INTERNATIONAL

BUSINESS
1. DOMESTIC BUSINESS V/S INTERNATIONAL BUSINESS
2. VARIOUS MODES OF ENTRY INTO INTERNATIONAL BUSINESS

TUTE - P79
RACHIT PODDAR (21BC484)
GHANISHT LAKHANI (21BC497)
DEVESI VERMA (21BC499)
DOMESTIC BUSINESS
Domestic business involves those economic
transactions that take place inside the geographical
boundaries of a country. Both the buyer and seller
belong to the same country in this form of
business. Domestic business is also known as
‘Internal Business’ or ‘Home Trade’.

t involves producing, distributing, and consuming

goods and services within the domestic market. In a
domestic business context, companies primarily focus
on serving local customers’ needs and operate within
their own country’s legal and regulatory frameworks.
INTERNATIONAL BUSINESS
International business involves those economic
transactions that take place outside the geographical
boundaries of a country. The buyer and seller do not
belong to the same country in this form of business.
Companies involved in international business are
known as ‘Multinational’ or ‘Transnational’ companies.

Difficult to conduct business research in

international business when compared to domestic
companies
The degree of risk is significantly high
The selling process, currency, type of customers,
taxation laws are different for the buyer and seller,
which acts as a hindrance
 EXPORTING
Exporting is a common mode of entering international business where a company sells its
products or services to customers in another country. This approach allows businesses to
expand their market reach, increase sales, and tap into new opportunities.

DIRECT INDIRECT
The company handles all of the T The company uses
middleman to handle all the
a
necessary paperwork for the
shipment and financing
goods and services and deals
of Y paperwork and negotiate with
foreign suppliers or customers.
directly with foreign suppliers
or purchasers.
P The company’s involvement is
limited.
Example: Clif Bar, a maker of
Example: Nike, based in the
USA, engages in direct
E organic foods and snacks,
partners with distributors to
exporting
footwear,
by selling
apparel,
its
and S make its products available
equipments worldwide. globally without directly
managing the export process.
BENEFITS AND CHALLENGES
Market Expansion Market Entry Barriers

Revenue Diversification Logistical Challenges

Economies of Scale Currency Fluctuations

Risk Diversification Regulatory Compliances

Global Brand Recognition Cultural and Language Differences

Utilization of Excess Capacity Political and Economic Risks

Access to Specialized Markets Dependence on Intermediaries

BENEFITS CHALLENGES
 LICENSING
Licensing is a common mode of entering international business where a company (licensor) grants the
rights to another company (licensee) in a foreign market to use its intellectual property, such as
patents, trademarks, copyrights, or proprietary technology. In return, the licensee pays fees or
royalties to the licensor.
Example: Microsoft has a long history of licensing its software products globally. For instance, the
company licenses its Windows operating system and Office productivity suite to international
partners. Local companies then distribute and sell Microsoft software in their respective regions,
paying licensing fees to Microsoft.

Intellectual Property Transfer Global Brand Presence

F
Companies leverage their intellectual Licensing facilitates the establishment of a
property, such as brand names, E global brand presence as the licensee
introduces and promotes the licensed
technology, or know-how, by transferring
A products or services in their local market.
the rights to use it to a foreign partner.
T
Minimized Investment and Risk U Revenue Generation
Licensees take on the responsibility for R Licensors earn revenue through upfront fees,
production, marketing, and distribution, ongoing royalties, or a combination of both,
reducing the financial and operational
E providing a source of income without the
risks for the licensor. S need for significant capital investment.
BENEFITS AND CHALLENGES
Low Market Entry Costs Loss of Control

Access to Local Expertise Intellectual Property risks

Revenue Generation Dependency on Licensees

Global Brand Expansion Limited Revenue Potential

Risk Mitigation Cultural and Language Differences

Faster Market Entry Strategic Conflicts

Market Adaptability Lack of direct market presence

BENEFITS CHALLENGES
 FRANCHISING
Franchising is a mode of entering international business where a company (franchisor) grants the
rights to another party (franchisee) to operate a business using its brand, business model, and
support systems in a specific geographical area. In return, the franchisee pays fees and royalties to
the franchisor.
Example: McDonald's franchise model involves granting franchisees the right to operate McDonald's
restaurants globally. The franchisees follow standardized procedures for food preparation, quality
control, and customer service, ensuring consistency across locations. This has contributed to
McDonald's becoming one of the world's leading fast-food chains.

Business Model Transfer Financial Arrangement

F
Franchisors replicate their successful Franchisees typically pay an initial franchise
business model, including brand identity, E fee and ongoing royalties based on sales
revenue. In return, they gain access to the
trademarks, operational procedures, and
A franchisor's brand, business model, and
support systems, for franchisees to use.
T ongoing support.

