7 Types of International Business with Examples
International business is the exchange of goods, services, and capital across national borders. It can take various forms, depending on the objectives, strategies, and resources of the businesses involved. In this article, we will explore seven types of international business with examples from different industries and regions.
1. Exporting and Importing
Exporting and importing are the most common and simplest forms of international business. Exporting involves selling goods or services produced in one country to customers in another country. Importing involves buying goods or services from another country and bringing them into one’s own country. Exporting and importing can help businesses expand their markets, reduce costs, access raw materials, and diversify their sources of income.
Some examples of exporting and importing are:
– Apple exports its iPhones and iPads from China to various countries around the world.
– Starbucks imports coffee beans from Colombia, Ethiopia, and other countries to roast and brew them in its stores.
– Toyota imports parts and components from Japan and other countries to assemble its vehicles in the US, Canada, and Mexico.
2. Licensing and Franchising
Licensing and franchising are two ways of transferring intellectual property rights, such as patents, trademarks, or trade secrets, from one business to another. Licensing involves granting permission to use or produce a product or service under certain conditions, such as paying royalties or fees. Franchising involves granting permission to operate a business under a specific brand name and following certain standards and procedures.
Some examples of licensing and franchising are:
– Disney licenses its characters and movies to various toy manufacturers, clothing brands, and theme parks around the world.
– McDonald’s franchises its restaurants to local operators who pay fees and follow its quality and service standards.
– Microsoft licenses its Windows operating system and Office software to various computer manufacturers and users.
3. Contract Manufacturing and Outsourcing
Contract manufacturing and outsourcing are two ways of delegating some or all of the production or service activities to another business, usually in a lower-cost country. Contract manufacturing involves hiring another business to produce a product according to the specifications and quality standards of the original business. Outsourcing involves hiring another business to perform a service function that is not part of the core competencies of the original business.
Some examples of contract manufacturing and outsourcing are:
– Nike contracts with various factories in China, Vietnam, and other countries to produce its shoes and apparel.
– IBM outsources some of its IT functions, such as data center management and customer support, to companies in India, Philippines, and other countries.
– Coca-Cola contracts with various bottlers around the world to produce and distribute its beverages.
4. Joint Ventures and Strategic Alliances
Joint ventures and strategic alliances are two ways of collaborating with another business to share resources, risks, and benefits in pursuing a common goal. Joint ventures involve creating a new entity that is jointly owned and controlled by two or more businesses. Strategic alliances involve forming a long-term partnership that does not involve equity ownership or legal obligations.
Some examples of joint ventures and strategic alliances are:
– Sony and Ericsson formed a joint venture called Sony Ericsson to produce mobile phones.
– Starbucks and PepsiCo formed a strategic alliance to market and distribute ready-to-drink coffee products.
– Boeing and Airbus formed a joint venture called Aerion to develop supersonic aircraft.
5. Foreign Direct Investment (FDI) and Multinational Corporations (MNCs)
Foreign direct investment (FDI) is the process of establishing or acquiring a substantial ownership stake in a business in another country. Multinational corporations (MNCs) are businesses that operate in more than one country through FDI. FDI can help businesses gain access to new markets, resources, technologies, skills, and networks. MNCs can also benefit from economies of scale, scope, and learning.
Some examples of FDI and MNCs are:
– Walmart invested in various retail chains in Canada, Mexico, Brazil, China, India, and other countries.
– Samsung invested in various factories, research centers, offices, and subsidiaries around the world.
– Nestlé invested in various food and beverage brands, such as Nescafé, KitKat, Maggi, Purina, etc., in different countries.
6. E-commerce and Digital Platforms
E-commerce is the process of buying or selling goods or services online through websites or mobile applications. Digital platforms are online networks that connect buyers and sellers or providers and users of goods or services. E-commerce and digital platforms can help businesses reach global customers, reduce transaction costs, increase efficiency, and enhance customer satisfaction.
Some examples of e-commerce and digital platforms are:
– Amazon sells various products online through its website and app, as well as provides cloud computing services through Amazon Web Services (AWS).
– Alibaba sells various products online through its website and app, as well as provides payment services through Alipay.
