Companies Expanding Internationally

How Companies Expand Internationally

  • global outsourcing: aka offshoring
    • using suppliers outside of the United States to provide labors, goods, or services
  • importing: a company buys goods outside the country and resells them domestically
  • exporting: a company produces goods domestically and sells them outside the country
  • counter-trading: bartering goods for goods
  • licensing: a company allows a foreign company to pay it a fee to make or distribute the firm’s product or service
  • franchising: a company allows a foreign company to pay it a fee and a share of the profit in return for using the company’s brand name and a package of materials and services
  • joint ventures: formed with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country
    • aka “strategic alliance”
  • wholly-owned subsidiary: foreign subsidiary that is fully owned and controlled by an organization
    • “greenfield venture”: foreign subsidiary that the owning organization has built from scratch

Organizations Promoting International Trade

  • World Trade Organization (WTO): designed to monitor and enforce trade agreements

    • agreements based on the General Agreement on Tariffs and Trade (GATT), an international accord first signed by 23 nations in 1947
    • currently consists of 164 countries
    • headquartered in Geneva, Switzerland

  • World Bank: provides low-interest loans to developing nations for improving transportation, education, health, and telecommunications

    • it was founded after WWII to help European countries rebuild
    • it has 189 member nations, with most contributions coming from Britain, United States, Japan, and Germany

  • International Monetary Fund (IMF): designed to assist in smoothing the flow of money between nations

    • founded in 1945 and now affiliated with the UN
    • operates as a last-resort leader that makes short-term loans to countries suffering from unfavorable balance of payments

The BRICS Countries

  • the 5 major emerging countries
    • Brazil, Russia, India, China, and South Africa
    • coined by a financial analyst as promising markets for finance capital in the 21st century
    • represent 40% of the world’s population
    • represent about 20% of the world’s economic activity