Debre Tabor University

Faculty of Business and Economics

Department Of Management
MBA Program
Individual Assignment for international business management

Submitted to

Kindye (Dr)

Submitted by

Melat Hailu

Id: 008/12

Debre Tabor, Ethiopia

 1. INTERNATIONAL BUSINESS, INTERNATIONAL MARKETING
AND INTERNATIONAL TRADE.

International business comprises all commercial transactions that take place between
two or more regions, countries and nations beyond their political boundaries. It is a trade of goods,
services, technology, capital and/or knowledge across national borders and at a global or transnational
scale. It refers to all those business activities which involve cross border transactions of goods, services,
resources between two or more nations. International business encompasses all commercial activities
that take place to promote the transfer of goods, services, resources, people, ideas, and technologies
across national boundaries. Simply, international business refers to the exchange of goods and services
among individuals and businesses in multiple countries.

It involves cross-border transactions of goods and services between two or more countries. Transactions
of economic resources include capital, skills, and people for the purpose of the international production
of physical goods and services such as finance, banking, insurance, and construction. International
business is also known as globalization.

International marketing is the application of marketing principles in more than one country, by
companies overseas or across national borders. International marketing is based on an extension of a
company’s local marketing strategy, with special attention paid to marketing identification, targeting,
and decisions internationally.

According to the American Marketing Association (AMA) "international marketing is the

multinational process of planning and executing the conception, pricing, promotion and distribution of
ideas, goods, and services to create exchanges that satisfy individual and organizational objectives."It
also can be define as International Marketing the performance of business activities designed to plan,
price, promote, and direct the flow of a company’s goods and services to consumers or users in more
than one nation for a profit.

In simple words, international marketing is trading of goods and services among different countries. The
procedure of planning and executing the rates, promotion and distribution of products and services is the same
worldwide
International trade is the exchange of goods and services between countries. It allows countries
to expand their markets for both goods and services that otherwise may not have been available
domestically. As a result of international trade, the market is more competitive which results in
more competitive pricing which brings a cheaper product home to the consumer.

International trade is, in principle, not different from domestic trade as the motivation and the
behavior of parties involved in a trade do not change fundamentally regardless of whether trade is
across a border or not. The main difference is that international trade is typically more costly than
domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time
costs due to border delays and costs associated with country differences such as language, the legal
system or culture.

2. EXPORTING, CONTRACTUAL AND INVESTMENT MODES OF ENTRY.

2.1. EXPORT
An export in international trade is a good or service produced in one country that is sold into
another country.[1] The seller of such goods and services is an exporter; the foreign buyer is an
importer.[ it refers to the sale of commercial goods to another country. In other words, exporting
entails the act of trading in the international market.

There are three kind of exporting: direct export

Indirect exporting

Cooperative exporting

 Direct exporting means sale of goods abroad without involving middlemen. In case of direct
exporting a firm itself undertakes selling its products overseas and is responsible for dealing
with foreign firms directly.

The advantages of direct exporting for a company include more control over the export process,
potentially higher profits, and a closer relationship to the overseas buyer and marketplace. These
advantages do not come easily, however, since the company needs to devote more time,
personnel, and corporate resources than are needed with indirect exporting.
 In-direct exporting means sale of goods abroad through middle men. Indirect exporting,
involves using the help of independent middle men and sales intermediaries that take the
responsibility of sending the products to foreign countries

The principal advantage of indirect marketing for a smaller company is that it provides a way to
penetrate foreign markets without the complexities and risks of direct exporting. Several kinds of
intermediary firms provide a range of export services. Each type of firm offers distinct
advantages for the company.

There are two types of indirect exporting: Occasional exporting.

Active Exporting.

Occasional exporting or passive exporting takes place when company exports from time to
time either on its own initiative or in response to unsolicited orders from abroad. Active
exporting takes place when the company makes a commitment to expand its exports to a
particular market.

The main difference between direct and indirect exporting is that the manufacturer performs the
export task himself in case of direct exporting while the manufacturer delegates the export task
to others (middle men) in case and indirect exporting. As a result, the costs and risks involved in
indirect exporting are less than those involved in direct exporting.

