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 practices 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.

Importing can mean higher-quality products.

Many 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 SME’s.

More Financial management effort .

More Customer 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 property’s activity provided by the licensor.

Appealing to new target markets who have not historically

been interested in a licensee’s 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 McDonald’s,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.

Shark-Infested Waters.

FOREIGN DIRECT INVESTMENT

Foreign direct investment (FDI) or foreign 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 technology 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.

THANK YOU