FORMS & ADVANTAGES OFINTERNATIONAL BUSINESS By M.Muthukumar
International Business conducts business transactions all over the world transactions include the transfer of goods, services, technology, managerial knowledge, and capital to other countries
FORMS OF MARKET ENTRY Exporting Licensing/franchising Contract manufacturing Management contract Assembly operations Fully owned manufacturing facilities JV Countertrade M&A Strategic alliance Third country location
EXPORTING Selling abroad, either directly to target customers or indirectly by retaining foreign sales agents and distributorsWhy exporting? Not large enough to justify production No guarantee for longer period Infrastructure problem
Licensor permits licensee to use its IPRequires neither capital or knowledgeIt is used as tool to enter developingmarket for the dead product Walt disney entered India with Modis
Licensing/franchising• Form of licensing in which a parent company grants another entity the right to do business in the prescribed mannerFORMS• Manufacturer-retailer Automobile dealership• Manufacturer-Wholesaler Soft drink companies• Service firm-retailer Lodging & fast food outletFranchise firm KFC, audi
CONTRACT MANUFACTURING• A company doing international marketing contracts with firms in foreign countries to manufacture the products while retaining the responsibility of marketing the product Park Davis, HUL, Ponds, etc.
MANAGEMENT CONTRACTING• The supplier brings together a package of skills that will provide an integrated service to the client without incurring risk and benefits of ownership MEANS - Know-how Ex : Tata tea, Harrisons malayalam, and AVT havecontracts to manage no of plantation in srilanka.
TURNKEY CONTRACTS• Agreement by the seller to supply a buyer with a facility fully equipped & ready to be operated by a buyer’s personnel .• Project in oil refineries, steel mills, cement• Mostly govt sector involves a buyer or sellerEx : BHEL, TN ASSEMBLY
FULLY OWNED MANUFACTURING FACILITIES• Acts as a domestic player(producer)• Full set up in domestic country Ex : coco cola, HUL, etc.
ASSEMBLY OPERATIONS• Establishment of assembly operation represent a cross between exporting and overseas manufacturing• Mostly electric equipmentEx : Hyundai, Nokia, etc.
JOINT VENTURES• Any form of association which implies collaboration for more than a transitory period is a joint venture• May be period of the time Ex : Tata AIG life insurance, Pepsi-agro industriescorporation
THIRD COUNTRY LOCATION• A form in one of these nations which wants to enter the other market will have to operate from a third country base. Ex : Taiwanese entrepreneurs found it easy to enterpeople’s republic of china through bases in Hongkong.
M&A• Major part of FDIs have been driven by cross border M & As.• Provides instant access to market, distribution• Major M&As--Automobile, pharmaceuticals, banking, telecom etc. Ex : UB acquired Wiltshire Brewery in UK.
ADVANTAGES OF IB• Maximum utilization of natural resource• Economic growth• Encouragement to industrialization• Establishment of international cooperation• Development of transport & communication• Employment• Greater competition• Security from famine• Stability in prices
Contd……• Economies of scale• Earning of FX• Less cost due to the use of modern techniques• High standard of living• International brotherhood• Up gradation of technology• Escape from competition