Modes of international business

Government Licensing Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, and production techniques.

Modes of international business

Classification of Exporters 2. Russia supplied news print and crude oil to India for decades and in turn India supplied tea, garments, medicines and tobacco products to Russia at a comparatively low price, so both the countries enjoyed advantage. Buy back Agreements It is a form of industrial counter trade.

A buy back is an arrangement by which the home country representative sets up a project in the host country, which has sufficient foreign exchange reserves to fully pay the supplier for the project.

Normally the counter period is for long term varying form 10 to 20 years.

Watch Videos

The project amount is paid partially in foreign exchange and the remaining amount is paid in kind. Usually the home country purchases the end product of the same project at a comparatively low price. This can be sold in the home country or could be diverted to a third country in order to maximize the profit margin.

It gets partial payments in foreign exchange and for the balance amount it takes back tankers from the host country and market them in any other country as well as sell in India at higher prices. Buy back Agreements … cont… Counter Trade: In s, Austria used to sell pipeline equipment related material to the then soviet union so that latter could develop certain gas fields and could pipe a part of the output back to austria.

In case of developing countries, such contracts arrangements are common as they suffer from technology gap on large scale. Country B which has a surplus of product Y, compensates by supplying it to company A, which finds a market for product Y in country C.

Country C sells the product z to country D which has sufficient foreign exchange to pay for it. Thus purchasing takes place against supply until a country with foreign exchange reserves is found for transactions.

Many multinational companies use this system to make large amount of money at every stage of the transaction. Develop-for-import Arrangement Develop for import arrangements are also a type of buyback arrangements where the exporter of plant and machinery participate in the capital of the importing firm and takes the share in the profit.

Five Modes of Entry Into Foreign Markets - Budgeting Money

The role of exporter is much more here than in general buyback agreements. Frame-Work agreement Frame work Agreements are the long term protocol or bilateral clearing agreement normally concluded between government. Trade is balanced after a long period of time as mentioned in the agreement.

If the trade is not equal in value, the debtor sells the agreed upon commodity in the international market and the creditor is paid off. Merits of Counter Trade: Bilateral or counter trade has various advantages: A good option for meeting import requirements Helps stabilize the export earnings because it predetermines the size of export and import.

Helps stabilize the terms of trade Due above two it encourages stability in the development process. Helps in trade diversification It augments the flow of technology to the developing countries It is long term in nature so provides other facility also.

It reduces the net currency outflow and recovers the foreign exchange problems Helps in correcting distortion in exchange rate policies. Demerits of Counter Trade: Bilateral or counter trade has various disadvantages: It is against multilateral trade Can no control distortion completely Difficult to sell products are sometimes traded.

Balancing of trade poses serious problems. Contractual Entry Modes 1.

Modes of international business

INTERNATIONAL LICENSING International licensing is an agreement between the licensor- generally a well developed company and the licensee can be its own unit located as subsidiary or a firm located abroad over a period of time for the use of its intangible property like brand name, marketing, know-how, blue print, copyright, work method, technology and manufacturing designs and trademark by paying a license fee.

Pepsi Cola provided a license to Heineken of the Netherlands, giving them exclusive right to produce and sell Pepsi Cola in Netherlands. Licensing works on specific conditions like specific territory and specific time period of license.

The licensor is entitled for such permission after the establishment of commanding position globally and has a brand command. In this form of technical collaboration, the franchiser is the entrant and the franchisee is the host country entity.

Here the franchiser exercises more control over franchisee. The franchisor supplies the main part of the product, and provides the following services to franchisee: Trade marks Operating Systems Product Brand name, managerial assistance, geographic exclusivity or specific set of procedures of the franchisor for creating the product in question.

Contractual Entry Modes 2. Hotel Hilton and Marriott are well known in operators in the hotel sector. Jatia in India are the national franchisee of McDonalds. All the investments on premises, HR, operations and promotions are totally borne by the franchisee.The six major modes of international business are imports and exports, tourism and transportation, licensing and franchising, turnkey operations, management contracts, and direct and portfolio investment.

Modes of Entry into International Markets (Place) How does an organization enter an overseas market? Background. Modes of entry into an international market are the channels which your organization employs to gain entry to a new international market.

This lesson considers a number of key alternatives, but recognizes that alternatives are many and diverse. The Five Common International-Expansion Entry Modes. In this section, we will explore the traditional international-expansion entry modes. David Ricks’s book on international business blunders relates the following anecdote for US companies doing business in the neighboring French-speaking Canadian province of Quebec.

Besides, exports are also used as strategic options to dispose of surplus production.

Modes of Entry into International Markets (Place)

Small firms with limited financial and other resources find exports the most suitable international business expansion mode. modes of international business A. Merchandise Exports and Imports: Merchandise exports are tangible products (goods) manufactured in one country and sent out of that country to another one.

Merchandise imports are tangible products (goods) brought in from another country. Contractual Entry Modes tranceformingnlp.comATIONAL LICENSING International licensing is an agreement between the (licensor- generally a well developed company) and the licensee (can be its own unit located as subsidiary or a firm located abroad) over a period of time for the use of its intangible property like brand name, marketing, know-how, blue print.

International business - Wikipedia