Operational Support U Local Adaptation

Franchisees receive ongoing support, R Franchisees often have the flexibility to adapt
training, and guidance from the the business to local market conditions,
franchisor to ensure consistent
E allowing for customization of products,
adherence to brand standards. S services, or marketing strategies.
BENEFITS AND CHALLENGES
Rapid Market Expansion Maintaining Brand Standards

Lower Capital Investment Cultural Variances

Local Knowledge Selection and Training

Brand Recognition Legal and Compliance Risks

Shared Risk with Franchisees Economic and Currency Risks

Access to Entrepreneurial Talent Potential for Conflict

Ongoing Revenue Streams Global Economic Downturns

BENEFITS CHALLENGES
 JOINT VENTURES
Joint ventures (JVs) are a form of partnership between two or more entities that come together to
undertake a specific business project, often in a foreign market. In a joint venture, the participating
entities share ownership, control, risks, and profits. This collaborative approach allows companies to
leverage each other's strengths, resources, and expertise. The trade is carried out in collaboration
with the importing nation’s firm.
Example: Starbucks formed a joint venture with Tata Global Beverages in 2011 to enter the Indian
market. Tata Starbucks Limited operates Starbucks outlets in India, combining Starbucks' global
brand and expertise with Tata's knowledge of the local market.

Shared Ownership and Control Technology & Knowledge Transfer

F
In a joint venture, two or more Joint ventures often involve the transfer of
companies pool their resources, capital, E technology, know-how, and specialized
skills between the partners, enhancing the
and expertise to create a new entity that
A capabilities of the newly formed entity.
they jointly own and control.
T
Risk and Reward Sharing U Local Market Expertise
Participants share both the risks and R If entering a foreign market, one partner may
rewards of the business venture. This contribute local market knowledge,
collaboration helps distribute the
E regulatory understanding, and cultural
financial and operational burdens. S insights, facilitating smoother market entry.
BENEFITS AND CHALLENGES
Shared Resources and Risk Alignment of Objectives

Access to Local Knowledge Control and Decision-Making

Cost Savings Dependency on Partner Performance

Market Entry Facilitation Legal and Regulatory Complexity

Technology Transfer Risk of Technology Leakage

Improved Positioning Exit Strategy and Dispute Resolution

Diversification of Portfolio Competitive Concerns

BENEFITS CHALLENGES
 STRATEGIC ALLIANCE
A strategic alliance is a cooperative agreement between two or more companies to pursue a set of
agreed-upon objectives while remaining independent organizations. In the context of international
business, strategic alliances enable companies to collaborate and share resources, expertise, and
risks to achieve mutual benefits. These alliances can take various forms, including joint ventures,
research and development partnerships, marketing alliances, and distribution agreements.
Example: Samsung, a major player in the smartphone industry, formed a strategic alliance with Google
to use the Android operating system in its smartphones. This collaboration has contributed to the
widespread adoption of Android devices globally.
1.
Collaborative Objectives Risk Mitigation
F
It involves partnering organizations By sharing risks and responsibilities,
working together to achieve goals, such E strategic alliances allow companies to
enter foreign markets or pursue complex
as entering new markets, developing
A projects without bearing the full burden of
innovative products, or improving
operational efficiency. T potential challenges.

Resource Sharing U Flexibility and Independence

Companies pool their resources, which R Unlike mergers or acquisitions, it allows
may include capital, technology, HR, or participating companies to maintain their
distribution networks, to enhance their
E independence while benefiting from the
overall capabilities. S synergies created through collaboration.
BENEFITS AND CHALLENGES
Market Access and Expansion Strategic Misalignment

Cost Sharing and Risk Mitigation Intellectual Property Concerns

Operational Efficiency Equity and Control Issues

Accelerated Innovation Exit Strategy and Dissolution

Competitive Advantage Regulatory and Legal Complexity

Flexibility and Adaptability Competitive Concerns

Knowledge Transfer Performance Evaluation and Accountability

BENEFITS CHALLENGES
 WHOLLY OWNED SUBSIDIARY
When a larger company owns all the shares of another company, the second company is called a
wholly-owned subsidiary. The company that wields rights over the common stocks is the parent
company.
After acquisition by a larger company, the smaller company/firm can become a wholly owned
subsidiary. A large company can have several wholly owned subsidiaries across different industries.
With the help of these subsidiaries, a company can diversify its business and lower its risk.
EXAMPLE: Marvel Entertainment is a wholly-owned subsidiary of Walt Disney
KFC is a wholly owned subsidiary of PepsiCo Inc.

Companies Act, 2013 Symbiotic Relationship

F
Companies Act 2013 controls the working A key feature of this structure is the shared
of majorly owned businesses. A wholly E risk and reward between the parent and
subsidiary companies. Both entities stand
owned subsidiary can be in a different
A to gain or lose, fostering a symbiotic
state, country or continent from the
parent company. T relationship and alignment of interests.

