A customs union removes trade barriers and reduces or removes customs duties between member countries, but does not allow free movement of capital and labor. A common market goes further by promoting duty-free trade and free movement of labor and capital among members. Geocentric companies operate globally to achieve both local and global objectives, with subsidiaries contributing unique competencies. Transfer pricing is the price at which divisions of a company transact internally, and is used to evaluate business unit performance and potentially shift earnings between tax jurisdictions. Letter of credit is a bank guarantee that ensures timely payment for imports by the buyer.

1. International Marketing
2 marks- 2008:-
WHAT IS CUSTOM UNION AND COMMON MARKET?
CUSTOM UNION: -
Agreement between two or more countries to remove trade barriers, and reduce or remove customs
duty on mutual trade. A customs union generally imposes a common external-tariff (CTF) on imports from non-
member countries and generally does not allow free movement of capital and labor among member countries
COMMON MARKET: -
Group formed by countries within a geographical area to promote duty free trade and free movement
of labor and capital among its members. European community is the best known example. Common markets
impose common external tariff (CET) on imports from non-member countries
DEFINE THE TERM GEOCENTRIC COMPANIES
A company with offices in multiple nations that operates to achieve global objectives as well as local objectives.
The subsidiaries contribute unique competencies as part of a whole rather a set of separate business units.
LIST FOUR ANTI-DUMPING MEASURES A COMPANY ADOPTS
WHAT DO YOU UNDERSTAND BY TOTAL AND PARTIAL CONVERTIBILITY?
WHAT IS TRANSFER PRICING?
The price at which divisions of a company transact with each other. Transactions may include the trade of supplies
or labor between departments. Transfer prices are used when individual entities of a larger multi-entity firm are
treated and measured as separately run entities.
Price charged by individual entities for goods or services supplied to one another in multi-department, multi-office,
or multinational firms. Transfer price policy is generally aimed at (1) evaluating financial performance of
different business units (profit centers) of a conglomerate, and/or to (2) shift earnings from a high tax
jurisdiction to a low-tax one. Taxauthorities usually frown upon transfer pricing aimed at tax avoidance and insist
that each internal part of the firm deals with the other on 'arm's length' (market price) basis. Also called transfer cost.

2. WHAT IS LETTER OF CREDIT?
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 payment on the purchase, the bank will be required to
cover the full or remaining amount of the purchase.
WHAT IS TRIP AND TRIM?
TRIP- TRADE RELATED INTELECTUAL PROPERTY
TRIM- TRADE RELATED INVESTMENT MEASURES
TRIM: Trade Related Investment Measures are rules that apply to the domestic regulations a country applies
to foreign investors, often as part of an industrial policy.
TRIP: Trade Related Aspect of Intellectual Property Rights is an agreement which allow members to provide
protection of intellectual property and left free to determine the appropriate method of implementing the provisions of the
agreement within their own legal system and practice.
DEFINE THE TERM MERCANTILISIM
The main economic system used during the sixteenth to eighteenth centuries. The main goal was to increase a
nation's wealth by imposing government regulation concerning all of the nation's commercial interests. It was
believed that national strength could be maximized by limiting imports via tariffs and maximizing exports.
WHAT ARE MANAGEMENT CONTRACT AND TURN KEY PROJECTS?
MANAGEMENT CONTRACT: -
o Agreement between investors or owners of a project, and a management company hired for
coordinating and overseeing a contract.
o The management contract is a businessformat which separates ownership from operation.
TURN KEY PROJECT:-
o It is a contract under which a firm agrees to fully design, construct and equip a manufacturing/
business/ service facility and turn the project over to the purchaser when it is ready for operation
for remuneration.
WHAT IS ZERO SUM GAME?
A situation in which one participant's gains result only from another participant's equivalent losses. The net change
in total wealth among participants is zero; the wealth is just shifted from one to another.

3. DEFINE THE TERM CURRENCY CONVERTIBILITY?
The ease with which a country's currency can be converted into gold or another currency. Convertibility is
extremely important for international commerce. When a currency in inconvertible, it poses a risk and barrier to
trade with foreigners who have no need for the domestic currency.
WHAT IS Balance of Payments and Balance of Trade?
BALANCE OF PAYMENTS: -
o A record of all transactions made between one particular country and all other countries during
a specified period of time. BOP compares the dollar difference of the amount of exports and
imports, including all financial exports and imports. A negative balance of payments means that
more money is flowing out of the country than coming in, and vice versa.
BALANCE OF TRADE
o The difference between a country's imports and its exports.
Debit items include imports, foreign aid, domestic spending abroad and domestic
investments abroad.
Credit items include exports, foreign spending in the domestic economy and foreign
investments in the domestic economy.
A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade
surplus.