Setting up a Multinational Company

Setting up a multinational company

15 Ways to expand your business to international markets- Part 1

Every entrepreneur or businessman would like to go international and cross boundaries in order to expand the business and be successful. Well…. Until now I knew only a couple of ways for that but my search showed me that there are many more like:

Licensing

It is an agreement that allows one party to use an industrial/intellectual property right to exchange for payment to the other party i.e. the agreement where licenser grants rights to intangible property to another entity (licensee) for a specific period in return for a royalty. Eg: Arms license, liquor license, etc.

Franchising

It is a business agreement under which one party i.e. the franchiser allows another party i.e. the franchisee to operate an enterprise using its trademark, logo, product and methods of operation in return for a fee. Franchiser often assists the franchisee to run the business on an ongoing basis. Eg: McDonald’s, Giani’s, etc.

Exporting

Exporting can be direct or indirect. It offers only available choice for small and new firms wanting to go international and also permits larger firms to begin international expansion. It is an easy access to overseas market and avoids the cost of establishing manufacturing operations.

Joint Ventures

When two companies invest funds into creating a third jointly owned company. The new subsidiary thus formed is called a joint venture. Typically, the ownership is 50-50 but not always. Having 50% or more does not necessarily mean that you have control over the joint venture. Joint Ventures are used to shield parent company from the risk of new venture failure. Eg: Sony Ericsson.

Strategic Alliance

When company wants quickly gain a new area of expertise or access to new technology or markets. They usually have two options i.e. by a smaller company with close assets or form a strategic alliance with another company that would benefit equally from the partnership. These agreements often have a limited scope and function such as trading access to emerging technology. Eg: Starbucks, Tata, etc.

Mergers and acquisitions

A domestic company selects a foreign company and emerges itself with the foreign company in order to enter international business. Alternatively, domestic company may purchase the foreign company and acquire its ownership access to international manufacturing and marketing network. Eg: Exxon Mobil, Lipton & Brookbond. Etc.

Wholly owned subsidiaries (WOS)

Subsidiary means individual body under parent company. They give their own rent, salary to employees, etc. but the policies and trademarks will be implemented from parent company. A WOS is an overseas operation that is totally owned and controlled by MNC.

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