1. FORMS OF
INTERNATIONAL
BUSINESS
RAJIV BABU CHINTALABY

2. FORMS OF INTERNATIONAL
BUSINESS
 EXPORTING
 TURNKEY PROJECTS
 LICENSING
 FRANCHISING
 JOINT VENTURES
 WHOLLY OWNED
SUBSIDIARIES

3. EXPORTING
 Many manufacturing
firms begin their
global expansion as
exporters and only
later switch to
another mode for
serving a foreign
market.

4. EXPORTING
Advantage
 Ability to realize
location and
experience curve
economies.
Disadvantage
 High transport costs.
 Trade barriers.
 Problems with local
marketing agents.

5. TURNKEY PROJECTS
 Firms that specialize in the
design, construction, and start-
up of turnkey plants are common
in some industries.
 In a turnkey project, the
contractor agrees to handle
every detail of the project for a
foreign client, including the
training of operating personnel.

6. TURNKEY PROJECTS
Advantage
 Ability to earn
returns from process
technology skills in
countries where FDI
is restricted.
Disadvantage
 Creating efficient
competitors.
 Lack of long-term
market presence.

7. LICENSING
 A Licensing agreement
is an arrangement
whereby a licensor
grants the rights to
intangible property to
another entity for a
specified period, and in
return, the licensor
receives a royalty fee
from the licensee.

8. LICENSING
Advantage
 Low development
costs and risks.
Disadvantage
 Lack of control over
technology.
 Inability to realize
location and experience
curve economies.
 Inability to engage in
global strategic
coordination.

9. FRANCHISING
 Franchising is similar to licensing,
although franchising tends to
involve longer-term commitments
than licensing.
 The Franchiser will also often
assist the franchisee to run the
business on an ongoing basis.
 It also receives a royalty payment,
which amounts to some
percentage of the franchisee’s
revenues.

10. FRANCHISING
Advantage
 Low development
costs and risks.
Disadvantage
 Lack of control over
quality.
 Inability to engage in
global strategic
coordination.

11. JOINT VENTURE
 A Joint venture
entails establishing
a firm that is jointly
owned by two or
more otherwise
independent firms.

12. JOINT VENTURE
Advantage
 Access to local
partner’s
knowledge.
 Sharing
development costs
and risks.
 Politically
Disadvantage
 Lack of control over
technology.
 Inability to engage in
global strategic
coordination.
 Inability to realize
location and
experience economies.

13. WHOLLY OWNED
SUBSIDIARIES
 In a wholly owned subsidiary, the
firm owns 100 percent of the
stock.
 WOS in a foreign market can be
done two ways. The firm either
can set up a new operation in that
country, often referred to as a
Greenfield venture, or it can
acquire an established firm in that
host nation and use that firm to

14. WHOLLY OWNED
SUBSIDIARIES
Advantage
 Protection of
technology.
 Ability to engage in
global strategic
coordination.
 Ability to realize
location and
experience
economies.
Disadvantage
 High costs and
risks.