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Operating methods in global business

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  1. Introduction.
  2. Export.
    1. Exporting services.
    2. Why export?
    3. Risks of exporting.
    4. Export requirements.
  3. Import.
    1. Why import?
    2. Risks of importing.
    3. Importing requirements.
  4. Licensing.
    1. Why license?
    2. Principal issues in negotiating licensing agreement.
    3. Risks and disadvantages of licensing.
  5. Franchising.
    1. Why Franchise?
    2. Risks of franchising.
    3. Requirements of franchising.
  6. Joint venture.
    1. Why enter a joint venture.
    2. Risks of a joint venture.
    3. Requirements of joint ventures.
  7. Management contract.
  8. Subcontracting and contract manufacturing.
  9. Project operations.
    1. Roles and benefits of project operations.
    2. The risks of the project operations.
  10. Conclusion.
  11. Bibliography.

When companies decide to enter foreign markets and start doing international business, there are different kinds of entry models they can use. In our report we give an overview of some of the entry modes, including benefits/motivations, risks and requirements of the models. First we go through export and import, transporting goods/services from country to another. Export and import are especially used in the beginning of internationalization. After that we have licensing and franchising, which basically mean that one company sells rights to use for example its business idea or trademarks to another company. Then we have subsidiary operations, establishing daughter companies, which is the most demanding form of internalization. Then we go through joint venture; company established with partners, followed by subcontracting and contract manufacturing; manufacturer performs jobs for foreman. Then in the end we have management contract; some of the operational control responsibility is transferred to another company, and project operations; projects provided to the customer. Export is transporting products from one country into another. It means that a producer itself sells the products aboard or uses domestic or foreign intermediaries. In this situation the products are produced in home country of the company, but when the operation expands the exporter can also establish separate units abroad, for example selling- or producing-units. This way the company can speed up and improve its operations. (Pirnes & Kukkola 2002, 77-78)

[...] (International Business 2003, It's not exporting anymore when a company establishes units abroad which produce the services themselves, the units have to situate in home country of the company. It's also a case of exporting services when exporter goes to a buyer and gives for example consultation. (Äijö 2001, 91) Why to export First of all if selling only domestically the company reaches only small share of potential customers, and sometimes companies are even forced to go abroad to get enough customers, if exporting is not own choice. [...]

[...] Some risks that are especially caused by exporting are needed language skills, knowledge about the culture, understanding the market and differences in legal systems. Also the foreign country can be somehow unstable; it might be economically weak or prone to natural disasters. Company's ideas may as well be copied or the trademarks abused overseas. Thus it may be hard to protect company's rights. Good idea would also be to be protected against the changes in exchange rates if the target country has a different currency. [...]

[...] From its shape and operating mode mixed joint venture is usually exactly like joint venture. (Äijö 2001, 107) Why to Joint Venture The other party knows the local conditions, and usually provides the distribution channels. (Pirnes & Kukkola 2002, 78) It is also possibility to utilize partner's resources, experience, marketing knowledge etc, and sometimes the company may lack own resources, and it is impossible to use other models of internalization. This model is also used when other form of internalization are not possible, because of foreign country's legislation or some other reason. [...]

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