Case of 100% FDI U Separate Legal Entity

If a company is permitted to have 100% R it is imperative that the subsidiary maintains
Foreign Direct Investment (FDI), no prior a distinct legal identity, emphasizing
approval from the Reserve Bank of India
E separation in terms of liabilities and
(RBI) is required. S obligations.
BENEFITS AND CHALLENGES
Taxation Hike Risk
Loss Offset Benefit
Inherited Clientele Advantage Financial Consolidation Complexity
Streamlined Decision-making
Business diversification Foreign Market Risks
Global Brand Presence
Liability Separation Advantage Mergers Challenge
Confidentiality Assurance
Financial System Integration Acquisitions Difficulty

Grassroots Relations Struggle

BENEFITS CHALLENGES
 TURNKEY PROJECTS
The word ‘turnkey’, stands for anything that is ‘complete and ready to use immediately’.
A turnkey project is one which is designed, developed and equipped with all facilities by a company under a
contract. It is handed over to a buyer when it becomes ready to operate business. Obviously, the
company responsible for building a turnkey project does it for the cost as agreed in the contract. The
work of the company includes design, fabrication, installation, aftermarket support and technical service for
the turnkey project.
EXAMPLE: The Jewar Airport project is being developed by Swiss company Zurich Airport International.
Once fully developed, the airport will be handed over to the local authorities to operate.

Hassle Free Operations Time Saving Solution

F
Outsourcing project development Companies can focus on growth as turnkey
minimizes legal and technical challenges, E projects eliminate the need for in-house
providing a seamless experience for
A facility development, saving time and
operators, especially beneficial in energy
complex environments like India T
Cost Saving Solution U Expert Knowledge Access

Turnkey projects involve fixed-cost

R Provide specialized expertise, allowing them
to benefit from professionals in fields
contracts, ensuring budget predictability E outside their core business focus, enhancing
for international businesses.
S overall project success.
BENEFITS AND CHALLENGES
Cost Overruns Risk
Cost-saving Contracts
Timeline Management Complexity
Time-saving Solutions
Quality Control Issues
Hassle-free Operations
Coordination Challenges
Expert Knowledge Access

BENEFITS CHALLENGES
Usually seen in the following industries:• Chemical Industries
• Pharmaceutical Industries
• Petroleum Industries
• Metal Refining Industries
 MANAGEMENT CONTRACTS
It is a type of contractual agreement between two or more parties in which the management of a project
or business is outsourced to a third-party contractor, known as the manager. This agreement stipulates
that the manager is responsible for all aspects of the project or business, including operations, finance,
and corporate governance, while the owner retains ownership and control of the underlying assets.

Hassle Free Operations Time Saving Solution

F
Outsourcing project development Companies can focus on growth as turnkey
minimizes legal and technical challenges, E projects eliminate the need for in-house
providing a seamless experience for
A facility development, saving time and
operators, especially beneficial in energy
complex environments like India T
Cost Saving Solution U Expert Knowledge Access

Turnkey projects involve fixed-cost

R Provide specialized expertise, allowing them
to benefit from professionals in fields
contracts, ensuring budget predictability E outside their core business focus, enhancing
for international businesses.
S overall project success.
BENEFITS AND CHALLENGES
Taxation Hike Risk
Loss Offset Benefit
Inherited Clientele Advantage Financial Consolidation Complexity
Streamlined Decision-making
Business diversification Foreign Market Risks
Global Brand Presence
Liability Separation Advantage Mergers Challenge
Confidentiality Assurance
Financial System Integration Acquisitions Difficulty

Grassroots Relations Struggle

BENEFITS CHALLENGES
 TURNKEY PROJECTS
The word ‘turnkey’, stands for anything that is ‘complete and ready to use immediately’.
A turnkey project is one which is designed, developed and equipped with all facilities by a company under a
contract. It is handed over to a buyer when it becomes ready to operate business. Obviously, the
company responsible for building a turnkey project does it for the cost as agreed in the contract. The
work of the company includes design, fabrication, installation, aftermarket support and technical service for
the turnkey project.
EXAMPLE: The Jewar Airport project is being developed by Swiss company Zurich Airport International.
Once fully developed, the airport will be handed over to the local authorities to operate.

Hassle Free Operations Time Saving Solution

F
Outsourcing project development Companies can focus on growth as turnkey
minimizes legal and technical challenges, E projects eliminate the need for in-house
providing a seamless experience for
A facility development, saving time and
operators, especially beneficial in energy
complex environments like India T
Cost Saving Solution U Expert Knowledge Access

Turnkey projects involve fixed-cost

R Provide specialized expertise, allowing them
to benefit from professionals in fields
contracts, ensuring budget predictability E outside their core business focus, enhancing
for international businesses.
S overall project success.
BENEFITS AND CHALLENGES
Taxation Hike Risk
Loss Offset Benefit
Inherited Clientele Advantage Financial Consolidation Complexity
Streamlined Decision-making
Business diversification Foreign Market Risks
Global Brand Presence
Liability Separation Advantage Mergers Challenge
Confidentiality Assurance
Financial System Integration Acquisitions Difficulty

Grassroots Relations Struggle

BENEFITS CHALLENGES
THANK YOU!