1. Licensing & Franchising 2. Exporting 3. Contract Manufacturing 4. Management Contract 5. Assembly Operations 6. Fully Owned Manufacturing Facilities 7.

Joint Ventures 8. Countertrade 9. Mergers & Acquisition 10. Third Country Location

- International licensing means, a firm in one country (the licensor) permits a firm in another country (the licensee) to use its intellectual property . (Patent, trade mark, copyright, technology, technical know-how, marketing skill or any other specific skills) - Royalty / Fees paid by licensee to licensor - Many countries it regulated by government; & it does not exceed 5 % of sales in developing countries

- Licensing agreement may also include cross licensing, where there is mutual exchange of knowledge / patent. - In cross licensing agreement, cash payment may or may not be included. E.g. = Books Exchange - The licensee have right to do business in a independent manner - Minimum involvement of resources & efforts

- Advantages of Licensing : 1. New R & D set up 2. Reduce risk of government interaction 3. Foreign market tested without major involvement or capital investment 4. Helpful for developing country - Disadvantages of Licensing : 1. Licensee become competitor after the expiry of licensing agreement.

E.g. = Nike International Ltd., world biggest sports shoe company, finally decided in 1995 to enter in the Indian market by licensing. Sierra Industrial Enterprise Ltd., the licensee, will invest in setting up the complete quality control, marketing, distribution operations & will pay Nike 5 % royalty on factory prices on footwear for the use of brand name in India.

- Franchising is a form of licensing in which a parent company (the franchiser) grants another independent entity (the franchisee) the right to do business in prescribed banner.
- This right can take in the form of selling the franchisors goods & services by using its name, manufacturing techniques. - In some cases, franchisor supplying an important ingredient (part, material, formula) for finished goods & services.

Generally franchising involves a combinations of many elements like 1. Manufacturer Retail System (Automobile Dealership) 2. Manufacturer Wholesaler System (soft drink companies) 3. Service firm Retailers System (lodging & fast food)

- Most famous method - Easy & less costly - Provide Incentive & Support by Govt. (EPC) - Not required to set up manufacturing unit, marketing operation in foreign countries - Direct Export & Indirect Export

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Export is suitable when following one or more conditions applicableThe volume/operation of foreign business is not large to introduce new set up in foreign market Cost of production/manufacturing in foreign market is high There are political & other risk of investment in foreign country Where licensing & contract manufacturing is not a better alternative

5. Foreign investment (FDI) is not favoured by the respective foreign country. 6. The company has no permanent interest in respective foreign country

OR There is no guarantee of the market available for long period

Under contract manufacturing, a company doing international marketing contracts with firms in foreign countries to manufacture or assemble the capital or industrial goods & in the same time, retain the responsibility of marketing of goods. ONLY Manufacturing & NOT Marketing NOT investing in infrastructure, raw m. NOT involve in management decision

* Advantages :
1. The company does not have to commit resources for setting up manufacturing facilities. 2. It frees from the risk of investing in foreign countries. 3. If idle manufacturing capacity is readily available in foreign country, it enables the

marketer to get started immediately.

Advantages : 4. It is less risky way to start it. 5. If business does not pick up successfully, dropping it is easy; but if the company had established its own production facilities, then EXIT would be difficult.

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Disadvantages : In some cases, there will be the loss of potential profits from manufacturing Less control over the process of manufacturing There is a risk of developing potential competitor It would be not suitable in case of high-tech goods & some cases involve technical secretes.

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In a management contact the supplier bring together a package of skills that will provide an integrated service to the client without incurring risk & the benefit of ownership. Advt. Transfer of know-how Investment Use of experienced personnel Management help & support services

Disadvt. 1. If the undertaking company with a greater profit . Management company may prevent a company from setting up its own operations for particular period. 2. Client company over-dependence & loss of control.
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It suitable where foreign market is idle when economics of scale in the manufacture of parts & component; & when assembly operations are labour intensive & labour is cheap in foreign country. Assembly operation represent a cross between exporting & overseas manufacturing.

Advantages 1. Cost Advantage. (Low import duty on parts & component) 2. No political & investment risk. 3. Employment generation 4. Trade secretes are not disclosed
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Those companies with long term & substantial interest in foreign country As Peter Drucker points out, it is simply not possible to maintain substantial market standing in an important area unless one has a physical presence as a manufacture So many factors encourage for establishing manufacturing facilities in foreign market. Like, trade barrier, government policy, differences in manufacturing & other cost

Advantages 1. Complete control over manufacturing & quality 2. It does not have risk of developing potential competitor, in the case of licensing & contract manufacturing
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Disadvantages Require sufficient financial & managerial resources Some countries may or may not be allowed for fully owned manufacturing facilities In some cases, manufacturing cost is high. It may face problems like type of technology, Absence of Skilled Labour, political risk because of FDI, infrastructure issues.

- The cooperation of two or more individuals

or businesses in which each agrees to share profit, loss and control in a specific enterprise.
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Types of Joint Ventures: Sharing of Ownership & management Licensing / Franchising Contract Manufacturing Management Contracts

Simply a Barter System Exchange of goods (Directly / Indirectly) Used by developing countries for increase exports Countertrade is a form of international trade in which certain export & import transactions are directly linked with each other & in which IMPORT of goods are paid for by EXPORT of goods, instead of MONEY/CASH PAYMENTS.

Types of Countertrade: 1. Barter 2. Buy Back 3. Compensation Deal

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1. Barter
- Barter refers to direct exchange of goods of equal value, with no money & no third party involved.

e.g. = Countertrade between India & Japan.

India exports Sugar 1o,000 ton of Rs. $ 40 million

Japan export new machineries of the same value

2. Buy Back

(Give some Goods & Cash)

- Under this agreement, the supplier of plant, equipment or technology agrees to purchase goods manufactured with that equipment or technology. - Here, full payment may be made in kind or part may be made & balance in CASH

3. Compensation Deal
(Receive Cash & Goods)

- Here, the sellers receives a part of the payment in CASH & rest in GOODS.

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Advt. Easily use new technology or patent Earn market share & brand Reduces competition Disadvt. In some cases, cost of acquisition may be high It may arise new problem

When there is no commercial transaction between two nations because of political reason or When direct transaction between two nations are difficult due to political reason or The firm in one country which wants to enter the other market will operate from third country.