INTERNATIONAL BUSINESS MANAGEMENT Types of Business Domestic Business

INTERNATIONAL BUSINESS MANAGEMENT

Types of Business Domestic Business International Business Multinational Business Global Business

Domestic Business A business that acquires all of its resources and sells all of its products or services within a single country. Most small businesses are essentially domestic in nature. This category includes local retailers and restaurants, agricultural enterprises and small service firms such as dry cleaners and hair salons.

International Business A business that is based primarily in a single country but acquires some meaningful share of its resources or revenues or both from other countries. Square fits this description. Most of its products are manufactured in the Bangladesh and earns almost 80% from here but also earn 20% from exporting to different countries.

Multinational Business A business that has a worldwide market place, from which it buys raw materials, borrows money and manufactures its products and to which it subsequently sells its products. GSK is an excellent example of a multinational company.

Global business A business that transcends national boundaries and is not committed to a single home country. For example Apple or microsoft.

Different approaches to internationalization Importing and Exporting Licensing Strategic Alliances and Joint Venture Direct investment

Importing and Exporting means making a product in the firm’s domestic market place and selling it in another country. For example medicine Importing means bringing a good, service or capital into the home country from abroad. For example raw materials

Advantages of importing and exporting Small cash outlay Little risk No adaptation necessary Disadvantages of importing and exporting Tariffs and taxes High transportation costs Government restrictions

Licensing A company may prefer to arrange for a foreign company to manufacture or market its products under a licensing agreement. Licensing is an agreement whereby a firm allows another company to use its brand name, trademark, technology, patent, copyright or other assets. In return the license pays a royalty usually based on sales.

Advantages of licensing Increased profitability Extended profitability Disadvantages of licensing Inflexibility Competition

Strategic Alliances & Joint Venture Strategic alliance is a co-operative arrangement between two or more firms for mutual gain. A joint venture is a special type of strategic alliance in which the partners share in the ownership of an operation on an equity basis.

For example, Nipro [Japan] and JMI [BD] collaborated on the development of a new pharmaceuticals to produce high efficient medicine and surgical instruments. Advantages Quick market entry Access to materials and technology Disadvantages Shared ownership limits control and profit

Direct investment When a firm headquartered in one country builds or purchases operating facilities or subsidiaries in a foreign country. The foreign operations then become wholly owned subsidiaries of the firm. Ford’s acquisitions of Jaguar, Volvo and Kia as well as British Petroleum’s acquisition of Amoco were major forms of direct investment.

Advantages of direct investment Enhanced control Existing infrastructure Disadvantages of direct investment Complexity Greater economic and political risk Greater uncertainty