List and discuss (compare) the various methods by which a firm may engage in international business (as
Question:
- List and discuss (compare) the various methods by which a firm may engage in international business (as discussed in class). Your response should include some of the advantages and disadvantages of each of the various options.
Export and import. Licensing, Subsidiary, Joint Ventures, Franchising, Contracted manufacturing, and Management contract and assembly are methods by which a firm can choose to conduct international business.
1. Through export and import in the overall market - A firm can send out the delivered things in the overall market or could import the items from the worldwide market for various capabilities.
Advantage - Chance is least as no capital in danger is implied.
Disadvantage - Need to keep different rules of the country in which exchange is being completed.
2. Licensing - Through permitting, an organization gives admittance to its development, licenses, etc to different nations and charge the amount consequently.
Advantage - There could be no other cost required as transport, which is a significant cost in trade.
Disadvantage - the quality assurance of the advancements used in different countries is at serious risk.
3. Establishment of subsidiaries in foreign markets- A firm can sell the overall market by laying out an organization's branch in an unfamiliar market.
Advantage - Market and growth extension over a period
Disadvantages - High capital cost, various guidelines, and guidelines limitations
4. Joint Ventures - An organization can in like manner penetrate the overall market by joining with the unfamiliar organization of the same business.
Advantage-Less office and other functional expenses included.
Disadvantage - Need to follow the methods of unfamiliar organizations. Choices cannot be taken independent therefore personal decisions cannot be made. Partnerships can hurt the business.
5. We can also add Franchising, Contracted manufacturing, and Management contract
Franchising is a method used for a business to adapt an already establish brand trademark or trade name along with exact business system while paying a royalty or fee.
Advantage- low starting cost, already built brand awareness, sales can be made right away
Disadvantage – limit of control, must use everything the company says, adapt business model.Contract manufacturing- makes an agreement with another company to produce certain products over a period.
Advantage- lower overhead cost, can produce goods at a faster rate, build a potential partnership.
Disadvantage- difficult to find a higher quality provider who can produce goods exactly every time
Assembly- it’s a form of a subsidiary in which a company can set up a production plan to assemble components manufactured in a domestic market.
Advantage- make items at a higher and faster rate.
Management contract- an agreement in which one firm attends to manage another firm.
Advantage- produce more revenue on both sides of the spectrum.
Auditing and Assurance Services
ISBN: 978-0077862343
6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws