H.R.

COLLEGE OF COMMERCE & ECONOMICS

123,

Dinshaw Wachha Road, Churchgate, Mumbai - 400020

A PROJECT
ON

BUSINESS PLAN OF
SWEET COFFEE SHOP
in the subject of

ENTREPRENURSHIP

SUBMITTED TO

UNIVERSITY OF MUMBAI
FOR

/ (SEM-III) OF

MASTER OF COMMERCE
BY

Name: JANAM SHAH

Roll No: 39
UNDER THE GUIDANCE OF

Prof. ______________________________
YEAR 2015-16

H.R. COLLEGE OF COMMERCE & ECONOMICS

123,

Dinshaw Wachha Road, Churchgate, Mumbai - 400020

DECLARATION BY THE STUDENT

I, JANAM SHAH student of M Com.(SEM-I)/ (SEM-III) Roll Number 58 hereby declare that the project for
the Paper

ENTREPRENURSHIP
BUSINESS PLAN

titled,
submitted by me for Semester-I / Semester-III during the

academic year 2015-16, is based on actual work carried out by me.

I further state that this work is original and not submitted anywhere else for any examination.

Signature of Student

H.R. COLLEGE OF COMMERCE & ECONOMICS

INTERNAL ASSESSMENT
PROJECT (40 Marks)
Name of the Student

Class

JANAM SHAH

MCOM

R. No.

BM /
ACCOUNTS

(SEM-III)

39

Subject: ENTREPRENURSHIP
Topic for the Project : BUSINESS PLAN
TRADE__________________________________________

Marks
Awarded
Documentation
Internal Examiner
(10 Marks)
External Examiner
(10 Marks)
Presentation
(10 Marks)
Viva and Interaction
(10 Marks)
TOTAL MARKS (40
Marks)

Signature

H.R. COLLEGE OF COMMERCE & ECONOMICS

TO BE FILLED IN BY STUDENTS WHO DEFAULT
LATE SUBMISSION
I hereby understand that I have submitted the Project late,

on _________________at

____________ a.m.
The date of submission announced by the college was _________________at
______________ a.m.
Signature of Student
-----------------------------------------------------------------------------------------------INTERNAL VIVAS
I declare that I was not present at the time of Internal Viva arranged by the College.
This has been a serious lapse on my part.

Signature of Student
-----------------------------------------------------------------------------------------------EXTERNAL VIVAS
I declare that I was not present at the time of External Viva arranged by the College.
This has been a serious lapse on my part
Signature of Student Modes of Payment in International Trade

This article throws light upon the four major modes of payment in international trade. The
modes are: 1. Advance Payment 2. Documentary Credit 3. Consignment Sales 4. Open
Account.

International Trade: Mode # 1.

Advance Payment:
Under this, the payment is remitted by the buyer in advance, either by a draft mail or telegraphic
transfer (TT). Generally, such payments are made on the basis of a sample receipt and its approval
by the buyer. The clean remittance is made after accepting the order but before the shipment,
through banking channels.
ADVERTISEMENTS:

It is the simplest and the least risky form of payment from the exporters point of view. Besides, no
post-shipment finance is required if the payment is received in advance. There is no payment of
interest on the funds and no commission is required to be paid as in other modes of payment, which
makes it the cheapest mode of receiving payment.
As it involves the highest level of risk for the buyer, advance payment is used only in cases where
the exporter is in a position to dictate his/her terms. For instance, advance payment is often used if
the product supplied is unique or has some sort of monopolistic power. However, such forms of
payment are common mainly in case of overseas affiliates of the exporting firm.
International Trade: Mode # 2.
Documentary Credit:
In a typical international transaction, an exporter deals with an overseas buyer who is situated in a
significantly different regulatory and business environment. The exporter is unwilling to part with
his/her goods unless she/he is assured of the receipt of the payment from the importer.

