Forms of Global Business | Summary and Q&A

TL;DR

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

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.

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

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.