ENTREPRENEURSHIP AND BUSINESS DEVELOPMENT

DESCRIBE THE PRINCIPLE STRATEGIES FOR GOING GLOBAL

By Anita Deshmukh

INDEX
Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Particulars Introduction Launching of World Wide Web Site Foreign Licensing Trade Intermediaries International Franchising Creating Joint Venture Counter Trading and Bartering Exporting Mergers and Acquisitions Bibliography Page No. 4 6 9 14 17 21 26 29 33 37

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INTRODUCTION
Why go global??? Companies that move into international business can reap many benefits, including offsetting sales declines in the domestic market, increasing sales and profits; extending their products life cycles; lowering manufacturing costs; improving competitive position; raising quality levels; and becoming more customer oriented. Offset sales declines in the domestic market

Increase sales and profits Extend products life cycles Lower manufacturing costs Lower product cost Improve competitive position Raise quality levels Become more customer-oriented The major barriers to international trade and their impact on the global economy:Three domestic barriers to international trade are common: the attitude that were too small to export, lack of information on how to get started in global trade, and a lack of available financing. International barriers include tariffs, quotas, embargoes, dumping, and political, business, and cultural barriers.

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The principal strategies small businesses have for going global:Eight Strategies for Pursuing Global:-

1. Launching a World Wide Web site 2. Relying on trade intermediaries 3. Joint ventures 4. Foreign licensing 5. International franchising 6. Countertrading and bartering 7. Exporting 8. Mergers and Acquisitions
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LAUNCHING A WORLD WIDE WEB SITE

E-commerce is creating a new economy, one that is connecting producers, sellers, and customers via technology in ways that have never been possible before. In this fast-paced world of e-commerce, size no longer matters as much as speed and flexibility. The Internet is creating a new industrial order, and companies that fail to adapt to it will soon become extinct. Benefits of the World Wide Web:

The opportunity to increase revenues. The ability to expand their reach into global markets. The ability to remain open 24 hours a day, seven days a week The capacity to use the Webs interactive nature to enhance customer service. The power to educate and to inform The ability to lower the cost of doing business. The ability to spot new business opportunities and to capitalize on them. The power to track sales results.

Strategies entrepreneurs should follow to achieve success in WWW:

Focus on a niche in the market. Develop a community of online customers. Attract visitors by giving away freebies. Make creative use of e-mail but avoid becoming a spammer. Make sure your Web site says credibility. Consider forming strategic alliances with larger, more established companies and not-for-profit organizations. Make the most of the Webs global reach. Promote your Web site online and offline. Develop an effective search engine optimization strategy.

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Companies track the results from their Web sites. The simplest technique for tracking the results of a Web site is the use of a counter, which records the number of hits a Web site receives. Another option for tracking Web activity is through log-analysis software. Server logs record every page, graphic, audio clip, or photograph that visitor to a site access, and loganalysis software analyzes these logs and generates reports describing how visitors behave when they get to a site. Key metrics for measuring the effectiveness of a sites performance include the click-through rate, the cost per acquisition, and the conversion rate. The Case Study of BEJING SAMIES:When Sam Goodman opened a new Sammies caf in Beijings Motorola Building, he cut prices by 50 percent for the first months in order to attract customers. The initial period was very successful but when he returned prices to normal, sales dropped dramatically and fell short of targets. The local store manager, when presenting the figures, suggested that Goodman simply lower the sales targets. Goodman was frustrated; the mangers had failed to address any of the issues that were keeping customers from returning. There were countless orders that went out with missing utensils, in the wrong bag, or [with items] simply left out. Delivery orders were being sent hours late or to the wrong location. This typified Goodmans early experience; the market was showing interest in Beijing Sammies products but he knew that without he could find employees who were thinkers and problem solvers and he wondered how to improve upon the business in order to turn Beijing Sammies into a sustainable and profitable enterprise. [Source: - This case was prepared by Christopher Ferrarone under the supervision of Boston College Professor Gregory L. Stoller as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administration situation.] Solution:As Beijing Sammies realized a growing corporate delivery base, Goodman adapted the model to provide the business clients with as much flexibility and customization as possible. Sammies set up corporate accounts, on-line ordering, flexible payment options, and a rewards program.
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Corporate customers who registered with Beijing Sammies could choose weekly or monthly payment terms whereby Beijing Sammies would send out itemized statements and invoices. Clients could choose to set up a debit accounts, clients prepaid a certain amount (usually a minimum 1000*) that was credited to an account and deducted each time an order was placed.

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FOREIGN LICENSING
What is Foreign Licensing?
When you have created a product or have the exclusive right to a product, trademark, patent, or copyright, you have the right to grant another person or company in another geographical location, to sell, market, or produce your property. In return, you, the property owner, get royalties or other forms of compensation. When entering a foreign licensing agreement, you need to protect yourself as much as possible from unscrupulous foreign partners and unforeseen events. Foreign licensing agreements are a great way to expand the market for your intellectual property and to profit from your creation. By partnering with foreign companies who already have a business network in place, all you have to do is give your permission to market your product and then wait for the royalties to start flowing to you. Because foreign licensing is done in unfamiliar territory (both business and cultural), while the opportunity for profit is enormous, so is the chance for being taken advantage of by unscrupulous partners (either through contract terms or their behavior). You need to choose your business partners wisely, negotiate for important terms in the contract, and monitor the progress of the marketing and use of your product.

