

Reference:

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