April 27, 2020

International Trade Relationship Building ways or Creating Ways

(1) Management Contract (2) Opening of New Branches (3) Franchising (4) Merger and Acquisition.                                      (1) Management Contract: Management Contract Means that a company takes the responsibility for the management and the administration of another company for multinational companies to hand over specific tasks such as calculating employees interest to other specialized companies. This helps the multinational corporations as they do not have to invest to create a new team for calculating these interest.                                 (2) Opening of New Branches: Many Companies are worried that their identities may be stolen if they use the 'Franchising' or 'Management Contract' model to expend their business in the international market. These Companies usually open up their own branches in the foreign markets. It is very expensive procedure as the company has to invest heavily in market research, create its own team in foreign, customers its offering as per the demand in the international market etc. All on its own. Thus, many large organisations leverage the opportunity of franchising.             (3) Franchising: It is a Contractual relationship between owner of the company (franchiser) and buyer of a Brand Name (franchisee). The owner of the company allows the franchisee to use its trademark along with certain business systems and processes in exchange for a fee. Franchising helps a small business to get the recognition of a larger company. The larger company usually charges a commission on the profits.                                              (4) Merger and Acquisition: A merger takes place when two or more than two Companies join together create a larger company. However, during a merger, merger companies forego their identities and a new company is formedIn case of Acquisition, usually a larger company takes over a smaller company by either buying all of its shares or paying up a specified amount. The acquiring company retains its name it is important to remember that in a general scenario most mergers take place to help companies diversify into new domains whereas acquisitions take place to avail Competition in the future.

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