Protecting Yourself
In any agreement, not just a foreign licensing contract, the goal is to maximize profits and minimize risk. In a contract, you do this by negotiating for favorable terms, having the other party assume liability for actions outside your control, adding clauses that protect your rights, and similar actions. But what happens when your agreement is with a foreign party? If you contract with a company in Singapore to market your product but it fails to do so, goes bankrupt, or even harms your interests, if you weren't careful in negotiating the deal, that agreement may not be worth the paper it's written on. You may have to sue them in a foreign court, and even assuming you have the resources to do that, you still may not be able to collect what's owed to you.

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License to Reputable Companies

Rule one in foreign licensing is to verify the competency of the company with whom you're licensing. Because you likely don't know the company or people personally, you will want to get references and their history with licensing similar products. Any licensing company should be willing to provide you with a list of clients and possibly even contact information (you may have to get contact info on your own). Make sure you track down as many clients as you can, not just the ones the licensing company gives you contact information for. Get their unadulterated opinion about the company and its timeliness, accounting practices, and service. If a company is relatively new to the field, there are two considerations. One is that they may not have the resources or business network to properly support your product in that market. Second is that you may be able to wrangle better terms from them as a result. However, the first consideration far outweighs the second? whats the use of great terms if the licensing company can't get you any business? You should be wary of doing business with a foreign company that doesn't have enough experience behind it. Investigate who's in charge and what kind of business connections they have. If the company is led by a former high ranking executive of another licensing company, it may suggest that the new company is well funded and knows what it's doing.

Insist on Certain Terms in the Contract

Once you've determined that a company is reputable, you can move on the negotiating terms for the actual licensing agreement. The contract is the document by which both parties must abide, so you'll need to protect yourself as much as possible. In addition to the general contract terms outlined above, you will want to include terms important to agreements with foreign companies. These terms include: Include Legal Protections in Your Agreement 1. Approval of licensed goods. When major U.S. manufacturers license products to companies abroad, they often arrange periodic inspections of the manufacturing facilities to ensure the quality of the goods (and also to monitor whether the licensee is siphoning off products or engaging in illegal labor practices). It's unlikely you'll be able to afford such onsite inspections but you can demand that copies of your licensed work be sent to you on a

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regular basis for approval. This offers you some assurance of consistency and quality for your work. 2. Choice of law. Of utmost importance is insisting that the laws of your state (and the United States if applicable) govern should disputes arise. Without such a clause, you may be forced to chase after your partner in whatever country they reside to enforce your rights. Every country (and every state) has laws as to how contracts are interpreted. The licensee will want the disputes to be resolved under the laws of its country. Try to include in your agreement that disputes will be resolved under U.S. law for copyright purposes and the laws of your state when it comes to contract issues. 3. Jurisdiction. U.S. courts need to have jurisdiction over the people who have a dispute. This means that they have to live in the U.S., be U.S. citizens, or have extensive business ties in the U.S. Foreign companies may or may not have such a business presence here, so you will need to include a clause that explicitly states that the licensing company agrees to the United States exercising jurisdiction over it. Sometimes referred to as personal jurisdiction, jurisdiction is the power of a court to bind the parties by its decision. Unless the company does substantial business in the states, the only way to get a foreign licensee into a U.S. court is to include a provision in the license agreement that requires the licensee to consent to U.S. Jurisdiction. 4. Arbitration. Lawsuits can take years and burn a great deal of money in attorney and court fees, and may be decided by a judge who is not wellversed in the specifics of your industry. Arbitration is a quicker, more inexpensive form of dispute resolution where a neutral third party is appointed to resolve the dispute. Typically, in licensing agreements, the parties will agree to appoint a neutral third party who has experience dealing with such disputes within the industry. For example, if you're licensing your music rights to an album, the arbitrator may be approved by a legal musical society. Arbitration. In arbitration, instead of filing a lawsuit, the parties hire a neutral arbitrator to evaluate the dispute and make a determination. You'll almost always benefit by agreeing to have disputes arbitrated and inserting this in your agreement. If possible, your agreement should award attorneys' fees to the victor in the arbitration. Hopefully, the licensee will agree to arbitrate the matter in the United States. If not, there are three popular (though expensive) spots for international arbitration:
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 London (The London Court of International Arbitration) Paris (The International Court of Arbitration of the International Chamber of Commerce), and Stockholm (The Arbitration Institute of the Stockholm Chamber of Commerce). 5. Method of payment. It's important to get the royalties by wire transfer. Wire transfer helps prevent the foreign partner from giving you the run around ("check's in the mail") and foreign checks can take several months to clear a U.S. bank. Avoid the delay and hassle, and insist on wire transfers for royalty payments. 6. Accounting. You should have semi-annual accounting statements from the licensing company. Additionally, you might want to include an auditing provision (giving you the power to have an accountant look at their books to ensure accurate royalty payments). Depending on your bargaining power, you could even try to have the other party pay for the audits? This incentivizes the company to make prompt and accurate payments. The company will likely balk at this proposal because of the cost of audits. Alternatively, you may also include a clause where you will pay for the audit unless there's a discrepancy of more than 10%, in which case the licensing company pays for the audit. 7. Release of obligation. In the event that the licensing company is doing a poor job, you should include language that allows you to release that company from licensing your product. The release could be triggered by a certain timeframe (i.e., your product is not being sold in the market within 60 days) or other circumstances you find relevant. 8. Termination. In addition to the release clause, you should probably specify a definite term after which the contract ends. In this way, you aren't locked into doing business with one company and you can renegotiate terms every few years as necessary. 9. Foreign registrations. If your works are protected by U.S. intellectual property laws like copyright or design patent law, you should determine whether it's worth your while to obtain foreign copyright or patent registration in the countries where your work is being manufactured or distributed. You may be able to require that the licensee handle these administrative tasks as part of the license.
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Licensing Procedure for Foreign Investor