 Cooperative exporting ,which is also known as piggybacking, is a form of distribution foreign

markets in which a SME company (the “rider”), deals with a larger company (the “carrier”) which already
operates in certain foreign markets and is willing to act on behalf of the rider that whishes to export to
those markets. It takes place when a company with an established distribution channels for its own
products contracts to export the goods of a non-competing foreign manufacturer.
Simply, Cooperative Exporting a company exports together with a group of firms to bundle resources and
skills and lower cost. Involves entering into collaborative agreements with the other firms (e.g. farming
products)This enables the carrier to utilize fully its established export facilities (sales subsidiaries) and
foreign distribution. The carrier is either paid by commission and so acts as an agent or, alternatively, as
an independent distributor buying the products. Piggyback marketing strategies are typically used for
products from unrelated companies that are non-competitive (but related) and complementary (allied)
2.2. Contractual agreement: Contractual agreements are long term non equity associations
between a company and another in a foreign market. Contractual agreements generally involve
the transfer of technology, processes, trademarks or human skills. In short, they serve as a means
of transfer of knowledge rather than equity.
Under contractual agreement there are five types of agreement: - franchising
: - licensing
:-management contract
:-turnkey operation
:-sub-contracting
 Franchising is based on a marketing concept which can be adopted by an organization as a strategy
for business expansion. Where implemented, a franchisor licenses its know-how, procedures,
intellectual property, use of its business model, brand, and rights to sell its branded products and
services to a franchisee. In return the franchisee pays certain fees and agrees to comply with certain
obligations, typically set out in a Franchise Agreement
It is not an equal partnership, especially due to the legal advantages the franchisor has over the
franchisee. But under specific circumstances like transparency, favorable legal conditions, financial
means and proper market research, franchising can be a vehicle of success for both franchisor and
franchisee.

 A licensing agreement is a written contract between two parties, in which a property owner permits
another party to use that property under a specific set of parameters. A licensing agreement or license
agreement typically involves a licensor and a licensee.

It is defined as a business arrangement, wherein a company authorizes another company by issuing a

license to temporarily access its intellectual property rights, i.e. manufacturing process, brand name,
copyright, trademark, patent, technology, trade secret, etc. for adequate consideration and under
specified conditions.
 A management contract is an arrangement under which operational control of an enterprise is
vested by contract in a separate enterprise that performs the necessary managerial functions in return
for a fee. Management contracts involve not just selling a method of doing things (as with franchising
or licensing) but involve actually doing them. A management contract can involve a wide range of
functions, such as technical operation and of a production facility, management of personnel,
accounting, marketing services and training.
 Turnkey is an agreement under which a builder agrees to complete a facility so that it is ready for use
when delivered to the other contracting party. A contractor may agree, for example, to build a fully
equipped ad operational factory under the turkey contract. The responsibility of the contractor ends
when he hands the completed installation over the client.
 Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a
contract to another party known as a subcontractor.
 2.3. Investment modes under this there are two basic modes subsidiary and foreign branch each of them
consists of joint venture, wholly owned and owned by parent company respectively.

A subsidiary is a company that belongs to another company, which is usually referred to as

the parent company or the holding company. The parent holds a controlling interest in the
subsidiary company, meaning it has or controls more than half of its stock. In cases where a
subsidiary is 100% owned by another firm, the subsidiary is referred to as a wholly owned
subsidiary. Subsidiaries become very important when discussing a reverse triangle mortgage.

 A joint venture is a contractual partnership with another company that operates in the country the
business wants to enter. Joint ventures work well when both companies have specialties that, joined
together, make the whole

 A foreign branch office is a representation of a company in a foreign country that usually can
do commercial transaction on its own. Depending on the law of the country, the branch office can
or should be a limited company, where the shares are held by the parent company abroad. In a
number of countries there is a list of activities that a company with foreign ownership cannot be
active in, depending on the percentage of shares.

3. Rank of entry mode based on level, based on level of risk, control

and profitability

Type of entry Cost Risk control

Exporting Direct Low Low Low
indirect low low Low
Contracting Licensing Less Less No
Franchising less less -
Investment Joint venture Moderate High High
Subsidiary Moderate High High
Investment Foreign High High High
investment High High High
Subsidiary
 4. Multinational company and its marketing strategies

A multinational corporation (MNC) is an enterprise or a company that owns several production unit
in different countries. It has facilities and other assets in more than one country other than its home
country. A multinational company generally has offices and/or factories in different countries and a
centralized head office where they coordinate global management. These companies, also known as
international, stateless, or transnational corporate organizations tend to have budgets that exceed
those of many small countries. 

There are lots of companies which has a production unit in two or more countries such as:

kia motors Nestle

Lactose Coca cola

Apollo tires Red-bull

Nivia IBM

A marketing strategy refers to a business's overall game plan for reaching prospective consumers
and turning them into customers of the products or services the business provides. A marketing
strategy contains the company’s value proposition, key brand messaging, data on target
customer demographics, and other high-level elements.

Kia motors

5. Types of global organization structure

There are five types or modes of global organizational structure.
A. Subsidiary model: this is a kind of global organization structure is active/ possible when the
organization owns HR, finhe ance and other function and operations by its own.
B. Product division model: while organization structure is based on their product portfolio and each
product division are separately accountable for the management function are said to be that the
organisation structure is product division.
C. Area division: unlike the product division model, this kind of model of global organization
structure is based on the geographical location. Each management function is separate for the
location. Here, this kind of model enables the organization to well understand each geographical
area marketing activities.
D. Functional structure: as its name indicates this mode is based on the functional activities of the
organization such as finance, HR, marketing and Rand D. This kind of mode doesn’t enable
inter-department communication and networking.
E. Matrix structure: here the model is the combination of functional and divisional structure this
model requests the employee to report both functional and divisional managers.

