International Business Basics

Letter of Credit – Definition, Types and Process

Letter of Credit is one of the most popular and more secured of method of payment in recent times as compared to other methods of payment. A Letter of Credit refers to the documents representing the goods and not the goods themselves. Banks are not in the business of examining the goods on behalf of the customers. Typical documents, which are required includes commercial invoice, transport document such as Bill of lading or Airway bill, an insurance documents etc. L/C deals in documents and not goods.

Definition of  Letter of Credit

A Letter of Credit can be defined as “an undertaking by importer’s bank stating that payment will be made to the exporter if the required documents are presented to the bank within the validity of the L/C”.… Read the rest

Abey Francis

Different Challenges Faced by the Multinational Companies (MNC’s)

A multinational company  (MNC) is an enterprise that manages production or delivers services in more than one country. There are some challenges faced by MNC’s that transact business in international markets which can hinder its competitiveness hence its controversies and these are as follows;

Market Imperfections

It may seem strange that a corporation has decided to do business in a different country, where it doesn’t know the laws, local customs or business practices of such a country is likely to face some challenges that can reduce the manager’s ability to forecast business conditions. The additional costs caused by the entrance in foreign markets are of less interest for the local enterprise.… Read the rest

Abey Francis

Levels of International Strategy

The globalization of the economy, internationalization of businesses and emergence of new markets are all key themes in contemporary business. Whereas international business may once have been the province of organisations with sufficient scale and reach, these types of companies — typically multi-national corporations – no longer have a monopoly on this kind of business. Increasing numbers of firms, of varying scale, are confronted with compelling reasons for expanding their activities across multiple national boundaries. In some cases, such motivation includes the knowledge that success in international markets is a pre-requisite for survival; if competitor organisations succeed in international markets, they may achieve the scale and liquidity which affords them sustainable competitive advantage.… Read the rest

Abey Francis

Steps in Conducting a Foreign Market Analysis

International businesses have the fundamental goals of expanding market share, revenues, and profits. They often achieve these goals by entering new markets or by introducing new products into markets in which they already have a presence. A firm’s ability to do this effectively hinges on its developing a through understanding of a given geographical or product market. To successfully increase market share, revenue, and profits, firms must normally follow three steps,

  1. Assess alternative markets
  2. Evaluate the respective costs, benefits, and risks of entering each, and
  3. Select those that hold the most potential for entry or expansion.
1. Assessing Alternative Foreign Markets

In assessing alternative foreign market a firm must consider a variety of factor including the current and potential sizes of the markets, the levels of competition the firm will face, their legal and political environment, and socio-cultural   factors that may affect the firm’s operations and performance.… Read the rest

Abey Francis

Sources of Attaining Competitive Advantage by a Business Firm

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. Competitive advantages are capabilities that are difficult to replicate or imitate and are non-tradable.

Pitts and Snow define a competitive advantage as “any feature of a business firm that enables it to earn a high return on investment despite counter pressure from competitors.”

A competitive advantage exists when the firm is able to deliver the same benefits as the competitors are but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage).… Read the rest

Abey Francis

Modes of Entry into International Business with Advantages and Disadvantages

The different types of entry modes, to penetrate a foreign market, arise due to globalization. The latter has drastically changed the way business conduct at international level. Owing to advances in transportation, technology and communications, nowadays practically every business of any size can supply or distribute goods, services, or intellectual property. However, when companies deal with international markets, it is complicated as the companies must be prepared to surmount differences in currency issues, language problems, cultural norms, and legal and regulatory regimes. Only the largest companies have the capital and knowledge to overcome these complications on their own. Many other businesses simply do not have the means to efficiently and affordably deal with all those variables in foreign jurisdictions, without a partner in the host country.… Read the rest

Abey Francis