Pre-licensing procedure: Register for Investment Certificate (14 working days since date of dossiers completed)

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TRADE INTERMEDIARIES
There is really only one true trade intermediary: a global trading company. Global trading companies have been a part of global trade in the modern era for almost six hundred years now. A global trading company is exactly what its name implies. It is a company that trades on a global basis. That is, it is involved with several manufacturers and/or distributors and other value added resellers in a variety of import and export transactions around the world. Some of you might be more familiar with the export management company. Well, in reality, the export management company is nothing more than a specialized type of global trading company that focuses on exporting for its manufacturer clients. There are other types of people and organizations that perform some functions that come under the heading of trade intermediary. Sales agents, commission merchants, manufacturers representatives, commodity brokers, sales brokers, procurement agents and buying agents all perform various aspects of facilitating trade. Some of these entities do become involved in import-export transactions, but their involvement is usually very specialized and most newcomers will not become involved with them upon their first foray into global marketing. Note: Technically speaking, foreign distributors can also act as intermediaries in some instances. As was previously mentioned above, global trading companies are not middlemen. In fact, with rare exceptions, the highly glorified middleman does not truly exist. That is, it is not the role of the intermediary to bring together buyer and seller, all the while keeping each party unknown to the other. This is a highly unusual case and in most instances, it just does not work. The middleman of whom people speak is the global trading company, but its role is far different than people imagine. When a trading company represents a seller, it functions as an export management company. When it represents a buyer, it functions as an importer. In both instances, it is the intermediary. That is, its role is to facilitate the transaction. Normally, there is only one intermediary per each transaction. Obviously, wannabe intermediaries are always attempting to insert themselves into transactions for a socalled small piece of the action.

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However, only very inexperienced traders would allow this to happen. In some instances, such as the case of foreign governments making tender offers, intermediaries in the country where the tender originates have the opportunity to participate guaranteed by their government. What does the intermediary actually do? Foreign companies who need to make a one-time procurement purchase of a bigticket item sometimes retain trading companies. In this instance, an import-export clerk would go to the local library and search through hard print industrial directories in order to find as many manufacturers of the particular item requested unless the buyer already limited its choices to a few select manufacturers. Then a trade specialist would compose an RFQ: a request for a price quotation and then send it to all of the different manufacturers. Normally, the manufacturer would initially respond by asking the trading company about the destination of the product. Scrupulous companies would reply honestly. If the manufacturer had an exclusive distributor in that country, it would usually decline to send the trading company a price quotation in order to not step on or hamper the efforts of its local distributor. The trade specialist would then evaluate the price quotations of various manufacturers who did respond. (These price quotations are normally sent by way of what is called a pro forma invoice, which is merely a mock invoice.) The trade specialist might then contact the logistics department of the trading company in order to determine the transport and insurance costs. It would then send its own price quotation to the buyer. If the buyer accepts, then the trading company might shop around to different banks for the best deal on a letter of credit and would forward that information to the buyer. If a letter of credit is successfully opened, a shipping clerk at the trading company would note entry requirements for the destination country and then would advise the shipping department at the manufacturer about packing and marking requirements as well as required paperwork.

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The import-export clerk and trade specialist might review the required paperwork with the manufacturer and once it was completed, the logistics department of the trading company might then contact local trucking companies near to the manufacturer and look for a steamship going to the foreign destination. Once the cargo is loaded onto the steamship and the captain draws up a bill of lading, the trading company will get paid when the bank executes the letter of credit after all of the proper documents have been submitted. This is not something that an amateur without training, education or experience can do properly.

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INTERNATIONAL FRANCHISING
The Franchising system can be defined as: A system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system. Businesses for which franchising work best have the following characteristics:

Businesses with a good track record of profitability. Businesses which are easily duplicated.

It should be recognized that franchising is one of the only means available to access venture investment capital without the need to give up control of the operation of the chain and build a distribution system for their services. After the brand and formula are carefully designed, and properly executed, franchisors are able to sell franchises and expand rapidly across countries and continents using the capital and resources of their 'franchisees' while reducing risk. Franchising can be an ideal strategy for small businesses because outlets require little investment in capital or human resources. In fact, through franchising, an entrepreneur can use the resources of franchisees to expand; most of today's large franchises started out with this strategy. An entrepreneur can also use franchisees to enter a new business. Higher costs in entry fees and royalties are offset by the lower risk of an established product, trademark, and customer base, as well as the benefit of the franchisor's experience and techniques. There are the large franchises - hotels, spas, hospitals, etc. Two important payments are made to a franchisor: (a) a royalty for the trade-mark and (b) reimbursement for the training and advisory services given to the franchisee. These two fees may be combined in a single 'management' fee. A fee for "Disclosure" is separate and is always a "front-end fee". Although franchisor revenues and profit may be listed in a franchise disclosure document (FDD), no laws require the estimate of franchisee profitability, which depends on how intensively the franchisee 'works' the franchise. Therefore, franchisor fees are always based on 'gross revenue from sales' and not on profits realized.

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A franchise usually lasts for a fixed time period (broken down into shorter periods, which each require renewal), and serves a specific "territory" or area surrounding its location. One franchisee may manage several such locations. Agreements typically last from five to thirty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees. A franchise is merely a temporary business investment, involving renting or leasing an opportunity, not buying a business for the purpose of ownership. It is classified as a wasting asset due to the finite term of the license. Franchise brokers help franchisors find appropriate franchisees. There are also main 'master franchisors' who obtain the rights to sub-franchise in a territory. According to the International Franchise Association approximately 4% of all businesses in the United States are franchisee-worked. Compared to licensing, franchising agreements tends to be longer and the franchisor offers a broader package of rights and resources which usually includes: equipments, managerial systems, operation manual, initial trainings, site approval and all the support necessary for the franchisee to run its business in the same way it is done by the franchisor. Franchises are well known in the domestic fast-food industry; McDonald's, for example, operates primarily on this basis. For a large up-front fee and considerable royalty payments, the franchisee gets the benefit of McDonald's reputation, existing clientele, marketing clout, and management expertise. The Big M is well recognized internationally, as are many other fast-food and hotel franchises, such as Holiday Inn. A critical consideration for the franchisor's management is quality control, which becomes more difficult with greater geographic dispersion. Some of the well known franchises in India 1. 2. 3. 4. Subway Pizza hut Dominos KFC

Hotels like Hilton and Marriott, rental cars like Hertz and Avis have international franchises.

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Advantages of the international franchising mode:

Low political risk Low cost Allows simultaneous expansion into different regions of the world Well selected partners bring financial investment as well as managerial capabilities to the operation.

Disadvantages of the international franchising mode:

Franchisees may turn into future competitors Demand of franchisees may be scarce when starting to franchise a company, which can lead to making agreements with the wrong candidates A wrong franchisee may ruin the companys name and reputation in the market Comparing to other modes such as exporting and even licensing, international franchising requires a greater financial investment to attract prospects and support and manage franchisees.

Example on McDonalds McDonald's Corporation develops, operates, franchises, and services a worldwide system of restaurants that prepare, assemble, package, and sell a limited menu of value-priced foods. All restaurants are operated by the company or under the terms of franchise agreement, by franchisees that are independent third parties, or by affiliates operating under joint venture agreements between the company and local business people. McDonalds business is divided into two main parts, company- owned stores and franchising. It has relied on its franchises to pay a major role in its success. McDonalds remains committed to franchising as the predominant way of doing business. Approximately 70 % of McDonalds worldwide is owned and operated by franchisees. McDonalds continues to be recognized as a premier franchising company around the world. Perhaps the fact that McDonalds management listens so carefully to its franchisees is one reason why McDonalds is perennially named as Entrepreneur Magazines number one franchise for franchisee satisfaction. Its franchising system is built on the premise that the McDonalds Corporation can be successful only if its franchisees are successful first. The company believes in maintaining a relationship with its owners/operators, suppliers, and employees.
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The selection of prospective franchisees is based on an assessment of overall business experience and personal qualifications. It franchises only to individuals, not to corporations, partnerships, or passive investors. McDonalds is, by choice, an equal opportunity franchisor, with a proven track record of franchising to all segments of the society. In the United States, minorities and women currently represent over 34% of McDonalds franchisees and 70% of all applicants in training. McDonalds franchisees need to meet certain criteria, such as: Business experience in the market where they are seeking a franchise A strong desire to succeed, work hard, and contribute to a winning team Demonstrate personal integrity with emphasis on interpersonal skills A willingness to participate in a comprehensive training program A willingness to personally devote full-time efforts to the day-to-day operations of the business

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CREATING JOINT VENTURE

Joint Ventures tend to be equity-based i.e. a new company is set up with parties owning a proportion of the new business. There are many reasons why companies set up Joint Ventures to assist them to enter a new international market:

Access to technology, core competences or management skills. For example, Honda's relationship with Rover in the 1980's. To gain entry to a foreign market. For example, any business wishing to enter China needs to source local Chinese partners. Access to distribution channels, manufacturing and R&D are most common forms of Joint Venture.

At a much higher level of investment and risk (though usually less risk than a wholly owned plant), joint ventures present considerable opportunities unattainable through other strategies. A joint venture involves an agreement by two or more companies to produce a product or service together. In an international joint venture ownership is shared, typically by an MNC and a local partner, through agreed-upon proportions of equity. This strategy facilitates an MNC's rapid entry into new markets by means of an already established partner who has local contacts and familiarity with local operations. International joint ventures are a common strategy for corporate growth around the world; they also are a means to overcome trade barriers, to achieve significant economies of scale for development of a strong competitive position, to secure access to additional raw materials, to acquire managerial and technological skills, and to spread the risk associated with operating in a foreign environment. Not surprisingly, larger companies are more inclined to take a high equity stake in the international joint venture engage in global industries, and are less vulnerable to the risk conditions in the host country. The joint venture reduces the risks of expropriation and harassment by the host country; indeed, it may be the only means of entry into certain countries, like Mexico and Japan that stipulate proportions of local ownership and local participation.

Joint Venture Strategy

Businesses should not engage in joint ventures without adequate planning and strategy. They cannot afford to, since the ultimate goal of joint ventures is the same as it is for any type of business operation: to make a profit for the owners and shareholders. A successful company in any type of business is often recruited
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heavily for participation in joint ventures. Thus, they can pick and choose in which partnerships they would like to engage, if any. They follow certain ground rules, which have been developed over the years as joint ventures have grown in popularity. For example, experience dictates that both parties in a joint venture should know exactly what they wish to derive from their partnership. There must be an agreement before the partnership becomes a reality. There must also be a firm commitment on the part of each member. One of the leading causes for the failure of joint ventures is that some participants do not reveal their true intentions in the partnerships. For example, some private companies in advanced countries have formed partnerships with militant governments to supply technological expertise and develop products such as chemicals or nuclear reactors to be used for allegedly peaceful purposes. They learned later that the products were used for military purposes. Such results can be detrimental to the companies involved and adversely affect their bottom lines and reputations, to speak nothing of the direct victims of the military development. Businesses should form joint ventures with experienced partners. If the partners do not have approximately equal experience, one can take advantage of the other, which can lead to failure. Joint ventures generally do not survive under this imbalanced dynamic. Nor do they survive if companies jump into them without testing the partnership first. Partners in joint ventures would often be better off participating in small projects as a way to test one another instead of launching into one large enterprise without an adequate feeling-out process. This is especially true when companies with different structures, corporate cultures, and strategic plans work together. Such differences are difficult to overcome and frequently lead to failure. That is why a "courtship" is beneficial to joint venture participants.

Why Joint Ventures Fail?

Joint ventures fail for many reasons. In addition to those mentioned above, other factors include: disappearing markets, lagging technology, partners' inability to honor the contract, cultural differences interfering with progress, or governmental and macroeconomic de-stabilizing factors. However, many of these reasons can be eliminated with careful planning.

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Inconsistent government interference is a difficult problem to overcome. For example, the United States government has long maintained restrictions against exporting certain technologies to selected foreign countries, such as those utilized to produce jet engines and computers. These restrictions place American companies at a competitive disadvantage, since other countries do not place similar constraints on their businesses. Thus, American companies are unable to engage in certain joint ventures. Companies that engage in military-oriented joint ventures are often subject to unanticipated risks. The federal government may allocate funds for the production of certain weapons, sign contracts with manufacturers, and then discontinue the project due to changing needs, budget restrictions, or election results. Such government actions are a common risk to these joint ventures. They introduce an element of insecurity into the projects, which is something that partners try to avoid as much as possible. Another problem with joint ventures concerns the issue of management. The managers of one company may be more adept at decision making than their counterparts at the other company. This can lead to friction and a lack of cooperation. Projects are doomed to failure if there is not a well-defined decisionmaking process in place that is predicated on mutual goals and strategies. To sum up the potential problems include:

Conflict over asymmetric new investments Mistrust over proprietary knowledge Performance ambiguity - how to split the pie Lack of parent firm support Cultural clashes If, how, and when to terminate the relationship

Joint ventures have conflicting pressures to cooperate and compete:

Strategic imperative: the partners want to maximize the advantage gained for the joint venture, but they also want to maximize their own competitive position. The joint venture attempts to develop shared resources, but each firm wants to develop and protect its own proprietary resources. The joint venture is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control.
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Recent Joint Ventures

KK Birla group company Texmaco Ltd. Has entered into an agreement with $4 billion Australian firm United Group Ltd. for setting up a plant to manufacture new generation wagons in West Bengal. The two companies would form a 50:50 joint venture to form biggest railway hub in the state, besides also exploring opportunities in areas like railway component manufacturing, exports and other railway services. The agreement was signed in the presence of West Bengal Chief Minister Buddhadeb Bhattacharjee. The proposed joint venture would cover design, manufacture and supply of wagons, locomotive bogies and components and encompass passenger rolling stock as well. UK Retailer Forms 51:49 joint ventures with Indian Realty Co, Present Franchise Deal with Shoppers Stop to Coexist. Mother care, a UK retailer for kids and expectant mothers, is forming a 51:49 joint venture with Indias largest real estate company DLF. The UK retailer had been in discussions with DLF and Tata group retailer Trent for a possible equity partnership in India. In the past, many foreign retailers, who nurtured a long-term view on India, have shunned the franchise route to form joint ventures with Indian partners. Last year, UKs largest apparel retailer Marks & Spencer entered into a joint venture with Reliance Retail ending its franchise agreement with Planet Retail. Indian laws make it compulsory for a foreign retailer selling a single brand to take on Indian partner as the former cant own more than 51% equity in a retail business. Foreign investment is still not allowed in companies that sell more than one brand. A joint venture in India traces Mothercares recent move in China, which saw it breaking from its tradition of growing overseas only by franchising to local organizations. It has formed a joint venture with local partner Good baby in China. Satyam Computer Services Ltd. and General Electric (GE) of US have formed an equal joint venture for carrying out design and development work in mechanical CAD/ CAM/CAE and product software for GE

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Industrial Systems global product development division in Europe and North America. (Business Standard) Recently, the worlds largest retailer Wal-Mart entered into a joint venture with Indias Bharti Enterprises to get a toe hold in the booming Indian retail market. This move was the only way Wal-Mart could have entered the Indian market as regulatory restrictions prohibit a full owned foreign retail chain to operate in the Indian market. As such, this joint venture was a market entry strategy for Wal-Mart.

Indias first geriatric hospital, the Heritage Hospital of Hyderabad has formed a joint venture with US-based United Church Homes to recruit, train and provide placement to registered Indian nurses in USA. Aviva Life Insurance- It is a private insurance company, formed by a joint venture between the Aviva insurance group of UK and the Dabur group of India. Aviva holds 26 percent stake and the Dabur group holds the balance 74 percent share in the joint venture. Aviva is also known as the fifth largest insurance group in the world. At the time of nationalization, Aviva was the largest foreign insurer in India in terms of the compensation paid by the Government of India

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COUNTER TRADING AND BARTERING

Countertrade is a term that covers a whole range of barter like agreements. It is primarily used when the firm is exporting to countries whose currency is not freely convertible, and who may lack the foreign exchange reserves required to purchase the imports. Countertrade means exchanging goods or services which are paid for, in whole or part, with other goods or services, rather than with money. A monetary valuation can however be used in counter trade for accounting purposes. In dealings between sovereign states, the term bilateral trade is used. OR "Any transaction involving exchange of goods or service for something of equal value."

Types of Counter Trade:

1.) Barter: Barter is the direct exchange of goods and services, or both, between two parties without a cash transaction. Although in theory barter is the simplest arrangement, in practice it is not that common. Barter is the direct exchange of goods between two parties in a transaction. The principal exports are paid for with goods or services supplied from the importing market. A single contract covers both flows, in its simplest form involves no cash. In practice, supply of the principal exports is often held up until sufficient revenues have been earned from the sale of bartered goods. One of the largest barter deals to date involved Occidental Petroleum Corporation's agreement to ship sulphuric acid to the former Soviet Union for ammonia urea and potash under a 2 year deal which was worth 18 billion Euros. Furthermore, during negotiation stage of a barter deal, the seller must know the market price for items offered in trade. Bartered goods can range from hams to iron pellets, mineral water, furniture or olive-oil all somewhat more difficult to price and market when potential customers must be sought.

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2.) Switch trading: Practice in which one company sells to another its obligation to make a purchase in a given country. Switch trading occurs when a third party trading house buys the firm's counter purchase credits and sells them to another firm that can make better use of them. 3.) Counter purchase: Counter purchase is a reciprocal buying agreement. It occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made. Counter purchase is the sale of goods and services to one company in other country by a company that promises to make a future purchase of a specific product from the same company in that country. 4.) Buyback: Buyback 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. 5.) Offset: Agreement that a company will offset a hard - currency purchase of an unspecified product from that nation in the future. Agreement by one nation to buy a product from another, subject to the purchase of some or all of the components and raw materials from the buyer of the finished product, or the assembly of such product in the buyer nation. Offset is similar to counter purchase because the exporter is required to purchase goods and services with an agreed percentage of the proceeds from the original sale. The difference is that the exporter can fulfill this obligation with any firm in the country to which the sale is being made. The main attraction of counter trade is that it gives a firm a way to finance an export deal when other means are not available. A firm that insists on being paid in hard currency may be at a competitive disadvantage vis--vis one that is willing to engage in counter trade.

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 The main disadvantage of counter trade is that it may involve the exchange of unusable or poor quality goods that cannot be disposed of profitably. As an option, counter trade is most attractive to large, diverse, multinational enterprises that can use their worldwide network of contacts to profitably dispose of goods acquired in a counter trade agreement. It is less attractive to small and medium sized exporters who lack a similar network.

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EXPORTING
Exporting is the most traditional and well established form of operating in foreign markets. Exporting can be defined as the marketing of goods produced in one country into another.

