Difference between Domestic Business and

International Business
• Domestic business operates within the boundaries of a
single country, serving the needs of the local market.
International business expands operations across national
borders, targeting multiple countries and diverse markets.

• Domestic business primarily caters to local customers

within the country of operation. Whereas international
business serves customers from various countries and
cultures.
• Domestic markets are typically smaller than
international ones, which offer access to larger and
more diverse consumer bases.

• Domestic business operates within the legal and

regulatory frameworks of a single country. While
international business must comply with both
domestic and international laws, treaties, trade
agreements, and regulations.
• Domestic business may face fewer trade barriers and
tariffs within its own country. International business
encounters trade barriers, tariffs, customs
regulations, and other barriers to entry in different
countries.

• Domestic business competes primarily with local

companies within the same market. On the other
hand international business faces competition from
local and global competitors in multiple markets.
• Domestic business may have limited exposure to
foreign exchange risks, geopolitical instability, and
economic fluctuations. While international business
is exposed to currency fluctuations, political risks,
legal uncertainties, and varying economic conditions
across different countries.
Difference between Multinational and
Transnational
Characteristics Multinational Transnational

Definition The definition of a A company is considered transnational

multinational corporation is if it has operations in countries other
one that has assets and than its home country and no central
facilities in more than one headquarters for its administration.
country, with worldwide
management being coordinated
from a single location.

Operations Branch offices of multi- No overseas branches or affiliates are

multinational firms can be part of a truly transnational
found in a wide variety of corporation.
countries.
Decision-making Decisions for a Every transnational
multinational enterprise is
corporation are made responsible for
in the home country making its own
and then spread to the decisions inside the
rest of the business's organization.
operations throughout
the world.

Local markets Multinational firms' To best serve their

capabilities in local markets,
domestic markets are transnational firms
hampered by their enjoy unfettered
reliance on top-down discretion in
management. making business
decisions.
Modes of Entry into International Business
A corporation can enter into international trade in a variety of ways
listed below:
1. Exporting and Importing
• Selling goods and services to a company in a foreign country is
referred to as Exporting.
• For instance, Gulab sold sweets to a store in Canada. Purchasing
goods from a foreign company is known as Importing.
• For instance, the purchase of dolls from a Chinese company by an
Indian dolls dealer.
• Exports and imports are the typical way through which businesses
begin their activities overseas before moving on to other kinds of
international trade.
Important Ways to Export and Import

i) Direct Importing/ Exporting: The company

handles all of the necessary paperwork for the
shipment and financing of goods and services and
deals directly with foreign suppliers or purchasers.
ii) Indirect Importing/ Exporting: The company
uses a middleman to handle all the paperwork and
negotiate with foreign suppliers or customers. The
firm’s involvement is limited.
2. Contract Manufacturing
• According to this, every well-known company in a nation
accepts responsibility for promoting the goods and services
created by a business in another nation.
• Here, the company is specialised in the manufacturing process
but lacks marketing skills, whereas the other company, due to its
established reputation, is capable of selling those items and
services.
• Offering these items and services is not the primary business of
these organisations, but they do it for the benefit of their name
and reputation, as well as to provide high-quality products at a
low cost to their customers.
3. Licensing
• When a corporation from one country (the Licensor) grants a
license to a company from another country (the Licensee) to
use its brand, patent, trademark, technology, copyright,
marketing skills; etc., to assist the other firm sell its products,
this contractual agreement is referred to as Licensing.
• The licensor corporation receives returns in proportion to
sales. Returns may take the form of royalties or fees. In other
nations, the government determines how the returns are fixed.
• This cannot exceed 5% of revenues in several developing
nations.
• For instance, Pepsi and Fanta are made and distributed
globally by local bottlers in other nations under the
licensing system.

