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FORMS OF INTERNATIONAL BUSINESS

By: Vishwas.B.P

The Various Forms/Types of International Business are:


1. Import trade 2. Export trade 3. Licensing 4. Franchising 5. Foreign Direct Investment (FDI) 6.Management Contract

IMPORT TRADE


Imports involve transfer of goods and services from a foreign country to home country. Proper import administration is essential for ensuring free inflow of goods and services to a home country. The principal objective of import administration is to enforce proper anti-dumping measures and implement fair trade antipractices across borders. Companies import goods and services to supply to the domestic market at a cheaper price and better quality than competing goods manufactured in the domestic market.

Benefits of Importing
  

Comparative advantage means lower-priced goods. lowerImporting can mean higher-quality products. higherMany governments actively support trade relations and aim to make importing easy for your business. Importing grants access to regionally exclusive resources. Various benefits stemming from trade agreements.

Demerits of Importing
   

Financial Risk. Political Risk. Operational Risk. Regulatory Risk. Cultural Risk.

EXPORT TRADE


Exports involves transfer of goods and services from a home country to the foreign consumers. Export trade is the primary source of foreign exchange for a country. Customs authorities of different nations are in charge of enforcing codes and regulations to ensure fair export trade practices in the international market.

Advantages of Exporting
      

Increased Sales and Profits. Enhance Domestic Competitiveness. Gain Global Market Shares. Diversification. Compensate for Seasonal Demands. Create Potential for Company Expansion. Gain New Knowledge and Experience.

Disadvantages of Exporting


Difficult for SMEs. More Financial management effort . More Customer demand. demand. Communication technologies improvement. Management mistakes.

   

LICENSING


Licensing is the practice of leasing a legally protected property (such as a trademarked or copyrighted name, logo, character, phrase or design) to another party in conjunction with a product, service or promotion. It is based on a contractual agreement between the owner of the property (or its agent) known as the licensor; and a licensee normally a manufacturer or retailer. Arvind Brand represent Wrangler, Arrow, Nautica, Jansport and Kipling.

The Benefit of Licensing for Licensors




Increasing its brand presence at retail or distribution outlet. Creating further brand awareness to support its core products or services. Supporting and enhancing its core values by associations with the licensed products/service or category (e.g. association with a healthy food or with a cutting edge mode of fashion). Entering new markets (consumer or geographical). Generating new revenue streams, often with little involvement or additional financial or other resource implications

 

The Benefit of Licensing for Licensees




Providing added value and differentiation from competitive offerings Providing additional marketing support or momentum from the core propertys activity provided by the licensor. Appealing to new target markets who have not historically been interested in a licensees product or service. Giving credibility for moving into new market sectors through product extension . Gaining additional retail space.

FRANCHISING


Franchising can be described as a 'business marriage' between a 'franchisee' and a 'franchisor'. The 'marriage' is protected by a Franchise Agreement which provides you with an exclusive territory for a set period of time on a renewable basis. Common example are McDonalds,KFC.

Benefits of buying a Franchise


    

Lower Failure Rate. Help with Start Up and Beyond. Buying Power. Star Power. Profits.

Disadvantages of Buying a Franchise


    

Do their Way. More ongoing Costs. Ongoing Support. Expensive. SharkShark-Infested Waters.

FOREIGN DIRECT INVESTMENT




Foreign direct investment (FDI) or foreign FDI) investment refers to the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It usually involves participation in management, joint-venture, transfer of jointtechnology etc.

Types of FDI
A foreign direct investor may be classified in any sector of the economy and could be any one of the following: An individual; A group of related individuals; A public company or private company; A group of related enterprises; A government body; An trust or other social institution; or Any combination of the above.

      

Advantages of FDI
    

Economic growth. Trade. Employment and skill levels. Technology diffusion and knowledge transfer. Linkages and spillover to domestic firms.

Disadvantages of FDI


Political Lobbying. Exploitation of Resources. Threaten Small Scale Industries. No Latest Technology.

MANAGEMENT CONTRACT


It is an agreement by which a company will provide its organizational and management expertise in the form of services. A management contract can involve a wide range of functions, such as technical operation of a production facility, management of personnel, accounting, marketing services and training. The first recorded management contract was initiated by Qantas and Mr Duncan Upton in 1978.

Advantages of Contract Management


   

Enhance Business Oerations. Lower Costs. Business Relationships. Competitive Advantage.

Disadvantages of Contract Management


    

Loss of Control. Time Delays. Loss of Flexibility. Loss of Quality. Compliance.

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