INTERNATIONAL BUSINESS LAW AND ITS ENVIRONMENT section 1

What are the three categories of international business ?

(1) trade, (2) licensing of intellectual property, (3) foreign direct investment.

Each form represents a different level of commitment to

a foreign market, a different level of in- volvement in the life of a foreign country, and a different set of managerial challenges.

Each form exposes firms to different sets of

business and legal risks.

One firm may be engaged in production of raw materials or component parts which are l

exported to an affiliated company in another country for final assembly.

For firms just entering a new foreign market, the method of entry might depend on a host of considerations,

including the sophistication of the firm, its overseas experience, the nature of its products or services, its commitment of capital resources, and the amount of risk it is willing to bear.

Trade usually represents the least involvement, and thus the least po- litical, economic, and legal risk; we buy or sell goods or services to others in foreign countries.

least involvement, and thus the least: po- litical, economic, and legal risk; That we buy or sell goods or services to others in foreign countries.

A firm that wants to use its intellectual property worldwide must contruct to

let others distribute it, license it to users, and then protect it from infringement.

One of the best examples is the vertically integrated firm that holds

minority or majority ownership interest in other firms along the supply chain.

However, the greatest risks come with

owning and operating a foreign firm, perhaps a factory.

The three forms in international business are not mutually exclusive, and each can

play a role in an international firm's strategy.

Dur to owning and operating a forign firm or factory, this carries with it the obligations of corporate citizenship and means

the complete involve- ment in all aspects of life in the foreign country —economic, political, social, cultural, legal.

Still another company, owned by the same parent corporation may own

the trademark for the product and have responsibility for global distribution.

To the international lawyer, they represent

three forms of doing business in a foreign country the legal re- lationship between parties to an international business transaction.

To the marketer these broad categories describe

three ways a firm may enter a foreign market, or foreign market entry methods.

Here the production and marketing of a single product involves elements of

trade, licensing, and investment.