Setting up a multi national company

Setting up a multinational company – 15 Ways to expand your business to international markets- Part 2

Contract Manufacturing

A company doing international marketing contracts with firms in foreign country to manufacture or assemble the products while retaining the responsibility of marketing the product. E.g.: Dettol, etc.

Management Contracting

The supplier brings together a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership.

Turnkey Contracts

It is a contract under which a firm agrees to fully design, construct and equip a manufacturing or business or service facilities and turn the project over the purchase when it is ready for operations for a fixed price. At completion of the contract, the foreign client is handed the key to the project.

Assembly Operations

A manufacturer who wants many of the advantages that are associated with overseas manufacturing facilities and yet doesn’t want to go that for may find it desirable to establish overseas assembly facilities in selected markets. In the sense, having assembly facilities in foreign markets is very ideal when there are economies of scale in the manufacture of parts and components and when assembly operations are labor intensive and labor is cheat in the foreign country.

Third Party Location

It is sometimes used as an entry strategy when there is no commercial transaction between two nations because of political reasons or when direct transaction between two nations are difficult due to political instability or the firm in one of these nations which wants to enter the other market will have to operate from a third country base. E.g.: Rank Xerox entered USSR through its Indian venture Modi Xerox.

CounterTrade

i. Barter System

It is an old method of exchange. In old times, people used to exchange goods and services for other goods and services in system.

ii. Buyback

It means the supplier of plant equipment or technology agrees to purchase goods manufactured with that equipment or technology. E.g.: supplying hard drive to a computer manufacturing company, but instead of taking money as payment, the supplier buys the computer in return of hard drive.

Compensation deal

In this, the seller receives a part of payment in cash but agrees to spend an equal amount of money in that country within a specified period of time. E.g.: India bought a technology from US and pays amount through this foreign currency has occurred in US. Therefore, US will invest its currency in India with the same amount to balance the flow of currency in foreign.

FDI

FDI or foreign direct investment offers an exclusive opportunity to enter into international/global business ,new markets and marketing channels, elusive access to new technology and expertise, expansion of company with new or more products or services, and cheaper production facilities.

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