International business refers to any business activities conducted across national boundaries. There are number of ways to internationalizing the business. Business can choose among these five basic activities to start.
1. Importing & exporting
Imports: a good or service brought into one country from another.
Exports: a good or service produced in one country then get marketed to other country.
Import-export is the most fundamental and the largest international business activity, and it is often the first choice when the businesses decide to expand abroad as it is the easiest way to enter the market with a small outlay of capital.
Licensing is one of other ways to expand the business internationally. Licensing is the arrangement between a firm, called licensor, allows another one to use its intellectual property such as brand name, copy right, patent, technology, trademark and so on for a specific period of time. The licensor gets benefits in term of the royalty. The company may choose to sell the products under the licensing when the domestic production costs are too high, strict government regulations, or the company wants to sell and produce standardized products everywhere.
Franchising is closely related to licensing. Franchising is a parent company (franchiser) gives right to another company (franchisee) to do business using the franchiser’s name and products in a prescribed manner. Franchising is different from the licensing in terms of the franchisees have to follow much stricter guidelines. Moreover, licensing is more about the manufacturers while franchising is more popular with restaurants, hotels, and rental services. For example, McDonald, KFC, Pizza Hut and so on.
4. strategic partnetships & Joint venture
A strategic partnership or alliance is a positive aspect of the cooperation of two or more companies in different countries are joined together for mutual gain. A joint venture is a special type of strategic alliance, where the partners across globe collectively found a company to product goods and services. The cooperation between the companies allow them to share the production cost, technologies, development, and sales networks. The resources will be pooled to mutual advantages and put the companies in win-win situations. For example, Motorola and Toshiba joined a strategic partnership to develop manufacturing processes for microprocessors.
5. foreign direct investment (fdi)
Foreign direct investment is a company’s physical investment such as into the building and facilities in the foreign country, and acts as a domestic business with a full scale of activity. Companies practice FDI to get benefits from cheaper labor costs, tax exemptions, and other privileges in that foreign country. The host country will get benefits by the introduction of new products, services, technologies and managerial skills. Also, FDI helps facilitate progressive internal policy reforms of the host country, and enhance the economic situation. For example, Intel, which is United States based company, has made the FDI in many countries in Southeast Asian.