Determining Your Products Export Potential: There are several ways to evaluate the export potential of your products and
services in overseas markets. The most common approach is to examine the success of your products domestically. If your company succeeds at selling in the U.S. market, there is a good chance that it will also be successful in markets abroad, at least those where similar needs and conditions exist.

Another means to assess your company's potential in exporting is by

examining the unique or important features of your product. If those features are hard to duplicate abroad, then it is likely that you will be successful overseas. A unique product may have little competition and demand for it might be quite high.

Finally, your product may have export potential even if there are declining sales in the U.S. market. Sizeable export markets may still exist, especially if the product once did well in the United States but is now losing market share to more technically advanced products. Other countries may not need stateof-the-art technology and/or may be unable to afford the most sophisticated and expensive products. Such markets may have a surprisingly healthy demand for U.S. products that are older or considered obsolete by U.S. market standards.

Developing a Sound Business Plan For Export: Once you have decided to
sell your products abroad, it is time to develop an export plan. An export strategy is an essential component of your business plan. Keep it simple, but make sure everyone in the company involved in achieving export results is aware of the plan and has a sense of engagement with it.

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Why Have An Export Strategy?

Developing a sound export strategy helps you define your export aims and match your resources to those aims. Your export strategy will help you manage the market sectors you have identified as core business. Focusing your resources enables you to provide quality responses and service to your new export customers. A well-developed export strategy will help in dealing with a range of service providers.

Incorporating Exports in Your Business Plan:

An export strategy must be integrated with your companys overall business plan. Align export activities with daily operations and avoid any conflicts between your domestic and international activities. Understand the areas where you have a strong competitive advantage. These areas may include your technology, your staff or business systems. Determine how best to use them to achieve your export goals. Also identify any weaknesses.

Developing an Export Strategy:

The most common methods of exporting are indirect selling and direct selling. 1.) Indirect Selling: In indirect selling, an export intermediary such as an export management company (EMC) or an export trading company (ETC) normally assumes responsibility for finding overseas buyers, shipping products, and getting paid. Direct Selling: In direct selling, the U.S. producer deals directly with a foreign buyer. The paramount consideration in determining whether to market indirectly or directly is the level of resources a company is willing to devote to its international marketing effort.

2.)

Other factors to consider when deciding whether to market indirectly or directly include:

The size of your firm;

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The nature of your products; Previous export experience and expertise; Business conditions in the selected overseas markets.

Approaches to Exporting:
The way a company chooses to export its products can have a significant effect on its export plan and specific marketing strategies. The basic distinction among approaches to exporting relates to a company's level of involvement in the export process. There are at least four approaches, which may be used alone or in combination: 1.) Passively filling orders from domestic buyers who then export the product: These sales are indistinguishable from other domestic sales as far as the original seller is concerned. Someone else has decided that the product in question meets foreign demand. That party takes all the risk and handles all of the exporting details, in some cases without even the awareness of the original seller. (Many companies take a stronger interest in exporting when they discover that their product is already being sold overseas.) 2.) Seeking out domestic buyers who represent foreign end users or customers: Many foreign corporations, general contractors, foreign trading companies, foreign government agencies, foreign distributors and retailers, and domestic companies as well purchase for export. These buyers are a large market for a wide variety of goods and services. In this case a company may know its product is being exported, but it is still the buyer who assumes the risk and handles the details of exporting.

3.) Exporting indirectly through intermediaries: With this approach, a company engages the services of an intermediary firm capable of finding foreign markets and buyers for its products. Export management companies(EMCs), export trading companies (ETCs), international trade consultants, and other intermediaries can give the exporter access to wellestablished expertise and trade contacts. Yet, the exporter can still retain
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considerable control over the process and can realize some of the other benefits of exporting, such as learning more about foreign competitors, new technologies, and other market opportunities. 4.) Exporting directly: This approach is the most ambitious and difficult, since the exporter personally handles every aspect of the exporting process from market research and planning to foreign distribution and collections. Consequently, a significant commitment of management time and attention is required to achieve good results. However, this approach may also be the best way to achieve maximum profits and long-term growth. With appropriate help and guidance from the Department of Commerce, state trade offices, freight forwarders, international banks, and other service groups, even small or medium-sized firms, can export directly if they are able to commit enough staff time to the effort. For those who cannot make that commitment, the services of an EMC, ETC, trade consultant, or other qualified intermediary are indispensable.

If the nature of the company's goals and resources makes an indirect method of exporting the best choice, little further planning may be needed. In such a case, the main task is to find a suitable intermediary firm that can then handle most export details. Firms that are new to exporting or are unable to commit staff and funds to more complex export activities may find indirect methods of exporting more appropriate. Using an EMC or other intermediary, however, does not exclude all possibility of direct exporting for the firm. An exporter may also choose to gradually increase its level of direct exporting later, after experience has been gained and sales volume appears to justify added investment.

