What are the different types of international business?
Answers
HI
The four types of international businesses one can start are as follows: 1. Exporting 2. Licensing 3. Franchising 4. Foreign Direct Investment (FDI).
1. Exporting:
Exporting is often the first choice when manufacturers decide to expand abroad. Simply stating, exporting means selling abroad, either directly to target customers or indirectly by retaining foreign sales agents or/and distributors.
2. Licensing:
Licensing is another way to expand one’s operations internationally. In case of international licensing, there is an agreement whereby a firm, called licensor, grants a foreign firm the right to use intangible (intellectual) property for a specific period of time, usually in return for a royalty.
3. Franchising:
Closely related to licensing is franchising. Franchising is an option in which a parent company grants another company/firm the right to do business in a prescribed manner. Franchising differs from licensing in the sense that it usually requires the franchisee to follow much stricter guidelines in running the business than does licensing.
4. Foreign Direct Investment (FDI):
Foreign direct investment refers to operations in one country that ire controlled by entities in a foreign country. In a sense, this FDI means building new facilities in other country. In India, a foreign direct investment means acquiring control by more than 74% of the operation. This limit was 50% till the financial year 2001-2002.