Question

Explain the different levels of organizational involvement in international trade, including exporting, importing, licensing, franchising, contract manufacturing, outsourcing, offshoring, direct investment, and joint venture.

Answer 1

Different levels of organization involvement in international trade :

1. Exporting: The sale of goods and services to foreign markets.

2. Importing: The purchase of goods and services from foreign sources.

3. Countertrade agreement : Foreign trade agreements that involve bartering products for other products instead of foreign currency.

4. Licensing: A trade agreement in which one company (the licensor) allows other company (the licensee) to use its company name,products, patents, brands ,trademarks or production processes in exchange for a fee or royalty.

5. Franchising: A form of licensing in which the company (the franchiser) agrees to provide franchise a name,logo, methods of operation, advertising ,products and other elements associated with a franchiser's business in return for a financial commitment and the agreement to conduct business in accordance with the franchiser's standard of operation.

6. Contract manufacturing: The hiring of a foreign company to produce a specified volume of the initiating company's product to specification; the final product carries the domestic firm name.

7. Offshoring: The relocation of business processes by a company or subsidiary to another country.

8. Outsourcing: Hiring a party outside a company to perform services and create goods that traditionally were performed-in-house by company's own employees.

9. Direct investment: The ownership of overseas facilities.

10. Joint venture: The sharing of the costs and operation of a business between a foreign company and a local partner.

11. Strategic alliance: A partnership formed to create competitive advantage on worldwide basis.