• The company that provides such authorisation is known as

the Licensor while the other company in a different country
that receives these rights is known as the Licensee. The
mutual sharing of knowledge, technology, and/or patents
between the companies is called Cross-licensing.
4. Franchising
• The franchise is the unique right or freedom that a
producer grants to a certain person or group of people to
establish the same business at a specific location.
• The producers use this contemporary business model to
market their products in far-off locations.
• In general, producers who have a good reputation use
this system.
• Individuals are motivated by their goodwill and try this
mode of business in order to earn profit.
• The business that gives the rights (i.e., the parent
company) is referred to as the Franchisor, and the
business that purchases the rights is referred to as
the Franchisee.
5. Joint Ventures
• A joint venture is formed when two or more businesses decide to
work together for a common goal and mutual benefit.
• These two commercial entities could be private, public, or foreign-
owned.
• Joint ventures are those types of businesses that are established in
international trade where both domestic and foreign entrepreneurs
are partners in ownership and management.
• The trade is carried out in collaboration with the importing nation’s
firm. For instance, the Joint venture of the Indian company Maruti
with the Japanese Company Suzuki.
6. Wholly Owned Subsidiary
• When a foreign company establishes a business unit
or acquires a full stake in any domestic company,
then they are called a Wholly-owned Subsidiary.
• Wholly owned subsidiaries are set by a foreign
company to enjoy full control over their overseas
operations.
• A wholly-owned subsidiary in a foreign country may
be established in two ways:
Setting up of wholly-owned new firm in the foreign

land, also called Green Field Venture.

Acquiring an established firm in a foreign country

and using that firm to do business in a foreign

country.
International Franchising

International Franchising, sometimes known as

Master Franchising or Master Licensing, is a method
of expansion that new or established franchises can
use to move into new geographical areas and markets.
Different Types of International Franchise Models.
1. Master Franchising is one of the most popular
international franchise models, and is considered to be one
of the simplest ways to expand a franchise overseas. In a
master franchising model, the franchisor chooses a master
franchisee for the target country or region, and awards
them master franchise rights, which are usually very
similar to the rights of a franchisor in a local franchise
system, in exchange for a larger investment in the
franchise.
2. Regional Franchises are a good choice for a franchise
model moving into a larger country or area, where it can
be difficult for one master franchisee to manage the
franchise operations across the whole area. In these
franchise areas, regional franchising is an option for
franchisors. The target country is usually divided into
regions, which are then operated similarly to a master
franchise, with each region containing a regional master
franchisee, and sub-franchisees below them.
Direct Franchising is a franchise model where the
franchisor retains control and licensing of the franchise
completely. In a direct franchising model, the franchisor
continues their role in a very similar way to during
domestic franchising. This kind of franchising requires a
lot of resources and time on the part of the franchisor, as
they will be providing the same level of training,
recruitment and support to franchisees as the franchise
expands rapidly and the difficulties of moving into a new
market are overcome.
Area Development is used mostly in markets or
sectors where sub-franchising isn’t permitted, and
involves a development agreement between the
original franchisor and a new franchisee, who will take
on the role of franchisor in the new region. In
development agreements, the territory of a country or
region is often split up in a similar fashion to regional
franchising.
Regional Economic Integration or Regional
integration
• Regional economic integration occurs when
countries come together to form free trade areas or
customs unions, offering members preferential trade
access to each others' markets.
• Economic integration is sometimes referred to as
regional integration as it often occurs among
neighboring nations.
• Economic integration is an arrangement among
nations that typically includes the reduction or
elimination of trade barriers and the coordination of
monetary and fiscal policies.

• Economic integration aims to reduce costs for both

consumers and producers and to increase trade
between the countries involved in the agreement.
Marketing Intelligence

Marketing intelligence (MI) is the everyday

information relevant to a company's markets, gathered
and analyzed specifically for the purpose of accurate
and confident decision-making in determining market
opportunity, market penetration strategy, and market
development metrics. Marketing intelligence is
necessary when entering a foreign market.
Transnational Companies

A transnational corporation is an enterprise that is

involved with the international production of goods or
services, foreign investments, or income and asset
management in more than one country. It sets up
factories in developing countries as land and labor are
cheaper there.