International Business: Contracts, Letter of Credit, Retail

This report delves into the realm of international business, specifically examining its application within the retail industry. It provides a detailed overview of various types of contracts, including international sales contracts, international distribution contracts, international service contracts, and international strategic alliance contracts, highlighting their significance in facilitating cross-border transactions and business expansion. The report also explores the role of letters of credit as a crucial financial instrument in mitigating risks and ensuring secure payment processes in international trade. It discusses the advantages and disadvantages of using letters of credit, emphasizing their impact on minimizing credit risk and reducing transaction costs. The report concludes by summarizing the key takeaways, emphasizing the importance of contracts and letters of credit in fostering successful international business operations within the retail sector. The report also references several academic sources to support its findings.

INTERNATIONAL
BUSINESSES

Table of Contents
INTRODUCTION...........................................................................................................................1
Types of contract.........................................................................................................................1
Letter of credit..............................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
International business mention that the business activity is done with the other country.
The international business is the purchasing and selling the goods, services and product across
the different national boarders (Kolk, 2016). So international business is the opportunity to
different business that they expand their business in international market through particular
business activity for example manufacturing, Relating, auto-mobile, construction, agriculture,
banking, insurance, transportation. It includes the cross boarder transaction of goods and service
across the boarder with more than two country.
The report will describe the internation business in context of retail industry which
describe that how contract can affects the international business in positively ad negatively.
Types of contract
Contract
International contract is the legal agreement when two company can legally agreement
with each other from buy and selling the goods and services. That means contract is written
document this is an agreement which they are obligated to each other that they do or not to do a
specific thing. Further, there are many business who can makes agreement for understand the
terms of contact also for enter in the international business.
Contract is one of the best document that helps to every industry to do business in
international market so the retail industry have also used the contract agreement in their business
to export and import the goods and services. It is a legal and essential document mandatory on
both the importer and the exporter for a particular deal in a fixed time period. Contract is
specifies the responsibilities and liabilities for the exporter and the importer (Hovhannisyan &
Keller, 2015). This is comes into force at the time when both parties confirm it and seal their
acceptance in written form. So retail industry must use contract in their business to lead business
success.
Types of contract
International sale contract
International sale contracts Is the agreement between two parties a buyer and seller that
they make the agreement to sale the goods and services across the boarder. International sales
regulated in under International sales of Goods (CIGS). The buyer and seller or exporter and
importer involve in the international sales contract that they come from different backgrounds
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and traditions. International sales can be regulated and governed by different two or more
countries. The retail industry also used the international sales contract to sale and purchase the
Goods and services. It is helps to reduce the transaction cost also help to reduce the barriers of
international trade and promote the development in international business. So this is helps to
retail industry for expand their business in the international market by the help of contracts.
There are also issues related to the sales contract that one party refuse the contract. Also, it could
be affect the international context for some reason such as it is difficult to determine that which
laws and regulation govern the sales contract (Cumming & Zahra, 2016). Secondly it also
describes that the applicable law In the contract is not much clear which increase the breach of
contract.
International distribution contract
International distribution contract is the contract which describe the geographical area of
different sales point which mean the distributors' sale and purchase the goods by using this
contract. The main purpose of an international distribution contract is that it is organized more
than one sales points within a geographical area in an international country from selling and
purchasing the goods, raw material and services can be offered to a different distributor or
clients. This type of contract entitle suppliers of retail industry -i.e. manufacturers of different
retail products- to benefit from existing commercial facilities and to select their business
partners.
This international distributor contract is has the advantage of entitle suppliers to inflict
sales methods and practices maintaining and increase the sales associated with their products or
brands. It helps to setting the right target because retail industry find potential distributor that
targets the market and provide the product to the customer (Cumming & Zahra, 2016). So this
the advantage that the ability of set the best target by the helps of contract. There are also some
issues related to the distributor contracts it is that how can managing the products in different
country how can sold the products and set the prices as well as choose the marker for the product
supposing a distributor is the right choice for the business or not. So the distributor contracts can
provide a relatively low risk also provide the cost effective solutions to enter into new
international or overseas market. Further also provide the best and logistic advantages compare
to other contract and direct selling.
International service contract
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International service contract that define as when the two company are located in
different country and they provide the services to each other (Doh and et.al., 2017). The
international service contract is the written document which describes the supply of services can
be easily adaptable. There are different type of services such as Technology consulting, software
and web services, marketing research in international market. Retail industry use this contract in
their business to provide the best services and expand their business in international market. The
contract is defined the proper information and provide assurance to both parties.
By makes the best and valuable the contract retail industry expand their business also
