Types of international business

Merchandise exports are goods sent out of a country whereas merchandise imports are goods brought in. Since these are tangible goods that visibly leave and enter countries, they are sometimes referred to as visible exports and imports. The terms exports or imports are used frequently yet in reality the reference is only to the merchandise exports or imports.

Exporting and importing of goods are the major sources of international revenue and expenditure for most countries. Among companies engaged in some form of international business, more are involvedin importing and exporting than in any other type of transaction.

Importing and/or exporting is usually but not always, the first type of foreign operations in which a firm gets involved. This is because at an early stage of international involvement these operations usually take the least commitment and least risk of a firm's resources Exporting or importing are not typically abandoned when firms adopt other international business forms. Although this may sometimes occur, exporting and importing usually continue, either by business with other markets or to complement the new types of business activities.

Service exports and imports refer to international earnings other than those from goods sent to another country. Receipt of these earnings is considered a service export, whereas payment is considered a service import. Services are also referred to as invisibles. International business comprises many different types of services.

Travel, tourism, and transportation. Earnings from transportation and from foreign travel can be an important source of revenue for international airlines, shipping companies, reservations agencies, and hotels. On a national level, such countries as Greece and Norway depend heavily on revenue collected from carrying foreign cargo on their ships. The Bahamas earns much more from foreign tourists than it earns from exporting merchandise.

Performance of activities abroad. Fees are payments for the performance of certain activities abroad, such services as banking, insurance, rentals (e.g., the Star Wars film), engineering, and management. Engineering services are often handled through turn-key operations, contracts for the construction of operating facilities that are transferred to the owner when the facilities are ready to begin operations. Fees for management services are often the result of management contracts, arrangements through which one firm provides management personnel to perform general or specialized management functions for another firm.

Use of assets from abroad. Royalties are the payment for use of assets from abroad, such as for trademarks, patents, copyrights, or other expertise under contracts known as licensing agreements. Royalties are also paid for franchising, a way of doing business in which one party (the franchisor) sells an independent party (the franchisee) the use of a trademark that is an essential asset for the franchisee's business. In addition, the franchisor assists on a continuing basis in the operation of the business, such as by providing components, managerial services, or technology.

Firms often move to foreign licensing or franchising after successfully building exports to a market. This move usually involves a greater international commitment than in the early stages of exporting. The greater involvement occurs because the firm commonly has to send technicians to the foreign country to assist the licensee or franchisee in establishing and adapting its production facilities for the new product.

Direct investments. Direct investment takes place when control follows the investment. This can amount to a small percentage of the equity of the company being acquired, perhaps even as little as 10 percent. The ownership of a controlling interest in a foreign operation is the highest type of commitment to foreign operations in the given country. Direct investment operations may be set up in order to gain access to certain resources or access to a market for the firm’s product.

When two or more organizations share in the ownership of a direct investment, the operation is known as a joint venture. In a special type of joint venture, a mixed venture, a government is in partnership with a private company.

The multinational enterprise, or MNE, has a worldwide approach to foreign markets and production and an integrated global philosophy encompassing both domestic and overseas operations. The term multinational corporation, or MNC, is also quite common in the literature of international business. Another term sometimes used interchangeably with MNE, especially by the United Nations, is transnational corporation, or TNC.

Questions:

1.What are the merchandise exports?

2.What is a joint venture?

3.Characterise the following terms: Service exports and imports, Travel, tourism, and transportation, Performance of activities abroad, Use of assets from abroad, Direct investments.

Exercises:

Ex. 1. Study the following words and word combinations and translate the sentences given below into Ukrainian.

mean business, none of one’s business, go out of business, businesslike, be busy with, have no business to do, be in business, like nobody’s business, mind one’s own business

1. Mother has busied herself with our affairs for too long.

2. When traveling on business I take my tiny travel kit.

3. Let’s get down to business.

4. She had no business to publish his letters to her.

5. 50% of these stores were not in business five years ago.

6.They are working away like nobody’s business.

7. Umbrella sellers went out of business.

8. Stop teaching me! It’s none of your business.

9. Listen to me! I mean business!

10.The visit to Copenhagen was brisk and businesslike.

Ex 2. The words given below are the synonyms to the word organization. In what do they differ? Give your own definition to each of them.