International business

International business comprises all commercial transactions that take place between two or
more regions, countries and nations beyond their political boundaries. Usually, private
companies undertake transactions for profit; governments undertake them for profit and
for political reasons.[1] The term "international business" refers to all those business activities
which involve cross-border transactions of goods, services, and resources between two or more
nations.

History of International Business

International business is not a new phenomenon but has been practiced around the world for
thousands of years. Through the routes established in the Mediterranean, the Phoenicians,
Mesopotamians, and Greeks did trading. As sophisticated business techniques emerged,
facilitating the flow of goods, resources and funds between countries flourished. This growth was
further stimulated by colonization activities. The Industrial Revolution further stimulated the
growth of international business by providing methods of production for mass ,markets and
efficient methods for utilizing raw materials. The inventions and technological developments
from Industrial revolution further accelerated the smooth flow of goods, services and capital
between the countries. The production grew at unprecedented levels by 1880's as the industrial
revolution was in full swing in Europe and the United States. Growth continued in an upward
spiral as mass production was realized and the manufactures were pushed to seek foreign
markets for their products. This marked the emergence of multinational corporations.

Factors leading to Growth in International Business

Development and expansion of technology

Liberalization of cross border activities

Development of supporting services
Elements of International Business

The four distinctive elements of international business are:

Globalization

International Business Environment

Unique Culture

International Business Management

List of international business companies

Meezan bank
Engro corporation
Coca cola
Pepsi
Apple
Google
Sui northern gas

Advantages Of international business

Earning valuable foreign currency

Division of labor
Optimum utilization of available resources
Increase in the standard of living of people
Benefits to consumers
Encouragement to industrialization
International peace and harmony
Cultural development

Dis-Advantages of International Business:

 Destruction of Cottage and Home Industries
Dependence on Foreign Business
Countries which Sell Raw Materials and Buy Manufactured Goods in Return are always
Loser and cannot improve the Country Economy
International Business may Completely Exhaust a Countrys Natural Resources like Coal
and Oil which are Irreplaceable
Imports of Harmful Drugs and Luxuries Goods ruin the Health of the Nation
International Business Rivalry Leads to Friction and War.

Licensing

A business arrangement in which one company gives another company permission to

manufacture its product for a specified payment.

A licensor (i.e. the firm with the technology or brand) can provide their products, services, brand
and/or technology to a licensee via an agreement. This agreement will describe the terms of the
strategic alliance, allowing the licensor affordable and low risk entry to a foreign market while
the licensee can gain access to the competitive advantages and unique assets of another firm.
This is potentially a strong win-win arrangement for both parties, and is a relatively common
practice in international business.
Advantages

Licensing affords new international entrants with a number of advantages:

Licensing is a rapid entry strategy, allowing almost instant access to the market with
the right partners lined up.

Licensing is low risk in terms of assets and capital investment. The licensee will provide
the majority of the infrastructure in most situations.

Localization is a complex issue legally, and licensing is a clean solution to most

legal barriers to entry.

Cultural and linguistic barriers are also significant challenges for international entries.
Licensing provides critical resources in this regard, as the licensee has local contacts,
mastery of local language, and a deep understanding of the local market.

Disadvantages

While the low-cost entry and natural localization are definite advantages, licensing also comes
with some opportunity costs:

Loss of control is a serious disadvantage in a licensing situation in regards to quality

control. Particularly relevant is the licensing of a brand name, as any quality control issue
on behalf of the licensee will impact the licensor's parent brand.
Depending on an international partner also creates inherent risks regarding the success of
that firm. Just like investing in an organization in the stock market, licensing requires due
diligence regarding which organization to partner with.
Lower revenues due to relying on an external party is also a key disadvantage to this
model. (Lower risk, lower returns.)
Franchising:

an authorization to sell a company's goods or services in a particular place .In franchising,

franchisors (a person or company that grants the license to a third party for the conducting of a
business under their marks) not only specify the products and services that will be offered by the
franchisees (a person or company who is granted the license to do business under the trademark
and trade name by the franchisor), but also provide them with an operating system, brand and
support.

It also provides the Know-How (Franchise Handbook), and the technical and commercial
support for distribution to be carried out correctly.

Advantages and disadvantages of franchising

Advantages of franchising
Risk
Market share.
Brand name and trade mark.
The franchisor gives you support
No prior experience is needed
Exclusive rights
Financing.
Relationships with suppliers have already been established.

Disadvantages of franchising
Costs
The franchise agreement usually includes restrictions
franchisor monitoring becomes intrusive
Other franchisees could give the brand a bad reputation
 All profits (a percentage of sales) are usually shared with the franchisor.

Direct Franchise Agreement

Which are direct contracts between the franchiser or sub-franchiser and the operator of the
franchise unit.

Master franchise agreement

Agreement under which the franchiser grants another party the right to sub-franchise within a
given territory.

Examples