6. ECOWAS and its function

ECOWAS is an acronomy stands for Economic Community of West African states. It is a
regional political and economic union of fifteen countries located in West Africa. Its head
quarter is at the federal capital territory of, Nigeria. The main goal of ECOWAS is to promote
economic cooperation among member states in order to raise living standards and promote
economic development. The original ECOWAS agenda are basically four (peace and security,
developing infrastructure, policy harmonization or facilitating trade and good corporate) also
includes a frame work for solving interstate.
There are 15 members of ECOWAS:
 Benin  Ghana  Niger
 Burkina Faso  Guinea  Nigeria
 Cabo Verde  Guinea-Bissau  Senegal
 Cote D’ivore  Liberia  Sierra Leone
 Gambia  Mali  Togo

ECOWAS will integrate a regional trade and increase external trade of processes good, thereby creating
jobs. A good deal of emphasis is placed on helping member states understand that adhering to the supra-
national level will being benefits at the national level.

7. EU and its function

EU was created because of in general EU is set up with the aim of ending the frequent and
bloody wars between neighbours, which culminated in the Second World War. As of 1950, the
European coal and steel community beings to unite, European countries economically and
politically in order to secure lasting peace.

EU is a political and economical union of 27 member states that are located primarily in Europe.
It has developed an internal single marketing through a standardized system of low that apply in
all member states in those matters and only those matters where member have agreed to act as
one.EU polices aim to ensure the free movement of people, goods, services and capital within the
internal marked enact legislation in justice and home affairs and maintenance common polices
on trade, agriculture, fisheries and regional development.
It consists of 27 members:
 Austria  Denmark  Malta
 Belgium  Estonia  Romania
 Bulgaria  Luxemburg  Sweden
 Croatia  Portugal  Hungary
 Lithuania  Spain  Ireland
 Poland  Finland  Italy
 Slovenia  France  Latvia
 Cyprus  Germany  Netherland
 Czech republic  Greece  Slovakia

EU promotes scientific and technological progress, enhance economic, social and territorial
cohesion and solidarity among EU countries, respect its rich culture and linguistic diversity, and
establish an economic and monetary union whose currency is the Euro.
 Promotes peace, its value and the well being of its citizens
 Offer freedom, security and justice without internal borders
 Sustainable development based on balanced economic growth and price stability,
a highly competitive market economy with full employment and social progress
and environmental protection
 Promote Europe as an area of freedom and justice
 Combat social exclusion and discrimination
 Promote scientific and technological progress
 Enhance economic, social and territorial cohesion and solidarity among EU
countries.
I.E. EU crates one of the world biggest single market.

8. WTO vs. GATT

GATT is an acronomy stands for general agremmnet on trade and tariff. It was not an institution
but have a small secretariat. Conversely, WTO is a permanent institution along with a secretariat.
A GATT agreement doesn’t still exist, but it is no longer the main set of rules for international
trade. And it has been updated.
GATT always dealt with trade in goods, and it still does. It has been amended and incorporate in
the new WTO agreements. The updated GATT lives alongside the new WTO agreement on trade
in services and agreement on trade related aspect of intellectual property rights. The WTO bring
the three together within a single organization, a single set of rules and single ayatem fro
resolving disputes.
In short, the WTO is not a simple extension of GATT, it’s a much more
The WTO is a body designed to promote free trade through organizing trade negotiations and act
as an independent arbiter in setting traded disputes. To some extent WTO has been successful in
promoting greater free trade.
Basically, The WTO replaced GATT as an international organization there are many reason for
the failures of GATT such as GATT by itself was only the set of rules and multilateral
agreements and has no constitute base, it was only interested in trade in goods without paying
attention to services and intellectual property right, but the general agreement still exist as the
WTO umbrella treaty for trade in goods, updated as a result of the Uruguay round negotiations.
But both GATT and WTO aim at reducing tariffs and eliminating other trade barriers among
members.
9. Why International business
Having a business knowledge is important in today’s activities since world become a single
country knowing and understanding how to run business internationally is a worth full.
IBM is a vital for students specially for postgraduate it gives a student’s an understanding of the
different business management practices found all over the world and prepare them for graduate
careers working abroad or in organization that are engaged in business on a global scale. For
instance if person is assigned as a general manager of international organization marketing
department so he/she have to well understand the typical type of business doing throughout the
world in order to perform well on the position. Since marketing need to understand the customer
desire the G/manager should understand this and assign employees to collect data to know the
desire of their customer and achieve the marketing goal of the organization.