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Global Business is where a company is doing a business across the world.

It is an
exchange of buying and selling of goods and services by people from different countries.

By taking business globally, you get access to a much larger base of customers. If your
product or service is a success, you can enjoy increased revenues from these new customers
even if you have saturated your markets domestically. Globalizing could be exactly the shot
of life your company needs to take its revenues to new heights.

If business is taken globally then it can help an exponentially greater number of people
find the answers to the questions helps solve. Taking your business global allows you to
diversify your markets so your revenue sources are more stable. So, the purpose is to identify
and describe the basic forms of global business and explain the strengths and weaknesses of
each form.

Firstly, exporting is when a company sells its physical products which are manufactured
outside the foreign country to the foreign country (Tallman and Shenkar, 1994). According to
Baker (2013) export means the process of sending or carrying of the goods abroad, especially
for trade and sales. Export is the start of international business, it is also most wide-spread
strategic deviation of international business as it does not let a company to be effected in a
large risk internationally, while financial resources needed for its achievement are acceptable
for most internationally oriented companies (C. Beriz and S. Ahmet, 2014). For example,
Ford Motor plans to triple exports from India with a $1 billion plant that will be one of its
most heavily systematized in Asia. Companies like Johnson & Johnson, Apple, General
Motors, Intel, Maybank, Genting, Sime Darby, Maxis, Petronas and more are also doing
exporting.

There are few advantages and disadvantages of having exporting. The advantages are
that it will increase the firm’s international competitiveness and improve its competitive
position locally (Williams cited in Zacharevič, 2008). In the initial stages of the
internationalization process, these are usually individual exports of temporary output surplus
that gradually turn into constant and planned export activities (C. Beriz and S. Ahmet, 2014).
It gives an opportunity to "learn" overseas markets before investing and reduces the potential
risks of managing in overseas (Tongesai Mpofu and Shylet Chigwende, 2013). On the other
hand, many exported goods will bring tariff and non-tariffs barriers (Williams, McWilliams &
Lawrence,2017).

Cooperative contracts an agreement in which a foreign business owner pays a


company a fee for the right to conduct business in person’s country (Williams, McWilliams &
Lawrence,2017). A cooperative agreement is a form of support. It reflects a relationship
between the U.S. Government and a recipient. There are two kinds of cooperative contracts:
licensing and franchising. Licensing and franchising are seen as the most popular cooperative
options of international business (C. Beriz and S. Ahmet, 2014).

According to Kotabe and Helsen (2010), licensing is where the firm the licensor
offers some registered assets to foreign company the licensee in trade for royalty fees which
is also known as contractual transaction. Based on my understanding, licensing means to
have the permission or permit to do something. It is related to franchising except that the
franchising organization tends to be more directly involved in the development and take the
marketing program in control (Tongesai Mpofu and Shylet Chigwende, 2013).

Nickelodeon & Viacom Consumer Products continues its leadership in entertainment


licensing with new property launches and innovative extensions of existing licensing hits.
There are more companies having licensing like The Trump Organization, Nissan Motor
Company, Timex, National Geographic and more.

It allows companies to earn additional profits without investing more money. It is also
quick, easy entry into foreign markets, lower capital requirements, potential for large return
on investment and low risk since we enter with an established product and fewer financial
risk. Disadvantages are the licensor might give up control over the quality of the product
(Williams, McWilliams & Lawrence,2017). Also, will have only a low level of control,
licensee may become a competitor, may lose intellectual property, license period is usually
limited and poor quality management can damage your brand’s reputation in other license
territories.

The term ‘franchise’ is understood as an exclusive right presented by the parent


organization to an individual or enterprise to use the former’s successful business model in a
specific area. According to Mathewson & Winter, Brickley & Dark, PL, Mendes Borini, F, De
Miranda Oliveira JR., M, & Couto Parente, R cited in De Resende Melo (2015), franchising
is connection that involves scarcity of resources of the parties involved. For example,
Subway, Boost Juice, 7 Eleven, Carrefour and more.

The advantage of franchising is that we can enlarge without the risk of debt or the cost
of equity (Williams, McWilliams & Lawrence,2017). No prior experience is needed as the
training is received to operate the franchise, a franchise allows a small business to compete
with big businesses, have exclusive rights in territory, financing the business may be easier
because banks lend money to buy a franchise with a good reputation, benefit from
communicating and sharing ideas with other franchisees in the network and the relationships
with suppliers have already been established.

