Comparative advantage is the concept that a country should specialize in the production and export of those goods and services that it can produce more efficiently than other goods and services, and that it should import those goods and services in which it has a comparative disadvantage. While it is a faster and cheaper mode of entry, it ultimately results in a profit share between the franchiser and the franchisee. Company INTERNATIONAL BUSINESS MACHINES CORPORATION TIDM IBM Headline Notification of filing of document The Corporation's current report on Form 8-K dated Dec. 18, 2020 was filed with the United States Securities Exchange Commission and in Luxembourg with the Luxembourg Stock Exchange as the officially appointed mechanism for the central storage of regulated information and with the … Imports are the inflow of goods and services into a country’s market for consumption. Lower revenues due to relying on an external party is also a key disadvantage to this model. Smuggled goods must also be included in the export measurement. Identify the benefits and risks associated with licensing as a foreign market entry model. The more units there are in one shipment, the less expensive the price per unit will be. Bartlett and Ghoshal clustered these businesses based on two criteria: global integration and local responsiveness. However, a business can provide a contract service to another business without necessarily insourcing that business process. Foreign direct investment (FDI) is investment into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Offshoring of a company’s services that were previously produced domestically can be advantageous in lowering operation costs, but has incited some controversy over the economic implications. Because they are servicing multiple customers, they can offer reduced costs in acquiring raw materials by benefiting from economies of scale. The Business Programs Division processes millions of business filings and information requests each year. An export’s counterpart is an import. For the franchiser, international expansion can be both complex and expensive, particularly when the purchase of land and building of facilities is necessary. Counter purchase: Party A sells salt to Party B. The enterprise, revenues, expenses and assets are shared by the involved parties. Buyback: This occurs when a firm builds a plant in a country, or supplies technology, equipment, training, or other services to the country, and agrees to take a certain percentage of the plant’s output as partial payment for the contract. Explain the effects of foreign direct investment (FDI) for the investor and the host country. 6) Summarized Business Reports The report that is made with the assistance of important details that have been discussed in the meeting is called a summarized report. Knowing what has influenced these decisions and the resulting trends in outcomes can be helpful for governments, non-governmental organizations, businesses, and private donors looking to invest in developing countries. Each company has distinctive needs and goals. Foreign direct investment is direct investment into one country by a company located in another country. Bartering: Bartering involves exchanging goods or services for other goods or services as payment. Import marketers may make short run profits from cheaper overseas labor and currency mainly in wealth consuming sectors at the long run expense of an economy’s wealth producing sectors straining the home county’s tax base, income growth, and increasing the debt burden. Quality assurance and protection of the brand is much more difficult when ownership of the franchise is external to the organization itself. However, the company may or may not incur unexpected costs to train these overseas workers. This term “export” is derived from the concept of shipping goods and services out of the port of a country. In other words, a country will export those products or services that utilize abundant factors of production. Franchising requires very little capital investment on behalf of the parent company, and the time and effort of building the stores are similar outsources to the franchisee. Imported goods or services are provided to domestic consumers by foreign producers. It may also hurt their ability to respond to demand fluctuations, risking their customer service levels. It is a good that is brought in from another country for sale. FDI is in contrast to portfolio investment which is a passive investment in the securities of another country, such as stocks and bonds. It is also worth noting that franchising is a very efficient, low cost and quickly implemented expansionary strategy. Finally, depending on the nature of the MNC, investment in any country reflects a desire for a medium- to long-term return, as establishing a plant, training workers and so on can be costly. Switch trading: Practice in which one company sells to another its obligation to make a purchase in a given country. METHODS OF PAYMENT IN INTERNATIONAL TRADE:LETTERS OF CREDIT Letters of credit (LCs) are one of the most secure instruments available to international traders. The licensee will provide the majority of the infrastructure in most situations. Offshoring entails a company moving a business process from one country to another. The study found the major contributing factor to increasing FDI flow was internal policy reform relating to trade openness and participation in international trade agreements and institutions. Singapore: The Port of Singapore is one of the busiest ports in the world. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. The advent of small trades over the internet such as through Amazon and eBay has largely bypassed the involvement of customs in many countries because of the low individual values of these trades. Site Development: Digital Strategies (Division of Communications) 1024px-Paulista_Avenue%2C_S%C3%A3o_Paulo%2C_Brazil.jpg. Some major joint ventures include Dow Corning, MillerCoors, Sony Ericsson, Penske Truck Leasing, Norampac, and Owens-Corning. 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