Method of Conducting International Business

Method of Conducting International Business

1. Exporting and Importing

Exporting denotes selling of goods and services from the home country to a foreign country. Similarly importing refers to purchasing of products from foreign country and bringing them into home country

2. Contract Manufacturing (or) Outsourcing

It connotes a type of international business where a firm enters into a contract with one or a few local manufacturers in foreign countries in order to get certain components of goods produced according to its specifications. It is also called outsourcing or contract manufacturing

3. Licensing and Franchising

Licensing is contractual agreement wherein one firm grants access to its plants, trade secrets or technology to another firm in a foreign country, for a fee called royalty, e.g. McDonald, Pisa Hut, etc., The firm which grants such permission is called Licensor or Franchisor and other  firm  to  whom  the license is granted is called Licensee or Franchisee

4. Joint Venture

A Joint venture is a business agreement wherein parties agree to develop a new entity and assets subscribing to equity shares and thereby exercising control over enterprise and consequently sharing revenues, expenses and the assets. It can be established under three different ways namely

·           Foreign Investors buying an interest in local company

·           Local firm acquiring an interest in the existing foreign firm

·           Both the foreign and local firms jointly forming a new enterprise.

5. Foreign Direct Investment (FDI)

FDI means investment made by a company or individual in one country in the business interest in another country in the form of either establishing new business operations or acquiring business assets in the other country.