Strengths and Weaknesses of Global Business Forms

The assignment content discusses various forms of global business, including licensing, franchising, and foreign direct investment (FDI). It highlights the strengths and weaknesses of each form, such as brand recognition and credibility through licensing, stringent guidelines for franchisees, increased exposure to confidential information through licensing, and benefits and drawbacks of FDI. The content emphasizes that each form has its unique attributes with advantages and disadvantages.

Running head: ORGANIZATIONAL BEHAVIOUR & MANAGEMENT
Organizational Behaviour and Management
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Global business is referring to the purchase and sale of the products and services within
various countries. A global business is an organization that is having its operation in majority of
the countries across the globe. While the organization might be having its headquarters as well as
major operations centre in one country, its products as well as services are used all over the
world. Certain examples of global businesses take into consideration the Coca-Cola Company
and Sony Electronics (Alfes 2013)
There exists four basic form of global business. These are Exports and Imports,
Licensing, Franchising and Foreign Direct Investment.
In regard to importing and exporting, it can be stated that importing or exporting or
both is considered to be the most basic and largest global business activity. It is the simplest
process of making an entry to a market with a small capital outlay. Exporting is to make a
product at a domestic location of the organization and conducting its sale in a different country.
Importing is to bring products, services as well as capital into the home country from abroad. For
instance, automotive organizations such as GM, Toyota, and Volkswagen do the exporting of
cars to various countries across the globe. Food retailers do the importing of global products and
sell them in domestic stores (Morgeson 2013).
There are several strengths associated with exporting. The organization will be able to
make significant expansion of its markets, leaving it less dependent on any individual market.
Moreover, rise in production will be leading towards larger economies of scale and better
margins. With the development of the organizational business in the foreign market, the
company will be having increased flexibility for improving or redirecting its marketing
endeavours (Wagner 2014).

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On the other hand, there are certain weaknesses associated with exporting as well. One of
the weaknesses is associated with extra costs. Since, it will be taking more time for developing
extra markets, and there exists longer periods of pay back, the up-front expenses to do the
development of new materials for promotion, allocation of personnel for travelling and other
administrative expenses in relation with the marketing of the product, will be restraining the
financial resources of organizations. Another weakness is associated with market information.
To find information regarding global markets is undeniably more challenging as well as time-
consuming in comparison to finding information as well as evaluating local markets. In
underdeveloped countries, for instance, steadfast business practice information, market traits,
barriers regarding cultural aspects might not be available (Luthans 2015).
There are certain strengths associated with importing. To import raw materials and
products is considered being one of the paths to increase the margins of profit. Also, an importer
will be having the accessibility of resources that are considered to be regionally exclusive as well
as cheap labour towards the production of goods. However, certain weaknesses are also there in
respect of importing (Chmiel 2017). One of them states that the importing of products will be
leading towards the aspect of the local market getting eroded and in particular, national
economies when there will occur a deficit regarding trade, i.e. there is higher import in
comparison to export.
In regard to licensing it can be stated that, it is an association between organizations of
various countries. An organization will be allowing another one to do the utilization of its brand
name, copyright, technology, patent, trademark or other assets in exchange for an amount
depending upon sales. Licensing of intellectual properties like patents, copyrights, processes of
manufacturing or trade names is abounding across the nations. Organizations might be choosing

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to do the manufacturing or selling of their products under licensing when there exists very high
transportation or domestic costs of production, regulations of governments restricting the
activities of business of foreign organizations or the organization wants purely to do the
production as well as selling of similar quality at all places (Wilson 2013). For instance,
Starbucks throughout the world is selling same-quality beverages in similar-looking stores under
the contracts of licensing.
There are certain strengths associated with licensing. To issue a license will be providing
immediate as well as definite revenue in respect of the licensing organization. The license
agreement will be requiring various kinds of payments, which includes a definite license
payment or inconsistent payments depending upon the profits incurred by the licensee business.
Either way, the licensee is making the payment in respect of the right for holding the license that
is producing revenues in respect of the licensing organization. Another understated strength to do
the licensing of a business process is promoting the aspect of brand recognition (Goetsch 2014).
This will assist in providing credibility for the brand as well as recognition advantages in respect
of the licensing organization, since more individuals are becoming alert that the licensing
organization is having the responsibility towards the production regarding the licensee business.
On the other hand, there are certain weaknesses associated with licensing. One of the key
weaknesses to issue a license is that it does the creation of competition. A licensing organization,
might be attempting towards limiting the competition by restraining the opportunity of the
license to the utmost. Another weakness associated with the aspect of licensing is that it
increases the exposure of the company’s confidential, proprietary process of production. When
more number of individuals will be having the knowledge of the organizational process, the
greater will be the threat that someone might be breaching the confidentiality (Alfes 2013). This

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is particularly correct where the licensing organization is being unable to control the staffs
directly as well as contractors who are working with the licensee business.
In regard to franchising, it can be stated that it is an option in which a parent
organization will be granting another organization the right for conducting business in a fixed
way. Franchising is different from licensing based upon the fact that it normally requires the
franchisee to do the following of much stringent guidelines to run the business in comparison to
licensing. Moreover, franchising is having more popularity regarding service organizations such
as hotels, restaurants as well as rental services (Luthans 2015).
There are certain strengths associated with franchising. To create an effective model of
business is considered being one of the means for launching a business that is considered to be
successful. In this regard, it can be stated that one of the strengths of franchises is that they are
depending upon the business models that already exists and are considered being successful
(Alfes 2013). For instance, there are McDonald’s franchises throughout the globe, so when a
new McDonald’s location gets opened, there can occur absolute confidence that there already
exists a sound business model, and there is no requirement for spending time as well as effort to
craft a business model from the beginning. Another aspect of strength is associated with the fact
that the franchisees are selling products as well as services that might already be having
familiarity with the customers (Miner 2015). Customers might be having more affinity for using
the products or services that have been used by them in the past or which is having a reputation
that has been established. For instance, franchises like Taco Bell, Subway are having strong
recognition of name that can assist in attracting customers.

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However, there are certain weaknesses relating to the franchises as well. One of the
weaknesses is that most of the time, franchisors will have the requirement for someone to pay a
certain minimum amount for opening at a new location. Franchisors might as well be taking a
portion of the profits, requiring the individual to make the payment of partial management fees,
or do the purchasing of products from them. As a result, to start as well as operate a franchise
might be considered being more costly than to start a small business. Another weakness
regarding the franchises is that an individual is subjected to the franchisee agreement terms that
will possibly be containing a number of rules that will be restraining the ways by which the
business could be run (Cameron 2015).
In regard to Foreign Direct Investment (FDI), it can be stated that it is referring to
operations in one country that are being administered by entities in a foreign country. The
meaning of FDI is to build new services in a different country. There exist two kinds of foreign
direct investment such as joint ventures as well as wholly-owned subsidiaries (Reynolds 2017).
The strength regarding FDI is that it is considered beneficial in respect of the global
economy, and also for the investors as well as the recipients. There occurs investment of capital
into the business with the optimum prospects for development, anywhere across the globe. The
reason for this is that the investors are seeking optimum return with the minimum amount of risk
(Armstrong 2014).
The weakness regarding FDI is that the countries should not be allowing excessive
foreign ownership of organizations in industries that are considered being strategically
significant. This might be lowering the country’s comparative advantage.

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To conclude the assignment, it can be stated that there are various forms of global
business that has been discussed and each of the global business form is having its individual
attributes that are associated with certain advantages as well as disadvantages.

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