Forms of Global Business

TL;DR

This content explains different forms of global business, including exporting, cooperative contracts, strategic alliances, and the evolution of companies going global.

Transcript

besides determining whether to adopt organizational policies and procedures a company must also determine how to organize itself for success in entry to foreign markets let's take a look at forms of global business when companies produce products in their home countries and sell those products to customers and foreign countries they're exporting ex... Read More

Key Insights

• 🍉 Exporting offers advantages in terms of control and market diversification but has disadvantages related to tariffs and transportation costs.
• 👻 Cooperative contracts, such as licensing and franchising, allow companies to expand globally without large financial commitments.
• ✳️ Strategic alliances, particularly joint ventures, enable companies to share resources and risks when entering foreign markets.
• 💗 Companies can now skip the phased model of globalization due to advancements in travel, communication, and a growing pool of experienced global business professionals.

Questions & Answers

Q: What are the advantages of exporting as a form of global business?

Exporting provides companies with a greater degree of control over their products, reduces dependence on the home market, and allows for more control over research, design, and production decisions.

Q: What are the disadvantages of exporting?

Exported goods are subject to tariffs and non-tariff barriers, increasing the final cost for customers. Additionally, transportation costs can significantly add to the price of an exported product.

Q: What is the difference between licensing and franchising?

Under a licensing agreement, a domestic company receives royalty payments for allowing another company to produce its product or use its brand name in a specific foreign market. Franchising involves licensing the entire business, including training, marketing, and an exclusive right to conduct business in a particular location.

Q: What is a strategic alliance in global business?

A strategic alliance is when two existing companies collaborate to form a third company, combining resources, costs, risks, technology, and people. The two founding companies remain unchanged but jointly own the newly created joint venture.

Summary & Key Takeaways

• Exporting is a form of global business where companies produce products domestically and sell them to customers in foreign countries, providing control over research, design, and production decisions.

• Cooperative contracts, such as licensing and franchising, allow companies to expand globally without large financial commitments by partnering with foreign businesses for production or marketing.

• Strategic alliances, particularly joint ventures, are collaborations between two companies to create a third company and combine resources, costs, and technology for entry into foreign markets.