ADVERTISEMENTS:

On the other hand, the importer is unwilling to part with the money unless assured of receiving the
goods. In such a situation, the bank plays the crucial role of an intermediary, providing assurance to
both the importer and the exporter in an international transaction.
The payment collection mechanism that allows exporters to retain ownership of the goods or
reasonably ensures their receiving payments is known as documentary collection.
The bank acts as the exporters agent in a documentary collection and regulates the timing and the
sequence of the exchange of goods for value by holding the title of the documents until the importer
fulfils his/her obligation as given in the Uniform Customs and Practices of Documentary Credits
(UCPDC), brought out by the International Chamber of Commerce (ICC) in its publication no. 600,
widely known as UCPDC 600, implemented on 1 July 2007.
The two principal documents used in documentary collection are the bills of lading (B/L) issued by
the shipping company and the draft (bill of exchange) drawn by the exporter. B/L are issued by the
shipping company to the shipper for accepting the merchandise for the carriage.
ADVERTISEMENTS:

As the document of title, it has a unique significance in shipping that only its legitimate holder is
entitled to claim ownership of the goods covered therein.
The importer simply cannot take possession of the goods unless the B/L is surrendered in original to
the shipping company at destination. The procedure and the process involved in documentary credit
employing banking channels assures both the exporter and the importer that the former gets the
payment and the later receives the goods.
The draft, commonly known as bill of exchange, is used as an instrument to effect payment in
international commerce. It is an unconditional order in writing, signed by the seller (exporter), also
known as drawer, addressed to the buyer (importer) or importers agent, known as drawee, ordering
the importer to pay on demand or at a fixed or determinable future date, the amount specified on its
face.

The draft provides written evidence of a financial obligation in clear and simple terms. Besides, it is
a negotiable and unconditional instrument, which means payment must be made to any holder in
due course despite any disputes over the underlying commercial transaction. Using a draft enables
an exporter to employ its bank as a collection agent.
ADVERTISEMENTS:
The exporters bank forwards the draft or bill of exchange to the importer, generally through a
correspondent bank, collects the draft, and then remits the proceeds to the exporter. Thus, in the
process, the bank has all the necessary documents for control of the merchandise, which are handed
over to the importer only when the draft has been paid or accepted in strict accordance with the
exporters instructions.
Documentary credit with letter of credit:
A documentary credit represents a commitment of a bank to pay the seller of goods or services a
certain amount, provided s/he presents stipulated documents evidencing the shipment of goods or
performance of services within a specified period. The modus operandi of an L/C is depicted in the
form of a self-explanatory diagram in Fig. 15.6.

The exporter gets in touch with the importer and based on mutual communications, either by
telephone, fax, or electronic messaging, and mutually agrees on terms of sale and enters into a
sales contract:
(1) The importer, also known as applicant, applies to the issuing bank located in his/her country
(2) For opening an L/C in accordance with the terms already agreed upon between the buyer and the
seller in the sales contract. The issuing bank opens the L/C and delivers it
(3) to the corresponding bank located in the exporters country, which in turn advises
(4) It to the exporter, also known as beneficially. The exporter carefully scrutinizes the L/C and
ensures that all the terms and conditions agreed upon in the sales contract are mentioned. In case
there is any variation or discrepancy, it is brought to the notice of the applicant (i.e., importer) and
got rectified. Once the exporter gets satisfied of the terms and conditions contained in the L/C, s/he
makes shipment
(5) Soon after delivering goods to the shipping company, the B/L are obtained,

