GETTING INVOLVED IN
GLOBAL BUSINESS
LOW RISK METHODS:
 INDIRECT EXPORTING:
 ALSO CALLED CASUAL OR ACCIDENTIAL
EXPORTING.
 BASICALLY A LOCAL COMPANY IS APPROACHED BY
A “BROKER” WHO STATES THAT A FORIEGN
COUNTRY BUSINESS WISHES TO SELL ITS
PRODUCT THERE.
DIRECT EXPORTING:
 A SIGNIFICANT STEP FORWARD
 A BUSINESS MAKES THE DELIBERATE DECISION
TO ACTIVELY EXPAND GLOBALLY INTO OTHER
COUNTRIES WITH ITS PRODUCTS.
 INVOLVES: MARKET RESEARCH, CUSTOMER
ANALYSIS, RISK ANALYSIS AND AN
UNDERSTANDING OF THE HOST COUNTRY
BEHAVIOUR AND CULTURE.
MANAGEMENT
CONTRACTING:
 KNOWKEDGE, SKILLS, EXPERTISE CAN ALSO BE
EXPORTED.
 CAN ASSIST IN:
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PLANNING (STRATEGIC);
FINDING OPPORTUNITIES;
COORDINATING RESOURCES;
SOLVING PROBLEMS;
MAKING DECISIONS;
PROVIDING SPECIFIC EXPERTISE
LICENSING:
 A COMPANY FROM ONE COUNTRY GIVES A
COMPANY IN ANOTHER COUNTRY( WITH THE
PRODUCTION CAPABILITY), THE RIGHT TO MAKE
AND SELL ITS PRODUCT.
 E.G., VERY COMMON FOR SOFT DRINK
COMPANIES (E.G., COKE) TO USE PRIVATE
BOTTLING COMPANIES TO PRODUCE ITS
PRODUCT.
 THE GERBER COMPANY STARTED SELLING ITS
PRODUCTS IN JAPAN USING A LOCAL PRODUCER
TO MAKE ITS PRODUCTS THROUGH LICENSING.
FRANCHISING:
 ALREADY DISCUSSED EARLIER.
 BASICALLY, A PARENT COMPANY (THE FRANCHISOR)
SELLS THE RIGHT TO OTHER PEOPLE (FRANCHISEES)
TO SET UP BUSINESS OPERATIONS THE SAME (OR
SIMILAR) TO THE PARENT COMPANY.
 USUALLY, SOME ADAPTATIONS ARE NECESSARY.
 IT IS AN EXCELLENT MEANS BY WHICH TO EXPAND
INTERNATIONALLY.
 E.G., McDONALDS, KFC, PIZZA HUT.
ABOVE FORMS OF
INVOLVEMENT ARE SEEN
AS LOWER RISK:
 MINIMAL COST INVOLVED;
 MINIMAL INVESTMENT NEEDED
 ACCEPTABLE PROFITS,
JOINT VENTURES
(STRATEGIC
PARTNERSHIPS)
 A BUSINESS VENTURE BETWEEN TWO OR MORE
BUSINESSES FROM DIFFERENT COUNTRIES.
 DIFFERENT COMPANIES MAY PROVIDE:

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
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RAW RESOURCES;
SHIPPING FACILITIES;
MANAGEMENT EXPERTISE;
MANUFACTURING CENTRES;
RETAIL OUTLETS.
FORIEGN DIRECT
INVESTMENT
 BASICALLY, A COMPANY BUYS “SHARES” (I.E.,
INVESTS) IN FORIEGN BUSINESSES.
WHOLLY OWNED
SUBSIDIARIES:
 A FORIEGN COMPANY SETS UP OR BUYS
CONTROLLING INTEREST IN LOCAL BUSINESS.
 HOST COUNTRY MAY RESTRICT FORIEGN
OWNERSHIP OF LOCAL LAND AND RESOURCES.
IMPORTING PRODUCTS
FOR SALE LOCALLY:
 IMPORTS ARE PRODUCTS (OR SERVICES)
PURCHASED FROM BUSINESSES IN OTHER
COUNTRIES.

IMPORTING:
 PRODUCT DEMANDED BUT NOT AVAILABLE
LOCALLY (E.G., BANANAS, COFFEE, TEA, RICE)
 FORIEGN PRODUCTS CHEAPER THAN LOCALLY
PRODUCED PRODUCTS ( E.G., TAIWANESE
ELECTRONICS);
 NEEDED AS INPUTS INTO PRODUCTION AND NOT
AVAILABLE LOCALLY (E.G., JAPAN IMPORTS IRON
ORE, CRUDE OIL, ETC).
STEPS IN IMPORTING:
 1) DETERMINE/FIND/DOCUMENT WANT OR NEED:
 WANT/NEED IDENTIFIED AND BUSINESS ATTEMPTS
TO FIND SOLUTION OUTSIDE HOME COUNTRY;
 THROUGH TRAVEL OR USE OF AGENT AN
INTERESTING PRODUCT/SERVICE IS FOUND IN
ANOTHER COUNTRY;
 MUST MEET HOME COUNTRY CUSTOMS AND
IMPORT REGULATIONS/CONDITIONS.
For Example:
 FOOD AND DRUGS ACT;
 MEAT INSPECTION ACT;
 CONSUMER PACKAGING AND LABELLING ACT;
 HEALTH OF ANIMALS ACT;
For example:
 SEEDS ACT;
 FERTILIZERS ACT;
 HAZARDOUS PRODUCTS ACT;
 CANADA ARGICULTURAL PRODUCTS ACT;
 FISH INSPECTION ACT;
For example:
 FEEDS ACT;
 WEIGHT AND MEASURES ACT;
 CANADIAN FOOD INSPECTION ACT.
