Planning for involvement in international markets requires considering various options like indirect and direct exporting, global strategies using the internet, licensing, joint ventures, and direct investment. Indirect exporting through domestic merchants reduces risk and investment, while direct exporting allows greater control through options like foreign sales teams, agents, or establishing an export department. Licensing production locally and joint ventures with domestic partners can also help companies access international markets with less risk. Direct investment in foreign manufacturing facilities provides the most control but at a higher level of risk and resource commitment. Proper planning is needed to determine the best approach for a company's goals and capabilities.
2. International Trade
International trade is the exchange of capital, goods,
and services across international borders or territories.
Most countries, such trade represents a significant
share of gross domestic product (GDP). While
international trade has been present throughout its
economic, social, and political importance has been
on the rise in recent centuries.
3. Importance Of International Trade
Without international trade, nations would be limited
to the goods and services produced within their own
borders.
International trade is the backbone of our modern,
commercial world, as producers in various nations try
to profit from an expanded market, rather than be
limited to selling within their own borders. There are
many reasons that trade across national borders
occurs, including lower production costs in one region
versus another, specialized industries, lack or surplus
of natural resources and consumer tastes.
4. Risks In International Trade
Buyer insolvency (purchaser cannot pay);
Non-acceptance (buyer rejects goods as different from
the agreed upon specifications);
Credit risk (allowing the buyer to take possession of
goods prior to payment);
Regulatory risk (e.g., a change in rules that prevents the
transaction);
Intervention (governmental action to prevent a
transaction being completed);
Political risk (change in leadership interfering with
transactions or prices); and
War and other uncontrollable events.
In addition, international trade also faces the risk of
unfavorable exchange rate movements.
5. Planning For Involvement In
International Market
Indirect and direct export:
The normal way to get involved in an international
market is through export. Companies typically start
with indirect exporting that is, they work through
independent intermediaries. Domestic based export
merchants buy the manufacturer’s products and then
sell.
6. Advantages Of Indirect Export
Less Investment.
Less Risk.
Many Ways Of Direct Exporting
• Domestic based export department.
• Travelling export sales representatives.
• Foreign based agents.
7. Using Global Based Strategy
Electronic communication via the internet is
extending the reach companies large and small to
worldwide market. Marketers like amazon.com is
using the web to reach new customers outside their
home countries.
8. Licensing
Licensing is a simple way to become involved in
international market. When sears opened department
stores in Mexico And Spain, it found qualified local
manufacturers to produce many of its products.
9. Joint Ventures
Foreign investors join with local investors to create a
joint venture company in which they share ownership
and control.
E.g. 1)Maruti- Suzuki.
2) Tata AIA.
10. Direct investment
The ultimate form of foreign involvement is direct
ownership of foreign-based assembly or
manufacturing facilities.
