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3.4 Getting Involved in International Business

There are several levels of organizational involvement in international trade, ranging from lower involvement like exporting and importing to higher involvement like direct investment. Exporting and importing involve sending or receiving goods across borders, while licensing and franchising allow companies to enter foreign markets without large expenditures. Higher levels include joint ventures, outsourcing, offshoring, and direct investment through wholly owned foreign facilities. The highest level is a multinational corporation that operates globally with few ties to any single nation.

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55 views15 pages

3.4 Getting Involved in International Business

There are several levels of organizational involvement in international trade, ranging from lower involvement like exporting and importing to higher involvement like direct investment. Exporting and importing involve sending or receiving goods across borders, while licensing and franchising allow companies to enter foreign markets without large expenditures. Higher levels include joint ventures, outsourcing, offshoring, and direct investment through wholly owned foreign facilities. The highest level is a multinational corporation that operates globally with few ties to any single nation.

Uploaded by

Sarra H.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Getting Involved in International

Business 1
Learning Objective

 Summarize the different levels of organizational involvement in international


trade.
Exporting and Importing

 Countertrade agreements: Exporting sometimes takes place through


countertrade agreements, which involve bartering products for other
products instead of for currency.

 Export agents are middlemen that help companies by handling their


international transactions.
Trading Companies

Buys goods in one country and sells them to buyers in another


country.
Licensing and Franchising

 Enable a company to enter international marketplace without


spending large sums of money or hiring or transferring employees
Licensing and Franchising

Enable a company to enter international marketplace without


spending large sums of money or hiring or transferring personnel
Licensing

 Is a trade arrangement in which one company—the licensor—allows


another company—the licensee—to use its company name, products,
patents, brands, trademarks, raw materials, and/or production
processes in exchange for a fee or royalty.
Franchising

Is a form of licensing in which a company—the franchiser—agrees to


provide a franchisee the name, logo, methods of operation, advertising,
products, and other elements associated with the franchiser’s business,
in return for a financial commitment and the agreement to conduct
business in accordance with the franchiser’s standard of operations.
Top 10 Global Franchises
Ranking Franchise
1 McDonald’s
2 KFC
3 Burger King
4 Pizza Hut
5 7 Eleven
6 Marriott International
7 RE/MAX
8 Dunkin’ Donuts
9 InterContinental Hotels and Resorts
10 Subway

 Source: “Top 100 Global Franchises – Rankings (2018),” Franchise Direct, https://www.franchisedirect.com/top100globalfranchises/rankings/ (accessed April 1, 2018).
Contract Manufacturing

When a firm hires a foreign company to produce a specified


volume of the firm’s product to specification
Final product carries the domestic firm’s name
Outsourcing

Transferring manufacturing or other tasks where labor and supplies


are less expensive
Insourcing—foreign companies transfer tasks to U.S. companies
Offshoring

Relocation of a business process by a company, or a subsidiary, to


another country
Joint Ventures and Alliances

Joint venture: finding a local partner to share costs and operations


of the business
Strategic alliance: partnerships formed to create a competitive
advantage on a worldwide basis
Direct Investment

Ownership of overseas facilities

Direct investment may involve the development and operation of new


facilities or the purchase of all or part of an existing operation in a
foreign country.
Direct Investment

The highest level of international business involvement is the multinational


corporation (MNC), a corporation such as IBM or ExxonMobil, that
operates on a worldwide scale, without significant ties to any one nation or
region.

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