(6) Which serve as the cargo receipt, contract of carriage, and the document for the tide of the
goods. The exporter submits the complete set of documents as mentioned in the L/C, including the
B/L along with the draft drawn by the exporter
(7) To the advising bank, which in turn sends it to the issuing bank
(8) The issuing bank scrutinizes the documents and if found in accordance with the terms and
conditions contained in the L/C, it accepts the documents and in the case of a sight L/C, releases the
payment
(9) To the issuing bank. The issuing bank in turn makes the payment to the exporter
(10) However, in the case of a usance L/C, payment is made at a later date as contained in the L/C.
The issuing bank presents the draft to the applicant (i.e., importer), who releases the payment
(11a) Upon which it handovers the B/L along with other documents
(11b) To the importer, who in turn hands over the B/L
(12) To the shipping company at the destination and takes delivery of the cargo (13).
The operation of L/C is governed by the UCPDC as prescribed by the ICC. As per the UCPDC,
payment is made only if the documents strictly conform to the terms and conditions of the
documentary credit. Under article 4 of the UCPDC, banks deal in documents and not in goods and
services.
Therefore, an exporter should carefully examine the L/C and ensure that:
i. The names and addresses are complete and spelled correctly
ii. The L/C is irrevocable and preferably confirmed by the advising bank, conforming to sales
contract. However, the confirmation of an L/C, although preferable by the exporter depends upon
the terms of the sales deal
iii. The amount is sufficient to cover the consignment
iv. The description of goods is correct
v. The quantity is correct

vi. The unit price of goods, if stated in the L/C, conforms to the contract price
vii. The latest date for shipment or the shipping date is sufficient to dispatch the consignment
viii. The latest date for negotiation or the expiry date is sufficient to present the documents and
draft(s) to the bank
ix. The port (or point) of shipment and the port (or point) of destination are correct
x. The partial shipment/drawing is permitted or prohibited
xi. The transhipment is permitted or prohibited
xii. The L/C is transferable or non-transferable
xiii. The type of risk and the amount of insurance coverage, if required
xiv. The documents required are obtainable
xv. The following words, or similar, are present in the L/C:
Unless otherwise expressly stated, this credit is subject to the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce Publication No. 600
Under a documentary credit, a debt relationship exists between the issuing bank and the beneficiary.
Therefore, it is advisable to assess the issuing banks standing, besides the sovereign and transfer
risk of the importing country.
The issuing bank authorizes a corresponding bank in the beneficiarys country to honour the
documents in its place.
Under the UCPDC, unless the credit stipulates that it is available only with the issuing bank, all
credits should nominate the bank (the nominated bank), which is authorized to pay (to incur a
deferred payment undertaking to accept drafts) or negotiate. However, in a freely negotiable credit
any bank is treated as a nominated bank.
Types of letters of credit:
According to methods of payments, the letters of credit may be of following types:
Irrevocable:

The issuing bank irrevocably commits itself to make payment if the credit terms as given in the L/C
are satisfied under article 9A of UCPDC. A unilateral amendment or cancellation of an irrevocable
L/C is not possible.
Revocable:
A revocable L/C is highly risky for the exporters as it can be revoked any time without consent of or
notice to the beneficiary. For an LC to be revocable, it should explicitly indicate as revocable,
otherwise under article 5C of UCPDC, in absence of any explicit indication that the credit is
revocable, it is deemed as irrevocable.
Nowadays, revocable letters of credit are rare, although these were not uncommon in the 1970s and
earlier, especially when dealing with less developed countries.
Confirmed:
The confirming bank (generally a local bank in the exporters country) commits itself to irrevocably
make payment on presentation of documents under a confirmed L/C.
The issuing bank asks the corresponding bank to confirm the L/C. Consequently, the corresponding
bank confirms the L/C by adding a clause, The above credit is confirmed by us and we hereby
undertake to honour the drafts drawn under this credit on presentation provided that all terms and
conditions of the credit are duly satisfied.
A confirmed L/C provides additional protection to the exporter by localizing the risk of payment.
Thus, the exporter enjoys two independent recognitions: one by the issuing bank and the other by
the confirming bank.
However, the confirming banks require the following criteria to be fulfilled:
i. The L/C should be irrevocable.
ii. The credit should clearly instruct or authorize the corresponding bank to add its confirmation.
iii. The credit should be available at the confirming bank.
iv. The contents of credits should be unambiguous and free of stop clauses (that allows buyer to
prevent the terms of credit being fulfilled).
Unconfirmed:

