We can’t avoid the importance of international business because as a result of international business our earth is rising very quickly. There are 8 forms of international business described below in detail:
Table of Contents
Forms of international business
Exporting means producing/procuring in the home market and selling in the foreign market. Exporting is not an activity just for large multinational enterprises; small firms can also make money by exporting. In recent days, exporting has become easier though it remains a challenge for many firms.
A licensing is an agreement whereby a licensor grants the rights to intangible property (patents, inventions, formulas, processes, designs, copyrights, and trademarks) to another entity (licensee) for a specified period and in return, the licensor receives a royalty/fee from the licensee.
Franchising is basically o specialized form of licensing in which the franchiser not only sells the intangible property to the franchisee but also insists that the franchisee agrees to abide by strict rules as to how it does business.
4. Joint venture
A joint venture entails establishing a firm that is jointly owned by two or more independent firms. Some joint venture examples
5. Management Contracts
A firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed-upon fee.
6. Turnkey projects
In a turnkey project, the contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel. At completing the contract the foreign client handles the ‘key’ of a plant that is ready for full operation
7. Strategic international alliances
A strategic international alliance is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective.
8. Direct foreign investment
Direct foreign investment is another important form of international business. Companies may manufacture locally
- to capitalize on low-cost labor,
- to avoid high import taxes,
- to reduce the high cost of transportation to market,
- to gain access to raw materials, or
- to gain market entry.
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