they take the advantages while makes the contract that the contract is clearly defined such as
provide the detailed information deadlines of contract, dispute resolution process, outlines of
grounds for termination or extensions, and provisions. So the main advantage to the service
contract is that they minimize the risk and liabilities by making sure that the parties of the
contract are agreed to the all terms and condition. So this is the best way to reduces the chances
of breach the contract because both parties are agreed and they sign a contract. There are also
increase the cost of the retail industry because its increase the time and money.
International strategic alliance contract
International strategic alliances contract it is the agreement between both parties in
different countries. They both are mutually agreed while making the contract. So this contract is
making for the purpose that is desire to achieving the objectives and achieve a joint befits. The
Retail industry also make the strategic alliance contract to achieve the joint benefits. The main
advantage of this contract is that both party can share profit and loss mutually. There are also
some disadvantage that the cost is increased because of long process of contract which means the
time and money also increased so the risk of cost is increased.
Letter of credit
Letter of credit is defines as document that is the negotiable instruments (Glavas &
Mathews, 2014). This is the letter issued by one bank to another bank in different country that
bank provides guaranteeing to the seller that buyer pay their payments on specified time to the
seller, but some event occurs and buyer are not able to pay the payments, so the bank will be
required to cover the full amount or remaining amount.
Letter of credit is the best payment methods to dealing with the international market. It is
very important when buyers are not able to pay the full amount of the money to the seller so the
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bank gives the guarantee on behalf of the purchaser that they pay the amount of purchase to the
seller. Banks also charges the fees that they provide the letter of credit service, typically they
collect a some percentage of the size of the letter of credit.
Retail industry also can take benefit from the letter of credit that they easily trade in the
international market. The letter of credit is helps retail industry that is helps to mitigate the risk
of the seller when buyer are not pay the payments so bank are responsible to pay the full amount
of the purchase.
In the situation when the buyer is unable to pay the amount on the purchase, the seller
may want the payment so they make a demand for payment to the bank. The bank will except
and they fulfil the demand of the seller bank examine the beneficiary's demand and they
complete the demand according to the term of the letter of credit.
Letter of credit is the best tool to trade in international market there have many
advantages to the retail industry when they use the letter of credit in their business (Chidlow,
Plakoyiannaki & Welch, 2014). The major advantage is that the minimising the credit risk of the
seller now the seller sale their product in different country by supporting the letter of credit. In
addition, retail industry sale their products in international market in order to expand the business
so the letter of credit is providing the guarantee by the buyers bank that payment is made by the
buyers bank. Further there are many advantages of letter of credit in international trade that is
helps to minimising time that the buyer is the responsible and he is the holder of the letter of
credit. The bank is acts on the behalf of the buyers. So this is the process that helps to make the
better arrangements to the importer that protect the importer and minimising the risk. Also, letter
of credit helps to the retail industry for reducing the transaction cost that increase the
performance of the business.
Letter of credit is the based on documentation there are some disadvantages of the letter
of credit that is less physical verification of goods. So retail industry use the letter of credit
which increase the operating cost that means the procedure of letter of credit is more costly as
compare to the other method (Neelankavil, 2015). The another disadvantage of letter of credit
which retail industry face in their business it is currency fluctuation. So there is the biggest
disadvantages that the fluctuation in currency is increase the cost. That may affect the price in
the local market so the demand of the imported goods is reduces due to currency fluctuations. So
retail industry also face the lack of demand to their product in international market.
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There are different types of letter of credit that bank provides to the Buyers and sellers
such as commercial letter of credit, Revolving letter of credit, Irrevocable letter of credit, Stand-
by Letter of credit, Confirmed LC, Unconfirmed LC, Transferable LC, Back-to-Back LC,
Payment at Sight LC etc. (Cumming & Zahra, 2016). So bank used the variety of letter of credit
to pay the amount to the seller on behalf of buyers.
Advantages
 Letter of credit is simple as compare to the other
 Letter of credit helps to mitigate the risk of seller
 Letter of credit is helps to reduce the transaction cost-effective
Disadvantage
 Letter of credit is the based on the documentation there s no physical proof
 Increase the cost of operating cost
CONCLUSION
The conclusion is being drawn through this Project Report of international business that
is described that international business is the business activity, that means many companies can
enter in the international market to expand and increase their growth in international market. The
report has been described the different contract that different company follow to expand their
business. Further report has been described the letter of credit that company used in their
business.
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REFERENCES
Books and Journals
Chidlow, A., Plakoyiannaki, E., & Welch, C. (2014). Translation in cross-language international
business research: Beyond equivalence. Journal of International Business Studies. 5(5).
562-582.
Cumming, D. J., & Zahra, S. A. (2016). International business and entrepreneurship implications
of Brexit. British Journal of Management. 27(4). 687-692.
Doh, J. and et.al., (2017). International business responses to institutional voids.
Temiz, D., & Gökmen, A. (2014). FDI inflow as an international business operation by
MNCs and economic growth: An empirical study on Turkey. International Business
Review. 23(1). 145-154.
Glavas, C., & Mathews, S. (2014). How international entrepreneurship characteristics influence
Internet capabilities for the international business processes of the firm. International
Business Review. 23(1). 228-245.
Hovhannisyan, N., & Keller, W. (2015). International business travel: an engine of
innovation?. Journal of Economic Growth. 20(1). 75-104.
Kolk, A. (2016). The social responsibility of international business: From ethics and the
environment to CSR and sustainable development. Journal of World Business. 51(1). 23-
34.
Neelankavil, J. P. (2015). International business research. Routledge.
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