Under such credit, the issuing bank asks the corresponding bank to advise about the L/C without
any confirmation on its part. It mentions, The credit is irrevocable on the part of the issuing bank
but is not being confirmed by us.
Sight:
The beneficiary receives payment upon presentation and examination of documents in a sight L/C.
However, the bank is given a reasonable time (generally not more than seven banking days) to
examine the documents after its receipt.
Term credits:
Term credits are used as financing instruments for the importer. During the deferred time period, the
importer can often sell the goods and pay the due amount with the sales proceeds.
Acceptance credit:
The exporter draws a time draft, either on the issuing or confirming bank or the buyer or on another
bank depending upon the terms of credit. When the documents are presented, the draft is accepted
instead of payment being made. For instance, the payment date may be 60 or 90 days after the
invoice date or the date of transport documents.
Deferred payment credit:
Such credits differ from the time draft in terms of lack of acceptance of a draft. The bank issues a
written promise to make the payment on due date upon presentation of the documents. The due date
is calculated on the basis of the terms of the credit.
The deferred payment credit is generally more economical from the point of view of commission
than the credit with time draft. However, an advance payment of credit amount may normally be
obtained only from the issuing or confirming bank whereas there are various possibilities for
discounting a draft.
Revolving:
Under revolving letters of credit the amount involved is reinstated when utilized, i.e., the amount
becomes available again without issuing another L/C and usually under the same terms and
conditions.
Back to back:

Such back-to-back letters of credit are used when exporter uses them as a cover for opening a credit
in favour of the local suppliers. As the credits are intended to cover same goods, it should be
ensured that the terms are identical except that the price is lower and validity earlier.
Documentary credit without letter of credit:
Documents are routed through banking channels that also act as the sellers agent along with the bill
of exchange. The major documents should include a full set of B/L, commercial invoice, marine
insurance policy, and other stipulated documents.
Sight draft (documents against payment) Similar to L/C, exporter and the importer enter into
a sales contract:
(1) On mutually agreed terms. Upon finalization of contract, the exporter (drawer) ships
(2) The goods and submits the documents along with the bill of exchange through his/her bank, also
known as the remitting bank
(3) To the corresponding bank, also known as collecting bank
(4) In the importers country. The corresponding bank presents the draft to the importer (drawee)
who makes payment at sight
(5a) And thereafter the documents
(5b) Are handed over. The collecting bank transfers the payment
(6) To the remitting bank in exporters country, which in turn makes payment
(7) To the exporter (Fig. 15.7).

Thus, under documents against payment, the importer can take physical possession of the goods
only when s/he has made the payment before getting the documents from the bank. Sight drafts are
generally considered safer as the exporter has possession and title of the goods till the time payment
is made.
Usance or time draft (documents against acceptance):
Once a sales contract:
(1) Is signed between the exporter and the importer, the exporter (drawer) ships the goods
(2) And submits the draft along with documents and the collection order
(3) To the bank located in his/her country, known as the remitting bank, which in turn sends
(4) The draft along with documents to a corresponding bank, also known as the collecting bank, in
the importers country. The collecting bank presents the draft to the importer (drawee), who
indicates his/her acceptance of the payment obligations
(5a) By signing the draft, upon which the B/L along with other documents is handed over to the
importer
(5b) For taking delivery of the goods.
The payment under time draft is usually to be made at a later date, after 30, 60, 90 or more days.
However, the bill of exchange already accepted by the drawee (i.e., importer) is again presented to
the buyer
(6a) On the due date, who in turn releases the payment

(6b) The collecting bank transfers the funds to the remitting bank
(7) For onward payment to the exporter
(8) (Fig. 15.8).

