COMSATS Institute of Information Techology, Islamabaad.

Introduction

All commercial transaction Private or Public More than one country Includes Sales, Purchase, Service agreement and Transportation etc. Why should study IB? IB comprises a large & growing portion of the world business Nowadays events & competition affects almost all firms, either Small, Medium or Large companies Nowadays most of the companies either sell product outside the country of production or purchase from abroad. If not at minimum they are competing with international products Why companies engage in IB To expand sales In international market organizations have more o Sales are dependent on consumer interest, willingness and ability. Consumer interest Consumer willingness Consumer ability To acquire resources o Resources Capital, Technology, Information, Expert manpower Diversify sources of Sales & Supplies o Sale can take advantage of business cycle o Supplies take advantage of international price (can get cheapest) and deal with shortage of supplies. Minimize Competitive risk Let say there are two company A & B A enter in International Market increase sakes increase profit higher profit, higher cash to spend Cash can be used to advertise in better way, buy new technology, invest in R&D etc. higher competitive risk than B.

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COMSATS Institute of Information Techology, Islamabaad.

Modes of IB

Import and Export (sell/buy Products to/from other country) Tourism and Transporting (Export/Import of Services) Licensing (when companies allow others to use their assets such as Trade mark, patents, copyright or expertise under contract) & Franchising (when one party (the franchisor) allows others party (the franchisee) the use of trademark that is an essential asset for the franchisees business). Turnkey Operations (performed under contract for specific operation) Management Contract (one company provides personnel to perform general or specialized management functions for other company). Type of Investments Direct Investment is one which gives controlling interest in a foreign company, usually known as FDI (Foreign Direct Investment). When two or more parties share ownership of an FDI, it is known as Join Venture. And if the government is one part, we call it mixed venture. Portfolio Investment is one which did not give the controlling interest in a foreign company. It takes one out of two forms i.e. stock in a company or loan to a company or country by purchasing bonds, bills or notes.

GBM/Lec-1

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