The document discusses two modes of entering international business: management contracts and business process outsourcing (BPO). Management contracts allow foreign companies to earn additional income without investment by managing other companies' operations. However, they present potential incentive and adverse selection problems. BPO involves outsourcing business functions like finance and customer support to third parties. India is a popular BPO destination due to its large, educated and English-speaking workforce at lower costs. While BPO improves productivity and costs, it can also result in lost knowledge and poor quality control if not managed properly. The document provides examples of companies like Hilton, ENI, and HP that have used management contracts or outsourced processes

1. Modes of entering international business
(MANAGEMENT CONTRACT &
BPO)

2. Management contracts

3. Management contracts
Advantages
• Foreign company earns additional income without any additional investment, risks and
obligations.
• Hilton hotels provided these services to other hotels without additional investment and
earned additional income.
• This arrangement and additional income allows the company to enhance its image with the
investors and mobilize the funds for expansion.
• Management contract helps the companies to enter other business areas in the host country.
• The companies can act as dealers for the business of the host country’s business in the home
country. Italy’s ENI (Ente Nazionale Idrocarburi) used its knowledge of European energy
industry to help the Algerian national oil firm. Later the Algerian national firm requested the
ENI to increase their business in European petroleum market. Under a management contract,
ENI constructed.

4. Management contracts
Disadvantages
• Potential incentive problem
• Potential adverse selection problem

5. BPO: Business Process Outsourcing
• Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting
of the operations and responsibilities of specific business functions (or processes) to a
third-party service provider. Originally, this was associated with manufacturing firms, such as
Coca Cola that outsourced large segments of its supply chain.
• BPO is typically categorized into back office outsourcing, which includes internal business
functions such as human resources or finance and accounting, and front office outsourcing,
which includes customer-related services such as contact center services.
• BPO that is contracted outside a company's country is called offshore outsourcing. BPO
that is contracted to a company's neighboring (or nearby) country is called near-shore
outsourcing.

6. Why BPO in India?
• Largest English speaking population after USA.
• Vast workforce of educated, English speaking and tech savvy personnel.
• In India, the manpower cost is approximately one-tenth of what it is overseas.
• India graduates about 100000 engineers each year.
• The government of India has recognized the potential of IT-enabled services.
• IT is one of the Government of India’s top five priorities.
• Regulatory and Infrastructure enablers

7. BPO Advantages
• Productivity Improvements
• Cost Savings
• Improved HR
• Focus on Core Business Competency
• Increased Capability

8. BPO Disadvantages
• Recent Studies
• Knowledge Disappears and is Transferred to the Outsourcing
Partner
• Poor Quality Control
• Restoring Operations is Complicated
• Lack of Loyal Employees
• Reduction in Strategic Alignment

9. Example
HP Goes The Distance For P&G
• Corporate Culture & Brand
• Finance and Accounting
• Bangalore & Mumbai, India
• Global Customers w/ Local Support
• Core Competencies cut Defects

10. Global Accounts Payable Processing