International business


 International Trade 

International Trade refers for to the trade between residents and between governments of two or more countries 

                      In other words we can say that it is the trade beyond national  boundaries of a country 

                Since the intimation of globalization the Outlook towards international Trade has significantly changed . Firms are increasingly buying and selling goods and services or investing fund across the globe.During the past two decades the world has observed a significant trend of rapid and sustained growth of international Trade   

Modes of entry into international business                                                               

Exporting

Licensing

Franchising 

Contract manufacturing

Management contracting 

Turn key contract 

Joined ventures

                

1. EXPORTING

Exporting is the oldest and simplest way to enter into the international trade. In this Arrangement the product is produced at the home country and marketed in a country or Countries other than the home country. Thus, exporting may be defined as “the marketing of Goods and services produced in one country into another country”. Exporting has got Significant importance in the recent past because of liberalisation and increasing Industrialization of developing and least developed countries. It has got further impetus with The world wide advancement of communication technology and improved transportation Systems.

2. LICENSING

Licensing is another most popular arrangement for entering into the international trade It is one of the cheapest methods for conducting international trade. Licensing is defined as

“the method of foreign operation whereby, a firm in one country agrees to permit a company"

In another country to use the manufacturing, processing, trademark, know-how or some other Skills provided by the licensor for an agreed consideration”. In other words, it is a business Arrangement in which the manufacturer of a product (or a firm with proprietary rights over Certain technology, trademarks, etc.) grants permission to some other person or group of Persons to manufacture that product (or make use of that proprietary material) in return for Specified payments in the form of fee or royalties etc. In the licensing agreement the only cost Involved is signing the agreement and its implementation. In licensing, the agreement usually Provides for the flow of information having commercial value from the licensor to the Licensee. Coca Cola is an notable example of license base trading in India.

 3. FRANCHISING

In many ways franchising is equal to licensing except for the difference that, franchising Is a package, comprising a license, equipped with some sort of the technical assistance,Quality control, or and supply of plant and machinery or managerial expertise etc. In other Words, it is a continuing relationship in which the franchisor provides a licensed privilege toThe franchisee to do business and offers assistance in organizing, training, merchandising,etc.

4.CONTRACT MANUFACTURING

 Contract manufacturing is a sophisticated form of licensing Under contract Manufacturing the company engaged in international marketing enters in to a contract with Foreign manufacturer or producer to produce a product but retains the right of marketing with Them. In other words, it is an arrangement of getting the product manufactured from others And selling it by own name or brand. It is an arrangement of contracting a third party to Manufacture a portion of a complete product line etc.

5.MANAGEMENTCONTRACTING

Management contracting is an arrangement where a company contracts with a foreign Corporation/company or government to manage an entire project or undertaking for a specific Period of time. It is the production of products/formulas on behalf of a client in which the Design and brand name belongs to the client. For example, an arrangement whereby a hotel Owner contracts with a separate company, to manage the hotel for a specified period of time for a given purpose. In other words, it is a contract where management is regarded as Separate discipline than operations. A management contract is an arrangement under which Operational control of an enterprise is vested by a contract to a separate enterprise which Performs the necessary managerial functions in return for an agreed fee. Management Contracts involve not just selling a method of doing things (as with franchising or licensing) But involve actually doing the things

6.TURNKEY CONTRACT

In the management contracting, a company contracts with foreign Corporation/company or government to manage an entire project or undertaking for a specific Time. While in case of Turn Key contracts the company contracts with a foreign entity not Only for managing the project but also contact for designing and building the entire operations.

7. JOINT VENTURES

Joint ventures are also the widely acceptable strategies for going global in the Contemporary world. It is an arrangement where two or more persons work together in a Limited and defined business undertaking. Ordinarily, all participants of the joint venture Contribute assets, and share risks. A joint venture is generally not recognized as a separate Legal entity, as opposed to a partnership. Revenue, expenses and assets ownership usually Flow through a joint venture of the participants since the joint venture itself has no legal status.Partnerships and joint ventures can appear to be very similar but in fact these two have Significantly different implications for those involved in it. It may be defined as “an Enterprise in which two or more investors share ownership and control over property rights And operations”

Advantages of International trade

1. Competitive Prices : The international trade ensures the availability of goods and services to all at competitive prices. The international trade creates perfectly competitive economic environment that leads to survival of the fittest only. If the imports are cheaper than domestic sources then it is better to buy from abroad instead of producing in domestic market. It leads to further fall in the prices in domestic market leading to competitive prices for the consumers.

2. Optimum Utilization of World's Natural Resources : The natural resources available within the world are limited. The developing and least developed countries of the world have obsolete technologies that lead to wastage of the precious natural resources.While through international trade these resources can be supplied to the technically advanced countries that can use these resources efficiently to make their optimum utilization

3. No Price Discrimination : The international trade eliminates the market imperfections like price discrimination etc. Usually these types of practices are exercised only when there are large number of buyers and few sellers and there is immobility of goods and services. The international trade eliminates the problem of few suppliers and ensures the mobility of goods and services by the international trading arrangement that the buyer can buy from any where in the world where ever it is cheap and best leading to removal of market imperfections.

4. Solution of Economic Crisis : Now a days the foreign trade is considered as a panacea of solving the socio-economic problems of the developing and least developed countries. International trade provides them access of new markets to sell the national surplus at premium prices. The increased foreign trade brings foreign exchange in the economy that improves the accumulation of foreign exchange reserves of the country. The higher foreign exchange reserves depicted the improved economic health and easy solution of economic crises.

5. Check on Monopolies and Unfair Trade Practices : The international trade serves as a check on the practice of monopolies and unfair trade practices. The foreign competitors break the domestic natural monopolies by providing competition to the domestic players

6. Easy Availability of Raw Materials : Some of the raw materials that have geographical specifications can be supplied to other countries of the world through international trade. For example, best wool is available in Russia and Australia and these Types of exclusive raw materials can be supplied to other countries through international trade.