– Uber connects drivers and riders through its app, as well as provides food delivery services through Uber Eats.
7. Social Entrepreneurship and Corporate Social Responsibility (CSR)
Social entrepreneurship is the process of creating or supporting businesses that aim to solve social or environmental problems through innovative products or services. Corporate social responsibility (CSR) is the process of integrating social or environmental concerns into the business operations and strategies. Social entrepreneurship and CSR can help businesses create positive social impact, enhance their reputation, and attract customers, employees, and investors.
Some examples of social entrepreneurship and CSR are:
– TOMS sells shoes online and offline, and donates a pair of shoes to a child in need for every pair sold.
– Patagonia sells outdoor clothing and gear, and donates 1% of its sales to environmental organizations.
– Unilever sells various consumer goods, such as Dove, Lipton, Ben & Jerry’s, etc., and pursues various social and environmental initiatives, such as improving health and hygiene, reducing greenhouse gas emissions, and empowering women.
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Types of International Business with Examples
International business involves transactions or activities that cross national borders. Some examples of international business are Apple, Coca-Cola, Amazon, and outsourcing. These companies or transactions may involve importing, exporting, investing, owning, or delivering goods or services in different countries.
Export Trade
Export trade is one of the most common types of international business. It involves selling products and services to other nations. Export trade can help a company expand its market, increase its revenue, and diversify its risk. Some examples of export trade are:
– China exports electronics, clothing, and machinery to many countries around the world.
– Germany exports cars, chemicals, and machinery to other European countries and beyond.
– Kenya exports tea, coffee, and flowers to the UK, the US, and other markets.
Import Trade
Import trade is another type of international business. It involves buying goods and services from other countries. Import trade can help a company reduce its costs, access better quality or variety, and meet customer demand. Some examples of import trade are:
– The US imports oil, cars, and consumer goods from Canada, Mexico, China, and other countries.
– Japan imports food, raw materials, and energy from Australia, the US, and other countries.
– France imports wine, cheese, and luxury goods from Italy, Spain, and other countries.
Entrepot Trade
Entrepot trade is a less common type of international business. It involves importing goods and services to re-export them to other nations. Entrepot trade can help a company take advantage of lower tariffs, transportation costs, or market opportunities. Some examples of entrepot trade are:
– Singapore imports oil, electronics, and chemicals from various countries and re-exports them to other Asian countries.
– The Netherlands imports flowers, fruits, and vegetables from Africa and South America and re-exports them to other European countries.
– Hong Kong imports textiles, toys, and jewelry from China and re-exports them to the US, the UK, and other countries.
Global Demand for International Business
International business is in high demand in the global market. According to the World Trade Organization (WTO), the volume of world merchandise trade increased by 5.3% in 2018. The main drivers of this growth were strong economic performance, technological innovation, and regional integration.
Some of the industries that have seen an increase in global demand for international business are:
– E-commerce: Online platforms such as Amazon, Alibaba, and eBay have enabled millions of buyers and sellers to connect across borders. E-commerce sales reached $29 trillion in 2017, up 13% from 2016.
– Renewable energy: The demand for clean and sustainable energy sources has grown rapidly in recent years. Renewable energy accounted for 26% of global electricity generation in 2018, up from 23% in 2017.
– Tourism: The travel and tourism industry has benefited from rising incomes, lower travel costs, and cultural diversity. International tourist arrivals reached 1.4 billion in 2018, up 6% from 2017.
References:
https://www.gpo.gov/fdsys/pkg/FR-2001-05-22/pdf/01-13115.pdf
https://www.gpo.gov/fdsys/pkg/FR-2002-05-22/pdf/02-13030.pdf
https://marketbusinessnews.com/financial-glossary/international-business-definition/
https://www.wto.org/english/news_e/pres19_e/pr837_e.htm
https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2022
https://www.iea.org/reports/renewables-2019
https://www.unwto.org/global-and-regional-tourism-performance
https://www.newscientist.com/article/2336385-korean-nuclear-fusion-reactor-achieves-100-millionc-for-30-seconds/
https://www.the-sun.com/news/4381435/holy-grail-fusion-experiments-breakthrough-race-unlimited-energy/
