1.

EXPORTING

It is the process of selling goods and services produced in one country to another
countries. Exporting may be direct or indirect.
Direct export– A company capitalizing on economies of scale in production
concentrated in the home country, establishes a proper system for organizing export
functions and procuring foreign sales.
Indirect export- involves exporting through domestically based export intermediaries.
The exporter has no control over his product in the foreign market.

Advantages 
It helps in the distribution of surplus.
It is less risky.
Under direct export, the exporter has control over the selection of market
It helps in fast market access

Disadvantages–
High start-up cost in case of direct exports
In Indirect export, the exporter has no control over the distribution of products
Exporting through export intermediaries increases the cost of the product

2. LICENSING

Licensing is a method in which a firm gives permission to a person to use its legally
protected product or technology and to do business in a particular manner, for an agreed
period of time and within an agreed territory. It is a very easy method to enter a foreign
market as less control and communication are involved.

Example: Starbucks (licensor) and Nestle (licensee) for exclusive rights to sell

Starbucks’ product

Advantages
Less investment is involved
Low cost of labour
Disadvantages
This method is time-consuming
The decline in product quality may harm the reputation of the licensor

3. FRANCHISING

It is a system in which semi-independent business owners (franchisees) pay fees and

royalty to a parent company (franchiser) in return for the right to be identified by its
trademark, to sell its product or services, and often to use its business format or system.

Example: Burger King, McDonald etc.

Advantages 
It is less risky
Advantage of expertise of franchiser
Highly motivated employees

Disadvantages
Difficulty in keeping trade secrets
Franchisee may become a future competitor
A wrong franchisee may ruin the company’s name and goodwill

4. MERGER & ACQUISITION

A merger is a combination of two or more district entities into one, the desired effect
being a accumulation of assets and liabilities of distinct entities and several other
benefits such as economies of scale, tax benefits, fast growth, synergy, diversification,
etc. The merging entities cease to be in existence and merge into a single servicing
entity.
Example: Vodafone and Idea formed a new company VI.

Acquisition implies the acquisition of controlling interest in a company by another

company. It does not lead to the dissolution of a company whose shares are acquired. It
may be a friendly or hostile acquisition or a bail-out takeover.
Example: LIC Acquired IDBI Bank .

Advantages
Low cost of production
Development of medium and small scale industries
No dilution of control
Disadvantages 
– Difficulty in maintaining quality standards
– Local manufacturers in foreign markets may lose business

6. JOINT VENTURE

It is a strategy used by companies to enter a foreign market by joining hands and sharing
ownership and management with another company. It is used when two or more
companies want to achieve some common objectives and expand international
operations.
Example: Uber (a taxi company) and Volvo (a heavy vehicle co.)

The common objectives are–

Foreign market entry
Risk/reward sharing
Technology sharing
Joint product development
It is useful to meet the shortage of financial resources, physical or managerial resources

Advantages
Technological competence
Optimum use of resources
Partners are able to learn from each other
Disadvantages
Conflicts over asymmetric investment
Cultural and political stability may pose a threat to successful operations
Conflicts in management

7. CONTRACT MANUFACTURING

When a foreign firm hires a local manufacturer to produce their product or a part of their
product it is known as contract manufacturing. This method utilizes the skills of a local
manufacturer and helps in reducing the cost of production. The marketing and selling of
the product is the responsibility of the international firm.

Example: Foxconn Technology (Local manufacturer) group that supplies products to

high profile companies like Microsoft. Apple and Amazon

Advantages
1. Low cost of production
2. Development of medium and small scale industries
3. No dilution of control

Disadvantages
1. Difficulty in maintaining quality standards
2. Local manufacturers in foreign markets may lose business

8. STRATEGIC ALLIANCE

It is a voluntary formal agreement between two companies to pool their resources to

achieve a common set of objectives while remaining independent entities. It is mainly
used to expand the production capacity and increase market share for a product.

Alliances help in developing new technologies and utilizing the brand image and market
knowledge of both companies. Example: Apple Pay and Master Card
Assembly Operations
An assembly operation is a variation of the subsidiary. A foreign production plan might be set
up simply to assemble components manufactured in the domestic market or elsewhere. The
exporting company may try to retain key component manufacture in the domestic plant,
allowing development, production skill and investment to be concentrated, while maintaining
the benefit from economies of scale. Some parts of the products may be produced in various
countries (multi sourcing) in order to gain each country´s comparative advantage.
What Is Countertrade?
Countertrade is a reciprocal form of international trade in which goods or services are
exchanged for other goods or services rather than for hard currency. This type of
international trade is more common in developing countries with limited foreign exchange
or credit facilities. Countertrade can be classified into three broad categories: barter, counter
purchase, and offset.