Steps in Importing
 2) LOCATE AND CONTACT FORIEGN SUPPLIERS
(THROUGH BROKER?);
 3) FINALIZE PURCHASE AGREEMENT INCLUDING:
 PURCHASE PRICE AND PAYMENT METHOD;
 SHIPPING ARRANGEMENTS;
 WHEN, WHERE AND HOW DELIVERED.
 4) RECEIVE GOODS:
 MAKE FINAL PAYMENT;
 CHECK FOR ACCURACY/DAMAGE.
 PAY SHIPPING, IMPORT DUTIES ETC.
Assignment
Choose an industry and write down the steps needed for
a new company to set up imports and exports. What legal
processes are required? How would the company choose
which foreign markets to operate in? Should the company
create subsidiaries or set up a joint venture? Which trade
shows could the company attend?
Present the information to the class as your group is the
head of the company (i.e. from the company’s point of
view).
THE EXPORTING PROCESS
 INDIRECT EXPORTING (ALREADY DISCUSSED).
DIRECT EXPORTING:
 STEPS:
 1) LOCATE POTENTIAL FORIEGN CUSTOMERS;
 2) DETERMINE WANT/NEED FOR
PRODUCT/SERVICE;
DIRECT EXPORTING:
 STEPS:
 3) MAKE ANY NECESSAY MODIFICATIONS OR
ADAPTATIONS GIVEN:
 GEOGRAPHY;
 CULTURE;
 LEGAL RESTRICTIONS.
DIRECT EXPORTING:
 STEPS:
 4) SALES TERMS AGREEMENT:
 SEVERAL COSTS HAVE TO RECOGNIZED:
 INSURANCE;
 TRANSPORTATION (MAJOR COST);
 ACTUAL PURCHASE COSTS.
 AS WELL AS WHO PAYS WHAT COSTS:
 SELLER;
 BUYER.
Steps Exporting: TERMS
 a) FREE ON BOARD (FOB): HERE, THE TOTAL
SELLING PRICE OF THE PRODUCT INCLUDES THE
COST OF LOADING THE GOODS ONTO A VESSEL
AND, AT A SPECIFIED PLACE.
 b) COST(TRANSPORTATION), INSURANCE AND
FREIGHT (CIF): ALL OF THESE COSTS ARE
INCLUDED IN THE SELLING PRICE.
 c) COST AND FREIGHT (C & F): INCLUDED IN
SELLING PRICE; BUYER MUST ARRANGE
INSURANCE SEPARATELY.
Steps Exporting
 THERE ARE NUMEROUS COMPANIES THAT ASSIST
EXPORTERS WITH THE “LOGISTICS” OF SHIPPING
CALLED FREIGHT FORWARDERS. THEY MAY
SPECIALIZE IN ONLY DEALING WITH CERTAIN
COUNTRIES AND PRODUCTS.
 THEY ARE CALLED “FREIGHT FORWARDERS”
 THESE COMPANIES MAY ALSO ACT LIKE
DISTRIBUTORS.
ACTUAL SHIPPING
INVOLVES A NUMBER OF
DOCUMENTS INCLUDING:
 A BILL OF LADING: WHICH IS THE AGREEMENT
BETWEEN THE EXPORTER AND THE SHIPPING
COMPANY.
 CERTIFICATE OF ORIGIN: WHICH INCLUDED THE
NAME OF THE COUNTRY WHERE THE GOODS
WERE MADE (FOR EXPORT TAX PURPOSES).
Steps Exporting
 5) COMPLETE TRANSACTION: AND EXCHANGE
ONE CURRENCY FOR ANOTHER.
Reasons companies don’t
export:
 1) NO AGENTS/REPRESENTATIVES IN THE
FORIEGN COUNTRY;
 2) PRODUCT NOT APPROPRIATE;
 3) LOCALLY, INSUFFICIENT PRODUCTION
FACILITIES;
 4) HIGH COSTS;
 5) DIFFICULTY/FUSTRATION IN UNDERSTANDING
FORIEGN BUSINESS PRACTICES
 6) DIFFICULTY OBTAINING PAYMENT.
SERVICES CAN ALSO BE
EXPORTED:
 HOSPITALITY (HOTELS, FOOD SERVICES);
 ENTERTAINMENT (MOVIES; AMUSEMENT PARKS);
 FINANCIAL SERVICES;
 HEALTH CARE;
 INFORMATION PROCESSING:
 EDUCATION/TRAINING.
FINALLY, TWO GENERAL
FUNDING SOURCES TO
SUPPORT EXPANSION OF
BUSINESS.
 1) EQUITY CAPITAL
 2) DEBT CAPITAL.
EQUITY CAPITAL:
 THIS COULD INCLUDE:
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MORE INVESTMENT BY OWNER(S);
USE OF COMPANY PROFITS;
SALE OF SHARES;
SALE OF COMPANY ASSETS.
DEBT CAPITAL:
 INVOLVES BORROWING OF FUNDS.
 BANK/FINANCIAL INSTITUTION LOANS;
 SALE OF COMPANY BONDS;
 MORTGAGE AGAINEST BUILDINGS.
 DEBT CAPITAL MUST BE PAID BACK WITH
INTEREST.