ASSIGNMENT OF INTERNATIONAL BUSINESS ENVIORNMENT

TOPIC- PROSPECTS AND CONSTRAINTS OF INTERNATIONAL BUSINESS

PROSPECTS
Importing And Exporting
Importing and exporting is one of the scope of international business. This is how many companies
link to the global market. Goods and services are exported from one country and imported to the
other.

Licensing
Some companies sell products that belong to a foreign company or use their intellectual property for
a fee (royalty). This occurs when a company wants to enter the international market quickly at
minimum costs and without taking much risk. The local entity and the foreign company enter into an
international licensing agreement. That way (the licensee), the local company is able to sell the
foreign products or make use of patents and pay the foreign company (the licensor) royalty fees.
Licencing is the other scope of international business.

Franchising
An international franchising agreement allows a company (the franchisee) to make use of another
company’s brand name or sell its products or services the (franchisor) in exchange for royalties.
Franchising is a scope of international business. Many companies such as KFC, McDonalds and
Holiday Inn are good examples. Although the franchisee may be responsible for the day to day
running of the business s/he will need to follow a business model designed by the franchisor. The
franchisor provides training, advertisement as well as product assistance. Franchising is an effective
way of expanding globally for companies that operate domestically as evidenced by fast food
restaurants and hotels.

Contract Manufacturing/Outsourcing
Due to high labour costs in some countries such as the USA, the manufacturing of products is done
in other countries. Such an arrangement is done under an international manufacturing contract or
an outsourcing contract. Outsourcing is common in the USA’s clothing industry where manufacturing
takes place in China, Malaysia and Mexico. A local company that contracts a foreign company for the
manufacture of certain products will still control the product design and development and will label
the finished product with its own name. Outsourcing is not limited to the manufacture of products
but can also be extended to services. For example, India has become a centre for software
development for many American companies. So contract manufacturing and outsourcing is also a
scope of international businesses.

Joint Ventures
Joint ventures are the other scope of international business. In some countries, governments do not
allow foreign companies to operate within their borders without a local partner. In such cases a joint
venture will be ideal. A local and international business can enter into a strategic alliance intended to
benefit both parties involved. Such an alliance can improve product quality, increase the market
share and reduce production costs among other factors.

Foreign Direct Investment

Foreign Direct Investment is within the scope of international business. Companies and individuals
can participate in international markets by making a direct investment in firms that operate in
various countries. These companies or individuals build factories and offices in the foreign country in
order to do business there.
CONSTRAINTS
Prior Licenses for Import
These are restrictions whose purpose is to control or limit the flow of imports and usually the tool
used is the obligation of prior import licenses.

Tariff Restrictions

They are fiscal restrictions, which aim at taxing certain products, according to the interests of the
country. This restriction is the most common as an instrument of protectionism.

Exchange Rate

It is the restriction made by the devaluation of the currency of the importing country, making at the
same time more expensive imported products and more competitive products for export.

Import Quotas

It is the restriction that limits imports to pre-established quotas, either by product or by country, in
value and quantity.

Maximum Value or Minimum Value

These restrictions are based on the establishment of maximum and minimum values for the
products to be imported and/or exported.

Prior Deposits

It is the requirement of previous deposits in currency, for a determined period, as against starting for
the release of the import licenses. It is an extra-fiscal measure.

Financing Deadlines

Limitation of terms of foreign financing, to reduce and restrict the import facilities.
SUBMITTED BY

MOHD AKIB ANSARI

MBA SEC A

ROLL NO 1944126