Q.Discuss the benefits and risks of international business to a firm and to a nation.

This question needs a balanced answer covering benefits and risks separately for a firm and, briefly, for the nation, since board answers on this topic are marked for covering both sides fairly.

International business brings real benefits to a firm that undertakes it. It gives access to a much larger market than the domestic one alone, allowing greater sales volume and overall profit. Producing at a larger scale for this bigger combined market allows the firm to achieve economies of scale, lowering its average cost per unit. Operating across several economies also spreads business risk, so the firm is not entirely dependent on the ups and downs of a single domestic market, and international exposure often brings access to newer technology, competitive practices, and management ideas, while also enhancing the firm's reputation and brand recognition beyond its home country.

At the same time, a firm taking on international business accepts real risks. It faces political risk, since a change in a foreign government's policy or political instability can disrupt its operations abroad with little warning. It faces currency risk, since an unfavourable exchange-rate movement between the transaction date and settlement date can reduce or eliminate the profit on a deal. It faces cultural and communication risk, since products, advertising, or business practices that succeed at home may not translate to a market with different customs and language. It also faces a heavier compliance burden, since it must satisfy more than one country's laws and standards simultaneously, and greater transit risk, since goods travelling longer distances and passing through customs checks are more exposed to delay, loss, or damage. …

A common mistake is discussing only benefits or only risks, or discussing them only at the firm level and forgetting the nation-level angle entirely — a well-rounded 5-mark answer on this topic co …