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MERGERS AND ACQUISITION

An entrepreneur may grow its business either by internal expansion or by external expansion. In the case of internal expansion, a firm grows gradually over time in the normal course of the business, through acquisition of new assets, replacement of the technologically obsolete equipments and the establishment of new lines of products. But in external expansion, a firm acquires a running business and grows overnight through corporate combinations. These combinations are in the form of mergers, acquisitions, amalgamations and takeovers and have now become important features of corporate restructuring. They have been playing an important role in the external growth of a number of leading companies the world over. They have become popular because of the enhanced competition, breaking of trade barriers, free flow of capital across countries and globalization of businesses. In the wake of economic reforms, Indian industries have also started restructuring their operations around their core business activities through acquisition and takeovers because of their increasing exposure to competition both domestically and internationally. Mergers and acquisitions are strategic decisions taken for maximization of a company's growth by enhancing its production and marketing operations. They are being used in a wide array of fields such as information technology, telecommunications, and business process outsourcing as well as in traditional businesses in order to gain strength, expand the customer base, cut competition or enter into a new market or product segment.

Mergers or Amalgamations
A merger is a combination of two or more businesses into one business. Laws in India use the term 'amalgamation' for merger. The Income Tax Act,1961 [Section 2(1A)]defines amalgamation as the merger of one or more companies with another or the merger of two or more companies to form a new company, in such a way that all assets and liabilities of the amalgamating companies become assets and liabilities of the amalgamated company and shareholders not less than nine-tenths in value of the shares in the amalgamating company or companies become shareholders of the amalgamated company.

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Acquisitions and Takeovers

An acquisition may be defined as an act of acquiring effective control by one company over assets or management of another company without any combination of companies. Thus, in an acquisition two or more companies may remain independent, separate legal entities, but there may be a change in control of the companies. When an acquisition is 'forced' or 'unwilling', it is called a takeover. In an unwilling acquisition, the management of 'target' company would oppose a move of being taken over. But, when managements of acquiring and target companies mutually and willingly agree for the takeover, it is called acquisition or friendly takeover. Under the Monopolies and Restrictive Practices Act, takeover meant acquisition of not less than 25 percent of the voting power in a company. While in the Companies Act (Section 372), a company's investment in the shares of another company in excess of 10 percent of the subscribed capital can result in takeovers. An acquisition or takeover does not necessarily entail full legal control. A company can also have effective control over another company by holding a minority ownership.

Procedure for evaluating the decision for mergers and acquisitions

The three important steps involved in the analysis of mergers and acquisitions are:

Planning:- of acquisition will require the analysis of industry-specific and firm-specific information. The acquiring firm should review its objective of acquisition in the context of its strengths and weaknesses and corporate goals. It will need industry data on market growth, nature of competition, ease of entry, capital and labour intensity, degree of regulation, etc. This will help in indicating the product-market strategies that are appropriate for the company. It will also help the firm in identifying the business units that should be dropped or added. On the other hand, the target firm will need information about quality of management, market share and size, capital structure, profitability, production and marketing capabilities, etc. Search and Screening:- Search focuses on how and where to look for suitable candidates for acquisition. Screening process short-lists a few candidates from many available and obtains detailed information about each of them. Financial Evaluation: - of a merger is needed to determine the earnings and cash flows, areas of risk, the maximum price payable to the target company
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and the best way to finance the merger. In a competitive market situation, the current market value is the correct and fair value of the share of the target firm. The target firm will not accept any offer below the current market value of its share. The target firm may, in fact, expect the offer price to be more than the current market value of its share since it may expect that merger benefits will accrue to the acquiring firm. A merger is said to be at a premium when the offer price is higher than the target firm's pre-merger market value. The acquiring firm may have to pay premium as an incentive to target firm's shareholders to induce them to sell their shares so that it (acquiring firm) is able to obtain the control of the target firm.

Biggest Merger and Acquisition deals in India

Tata Steel acquired 100% stake in Corus Group on January 30, 2007. It was an all cash deal which cumulatively amounted to $12.2 billion.

Vodafone purchased administering interest of 67% owned by Hutch-Essar for a total worth of $11.1 billion on February 11, 2007.

India Aluminium and copper giant Hindalco Industries purchased Canadabased firm Novelis Inc in February 2007. The total worth of the deal was $6billion.

Indian pharma industry registered its first biggest in 2008 M&A deal through the acquisition of Japanese pharmaceutical company Daiichi Sankyo by Indian major Ranbaxy for $4.5 billion.

The Oil and Natural Gas Corp purchased Imperial Energy Plc in January 2009. The deal amounted to $2.8 billion and was considered as one of the biggest takeovers after 96.8% of London based companies' shareholders acknowledged the buyout proposal.
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In November 2008 NTT DoCoMo, the Japan based telecom firm acquired 26% stake in Tata Teleservices for USD 2.7 billion.

Tata Motors acquired Jaguar and Land Rover brands from Ford Motor in March 2008. The deal amounted to $2.3 billion.

2009 saw the acquisition Asarco LLC by Sterlite Industries Ltd's for $1.8 billion making it ninth biggest-ever M&A agreement involving an Indian company.

In May 2007, Suzlon Energy obtained the Germany-based wind turbine producer Repower. The 10th largest in India, the M&A deal amounted to $1.7 billion.

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