Managing Different Forms of Global Business

There are six forms of global business. Global sourcing is hiring others outside the firm to perform work worldwide. It is also called outsourcing and offshoring, and it is expected to increase. When importing, a domestic firm buys products from foreign firms and sells them at home. Also known as cooperative contracts, internationals and MNCs use these two methods to go global.

In franchising, the franchisor licenses the entire business to the franchisee for a fee and royalties. The franchiser provides a combination of services to the franchisee for an initial fee and a percentage of the revenues. Contracting is similar to global sourcing, but it tends to be on a large scale. Global product sourcing commonly includes using materials and parts from other companies in the firm’s product. It is very difficult to go to a foreign country and operate a new venture on your own. Therefore, alliances and joint ventures are especially advantageous to smaller partners who want to go global but don’t have the resources.

A joint venture is created when two or more firms share ownership of a new company. The two companies remain separate and independently controlled but share the ownership and control of the new company created through the partnership. Direct investment is the building or buying of operating facilities in a foreign country. It is also called wholly owned affiliates or subsidiaries. Foreign direct investment is on the increase, as being local virtually eliminates trade barriers.
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