Operating methods in global business

Résumé du document

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)

Extraits

[...] Biggest part of importing happens through domestic and foreign intermediaries, like commercial agents and importers. (Pehkonen 2000, 67) Importing overall works as a reflection to exporting, and can get three forms like exporting; indirect, direct and own import. Import is indirect when it works through intermediaries. Direct import means that importer, which can be for example import agent or wholesaler, takes care of all the matters including the board crossing. Import is own when no intermediaries are used and the final customer takes care of all the importing matters. [...]

[...] As well while the company can control the production, it's harder to control the marketing when the market area locates abroad. The company doesn't either get lots of information and experience of the markets, and it's not possible to react quickly to changes of the markets. Also to achieve customers thrust abroad, to gain good company image, may be harder. (Pirnes & Kukkola 2002, 92) Export requirements Export requirements can be divided into two different parts; requirements for company and requirements for products. The company needs to have a working business plan that enables internalization. [...]

[...] This is also the way to get closer to customers, and it gives an image that the company is long lasting and noteworthy company in the business. As well getting information about company's marketing and other important matters are more efficient. The home company also gets its name better out as well as achieves better local image. As well for some reason other operation models might not be possible. Also establishing a subsidiary company may guarantee an easier entrance to foreign markets. (Seristö 2002, 118-119) To establish a subsidiary can also be an extension to exporting, or a substitute when there are restrictions on exporting. [...]

[...] In addition, difficult quality control, transportation connections, communication connections, and knowledge of transferring is main factor for the contract, also the risk of training competitor when contractor has a vested the contractee develop into an efficient, high quality producer but this mean less dependence on the contractor. (Luostarinen & Welch 1993, 111-124) 10. Project operations Project operations is arranged and planed by organization, co-operative company's effort to accomplish a specific plan. Project management includes developing a project plan, which includes defining project goals and objectives, specifying tasks or how goals will be achieved, what resources are need, and associating budgets and timelines for completion. [...]

[...] As well franchising is used when other operation models of internalization are not possible. (Äijö 2001, 96-97) Franchising also fits for companies that are starting to internalize or are after a quick expansion, and may be used before moving into using some other operation models of internalization, which require more resources, like experience. Franchising doesn't either require as much commitment as other models. (Seristö 2002, 110) So the reasons for international expansion of franchising system more are market potential, financial gain, and saturated domestic market. [...]