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FORMS OF INTERNATIONAL BUSINESS

- Krithiga.M

What is International Business?


International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations.

Forms
Trade Foreign Direct Investment(FDI) International Licensing International Franchising Contract manufacturing Management contracts Take-Over Turnkey projects Counter trade

Trade
1. Exporting Selling of products or services outside the country in which they are produced. One of the least risky forms of international business activity

2. Importing Process of buying goods or services from a foreign supplier and entering them into the customs territory of a different country.

3. Government controls over trade Tariffs: import duties or taxes imposed on goods entering the customs territory of a nation Quota: restriction imposed by law on the numbers or quantities of goods or of a particular type of good Embargo: a total or near total ban on trade with a particular country e.g. used against Iraq in 1990

FDI
Ownership and active control of ongoing business concerns including investment in manufacturing, mining, farming and other production facilities. Wholly owned foreign subsidiary Joint venture Mergers and acquisitions

1. Joint Venture
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies that are limited by guarantee, with partners holding shares.

2. Wholly-owned subsidiary
This is done when a firm sees its long-term substantial interest in the foreign market. A wholly owned subsidiary can be set up in a foreign market in two ways : The company can set up a totally new operations or can acquire an established firm and use the firm to promote its product.

International Licensing
License agreements entitle one company to use some or all of another firm's intellectual property in return for a royalty payment. It involves little out-of-pocket costs. A company can also license its products or technology to other companies in its domestic market.

International Franchising
Expanding into foreign markets. A franchisor enters into an agreement whereby the franchisee obtains the rights to duplicate a specific product or service - perhaps a restaurant, photocopy shop, or a video rental store - and the franchisor obtains a royalty fee in exchange.

Contract Manufacturing
Identifying a manufacturing unit at a competitive price in any part of the world E.g. Nike

Management contracts
Companies with low technology and expertise Agreement between two companies E.g. Delta Airlines, Air France

Turnkey Projects
Turnkey contracts are those contracts under which a firm agrees to fully design, construct and equip a manufacturing service facility and turn the profit over to the purchase. Infrastructure projects

Counter Trade
Counter trade is a form of international trade in which certain export and import transactions are directly linked with each other and in which imports of goods are paid for by export of goods. Pure barter, buy back, counter purchase

Take-Over
A company identifies a healthy company and brings it under it to become a leader in the field and guarantee success. Competition becomes inevitable.

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