This mode of payment poses a much greater risk as the documents are delivered to the importer,
who subsequently takes tide of the goods before the payment is released. In case the importer fails
to make payment, the recovery of the sales proceeds is difficult and involves a cumbersome process.
International Trade: Mode # 3.
Consignment Sales:
Under the consignment sales, the shipment of goods is made to the overseas consignee and the title
of goods is retained with the exporter until it is finally sold. As the title of goods lies with the
exporter, the funds are blocked and the payment period is uncertain.
Consignment sales involve certain additional costs, such as warehousing charges, insurance,
interest, and commission of the agents. Besides, the liability and risks lie with the exporter unless
the consignment is sold. The risk of violating the terms of consignment is much higher in
consignment sales. Besides, the price realization is also uncertain, over which the exporter has little
control.
Selling goods on consignment basis in international markets also provide opportunity to the exporter
to realize higher prices based on the buyers satisfaction. Generally, such a mode of payment is
restricted to dealing with trusted counterparts in the overseas markets.

Export of precious or semiprecious stones and cut flowers is generally made on consignment basis.
However, the exporters are required to declare the expected value of consignment on the guaranteed
remittance (GR) form.
International Trade: Mode # 4.
Open Account:
The exporter and importer agree upon the sales terms without documents calling for payments.
However, the invoice is prepared by the exporter, and the importer can take delivery of goods
without making the payment first. Subsequently, the exporting and importing firms settle their
accounts through periodic remittances.
As the payment is to be released later, it serves as an instrument to finance the importer for the
transaction and the importer saves the cost of getting bank finances. It requires sufficient financial
strength on the part of the exporter. The operation of open account is hassle free and simple. The
major drawback of an open account is the lack of safeguard measures against non-payment by the
importer.
Therefore, the open account is generally restricted to firms with longstanding dealing and business
relationship and intra-company transactions among subsidiaries and affiliates. The statutory
provisions related to foreign exchange often restrict using open account for receiving payments in
international transactions.
Generally, the central banks in most counties permit open accounts to foreign firms operating in
their country and restrict it for domestic firms.
International trade is the exchange of capital, goods, and services across international borders or
territories.[1] In most countries, such trade represents a significant share of gross domestic
product (GDP). While international trade has existed throughout history (for
example Uttarapatha, Silk Road, Amber Road, salt roads), its economic, social, and political
importance has been on the rise in recent centuries.
Contents
[hide]

1Characteristic of global trade

2History

3Models

4Largest countries by total international trade

5Top traded commodities (exports)

6See also

7Notes

8References

9External links
9.1Data

9.1.1Official statistics

9.1.2Other data sources

9.2Other external links

Characteristic of global trade[edit]

Trading globally gives consumers and countries the opportunity to be exposed to new markets and
products. Almost every kind of product can be found on the international market: food, clothes,
spare parts, oil, jewelry, wine, stocks, currencies and water. Services are also traded: tourism,
banking, consulting and transportation. A product that is sold to the global market is an export, and a
product that is bought from the global market is an import. Imports and exports are accounted for in
a country's current account in the balance of payments.[citation needed]

Ancient Silk Road trade routesacross Eurasia

Industrialization, advanced technology, including transportation, globalization, multinational
corporations, and outsourcing are all having a major impact on the international trade system.
Increasing international trade is crucial to the continuance of globalization. Without international
trade, nations would be limited to the goods and services produced within their own borders.
International trade is, in principle, not different from domestic trade as the motivation and the
behavior of parties involved in a trade do not change fundamentally regardless of whether trade is
across a border or not. The main difference is that international trade is typically more costly than
domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time
costs due to border delays and costs associated with country differences such as language, the legal
system or culture.
Another difference between domestic and international trade is that factors of production such as
capital and labor are typically more mobile within a country than across countries. Thus
international trade is mostly restricted to trade in goods and services, and only to a lesser extent to
trade in capital, labor or other factors of production. Trade in goods and services can serve as a
substitute for trade in factors of production. Instead of importing a factor of production, a country
can import goods that make intensive use of that factor of production and thus embody it. An
example is the import of labor-intensive goods by the United States from China. Instead of
importing Chinese labor, the United States imports goods that were produced with Chinese labor.
One report in 2010 suggested that international trade was increased when a country hosted a
network of immigrants, but the trade effect was weakened when the immigrants became assimilated
into their new country.[2]
International trade is also a branch of economics, which, together with international finance, forms
the larger branch called international economics.