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With increasing trade among nations, the term “international business” is gaining popularity day by day throughout the world. Irrespective of scale, every industry wants to stand in global market. Relaxation in foreign exchange regulations has made foreign trade more convenient and profitable for corporates. The emergence of multinational companies and globalization has increased competition in corporate market. To compete in global market, companies need higher expertise and skills. This need has led many industries to engage in offshoring strategies to set up an international business company. Let us understand different forms of international business before going for it. Six modes of international business: Import When goods or services from a foreign county are purchased by another country for trading, it is called importing. Goods or services can be purchased directly from the supplier or through intermediate agents/ service providers. Export Unlike importing, when a country sells goods or services to a foreign country, it is called exporting. Selling can be done directly with target customers or through foreign agents or distributors. Importing and exporting is most common mode of international business. Licensing It is a limited, but convenient mode of foreign trade. Rather than trading directly, a licensor firm grants license to a foreign firm (licensee) to use their intangible property that may include patents, trademarks, copyrights, technology, process, logo, etc. Licensee firm pays the profit share to the licensor. This mode neither require any international arrangement of company nor huge capital investment. Franchising It is the strongest form of licensing that require hard commitments by both parties in terms of finance and local circumstances. In this, franchisor offers franchisee with combination of productions, managerial guidelines, trademarks, etc. The major forms of franchising are – manufacturers, retailers and service providers. It allows business to grow rapidly and gain financially while maintaining standardisation in global market. Problem with this mode arise in selection of right franchisee and training them. inter-firm cooperation In this mode, firms from different nations cooperate with other to achieve common business goals. It has become an important tool in facing growing market competition easily, taking benefits from local marketing skills, sharing risks and resources and much more. Three major forms of inter-firm international business company are: Clustering: In this many small firms work in consortium to compete with large industries. Most of the time, these firms are geographical close and producing same goods or services. Benefits of clustering include local knowledge transfer, low cost and easy transaction and fast access to neighbour resources. Clusters are formed without intervention of government. Networking: This is the most commonly used form of inter-firm cooperation. In this, there is no need of any formal link among national and international firms. Positive point about networking over clustering is that it do not require geographical proximity to work together. Firms are linked with information exchange and commercial relation between customer and supplier. Strategic Partnership: Partnership becomes strategic when they seem to improve competitive position of firms in market. These partners may join R&D marketing, production, licensing, cross-licensing and outsourcing. Foreign direct investment: When a company directly invests resources and workforce in another country, it is called foreign direct investment. This investment is different from indirect investment. A firm making FDI becomes MNC. To allow direct investment in their country, government has to consider it is economical and political effects because in this some resource of country may go under the control of foreign investor.
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