There are disadvantages as well in franchising, cost may be higher than your
expectation (Williams, McWilliams & Lawrence,2017). To open a McDonald's franchise,
requires a total investment of $1-$2.2 million, with liquid capital available of $750,000. The
franchise fee is $45,000. Other than that, franchisor monitoring becomes intrusive, other
franchisees could give the brand a bad reputation and profits (a percentage of sales) are
usually shared with the franchisor. The drawbacks of franchising are that it is difficult to
control a large number of franchisees in different markets (Tongesai Mpofu and Shylet
Chigwende, 2013).

Strategic alliance is an agreement between two or more parties just like the joint
venture but strategic alliance does not create a new company. According to Czinkota and
Ronkainen cited in Tongesai Mpofu and Shylet Chigwende (2013), in a strategic alliance,
organizations share their resources and expertise with other firms and the parties share risks
or rewards of starting a new venture though equality of partners is not important. Starbucks is
a strategic alliance company because Starbucks has created an alliance with the NAACP to
advance the company's and the NAACP's goals of social and economic justice.

Joint ventures are business contracts where two or more owners create an individual
entity (Williams, McWilliams & Lawrence,2017). The joint investment happens when a
company wants to share in the stock of a foreign company (Dehghan, 2008). According to
Mohameed cited in Syed Zamberi Ahmad and Philip J. Kitchen (2000), most construction
organizations globally have mostly used international joint ventures (IJV) as a channel to
enter new construction markets worldwide. For example, Siemens AG and Nokia Corp. is one
of a joint venture company.

There are a few benefits of joint venture companies which includes parties to offer
their customers new products and services, helps parties to save money and time, it does not
require a long term commitment, help companies avoid tariffs and non-tariff blocks to entry
and bear only a part of the cost and threat of the business. Also, it decreases total investment
(Kogut, 1991 cited in Durmaz, 2014). Joint venture includes less capital and less limited
resources for foreign country operations (Tongesai Mpofu and Shylet Chigwende, 2013).

The disadvantage of having joint venture company is having an unrealistic and


unclear objective, share profits, clash of cultures and management styles may result in poor
co-operation, limited outside opportunities and it might have imbalance of expertise, assets
and investment as different companies are working together so we will not know who has the
leadership as both ownership has equal right. Problems on agreements also occurs (Williams,
McWilliams & Lawrence,2017).

A greenfield entry into a foreign market involves the establishment of a new affiliate
in a host country by another firm headquartered overseas, alone or with one or more partners
(Cheng citied in Durmaz,2014). Greenfield entry is also know as wholly owned affiliates or
wholly owned subsidiaries. For example, Honda Motors Japan because Honda Motors Japan
owns one hundred percent of Honda Motors Thailand.

The advantage of having wholly owned affiliates is that it allows the parent company
receive all the profits. Also, will have greater control of all properties of the business, able to
apply the best long-term strategy, commitment to the market will be solid, dealer financing is
frequently available, work with the relevant authorities from the beginning, control over your
brand and staff. The disadvantage is building new operations or buying existing business
(Williams, McWilliams & Lawrence,2017). If the wholly owned affiliates succeed, then it
will be easier to payoff the huge amount but if it does not succeed then it will lose massively.
This happens due to the risk that holds by the parent company. Furthermore, competition will
be difficult to overcome, entry process may take years, barriers to entry can be costly and not
appropriate for rapid entering in foreign markets (Tongesai Mpofu and Shylet Chigwende,
2013).

In conclusion, every entry mode in globalization has its own advantages and
disadvantages. In the world, there are countries and economies that are gaining from
globalization that were not benefitting in the past but benefitting now as globalization grows
stronger every day. Countries like China have been one of the biggest manufacturing
responsibilities due to globalization however they suffered from some negative aspects as
having such a huge market for manufacturing will come at a price. It is how a country and
economy can cope to the changes that effects the benefits and downfalls. So its all up to the
manager who is able to identify which method is the best for the company. Generally,
globalization helps to boost the economy of both locally and internationally. (C. Beriz and S.
Ahmet, 2014).

Reference

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