Types of Entry in Foreign Market

Types of Entry in Foreign Market

A company can enter into a foreign company in number of ways. Entry options of company can be explained in term of direct exporting, indirect exporting, contract manufacturing and setting up a manufacturing facility. each entry has its own advantages and disadvantages, which has been briefly mentioned below;

1.    Direct Export

Manufacture may directly export and sell product in the foreign country without any third party. The advantages of direct export include maximum profit, exploring and understanding the market, retention the market. There are also some disadvantages of indirect export, which include high staff cost, high risk exposures, no cost sharing.

2.    Indirect Export

In indirect export the goods are not directly sold in foreign market, rather it is sold through a distributor or other agent. The advantages of indirect export include more market access, limited political risks etc. Disadvantages of indirect export include profit sharing, risk of losing market etc.

3.    Contact Manufacturing

In contract manufacturing company does not establish its own manufacturing facility, rather manufacturing rights (trade mark) is offered to some local manufacturer against fees. The typical arrangement in this regard is to use brand name of the company against fees or royalty. Company can earn more profit with no investment, limited foreign investment risk.

4.    Owned Manufacturing Facility

Organization may decide to set up a fully owned subsidiary in the foreign country. This arrangement has number of advantages like customer relationship, wining public orders, lowering the cost of production. Disadvantages of wholly owned manufacturing facility are more exposure to different kind of risk i.e. foreign currency risk, political risks etc.

Types of Management

Types of Management

Management can be broadly divided into three categories i.e. Top level management, middle management and operational management.

1.    Top Level Management

Top level management includes director & chief executives. Top level management is responsible primarily set the overall direction for the organization and take strategic decision. Top level management oversees the overall performance of organization and performance of middle & operational management. Examples of Top Level Decisions are

·         Entry into the New Business

·         Launch of New Product Line

·         Structure of Financing for company

·         Dividend Payment Ratio

·         Core objective of Business

2.    Middle Management

Middle management is second tier of manage and take medium term decisions. Middle management primarily looks after or reviews the work of the operational management. This level of management primarily performs the review & controlling role within organization. Middle management makes following types of decisions;

·         Allocation of Required Resources

·         Goal or Target Setting for operational Manager

·         Review the performance of operational Manager

·         Establishment different Control procedures

·         Review the Compliance with set procedures

·         Approve operational budgets.

3.    Operational Management

Operational management is primarily responsible to carry out the operations. The examples of this management are assistant managers, supervisor, etc. These types of manager are involved in day to day decision making. The nature of these decision include the following,

·         Focuses on Efficiencies improvement of task assigned

·         Timely completion of tasks.

Types of Management Styles

Types of Management Styles

Management Styles can be categorized into Authoritative style, participative style, persuasive style, and laissez-Faire.

1.    Authoritative Style

Under this style Manager use authority and dominance. This style is based on belief that boss is always right. It means that manager will take the right decision and employee will implement/follow the decision. This style less popular in business community now days.

2.    Participative Style

Participative style manager believes in more participation from the employees. All decision made by the manager in consultation with employees. This style is gaining more popularity in the world. Participative style is also known as democratic style. Participative style ensures that employee effectively participate in decision making.

3.    Persuasive Style

In this method manager try to peruse the employee that decision was made by the manager was in the best interest of organization and, employee should honor this decision. Manager will find it difficult to get employee support, because employee was not involved in decision making.

4.    Laissez-Faire

In this method employees are allowed to work by their own, and manager have very little role in managing them, rather manager are treated as mentor. This style adopted by the management to promote innovation and creativity in the organization.

Types of Share Capital

Types of Share Capital

Share capital may be categorized into authorized capital, issued capital, subscribed capital, called up capital, and issued capital. Difference types of capital have been explained in logical sequence below;

1.    Authorized Capital

Authorized capital is the amount of capital, which a company can raise during its life. Authorized capital is normally mentioned in creation document of company. Authorized capital is used to calculate the license fee for company registration.

2.    Issued Capital

Company may not necessarily interest to raise all of its authorized capital at once. Therefore management may decide to issue some of its authorized capital for subscription.

3.    Subscribed Capital

Public may not be interested to take all the issued capital and may subscribed to a certain amount of shares. This amount shall not exceed the issued capital.

4.    Call up Capital

Companies may not be interested to take all the subscribed capital at once and may take the subscribed capital in installment. The amount which called from the shareholder is known called up capital. This capital does not exceed the subscribed Capital.

5.    Paid up Capital

The amount of called up capital, which is actually paid by the shareholder are known as paid up capital. This capital is paid in response of company called up capital; most of the time called up & paid up capital coincides.

Types of Preference Shares

Types of Preference Shares

Preference shares are issued with promise of fixed dividend.  Preference shares may be classified in terms of dividend accumulation (cumulative and non cumulative preference shares) and in term of redemption (redeemable & irredeemable preference shares).

1.    Cumulative Preference Shares

Cumulative preference share are entitled to receive the dividend in future, if company fails to pay dividend in a particular year. It means dividend is accumulated till the time of payment. Companies normally issue cumulative preference shares, because these shares have more acceptability ratio in the market.

2.    Non cumulative Preference Shares

Non cumulative preference shares dividend does not accumulate and lapse in case of nonpayment. These shares are rarely issued by the company, because investors are not interested in theses shares due to high risk of nonpayment of dividend.

3.    Redeemable Preference Shares

Preference shares are redeemed (buy back by company) at or after some future date.  Companies normally issue redeemable preference share, because most of the investor want to receive their original investment back.

4.    Irredeemable Preference Shares

Irredeemable share are never buy back by the companies. It means you can only receive divided for indefinite period, but investor cannot take back the original investment. These types of shares are offered with very high rate of return.

Types of Ordinary Shares

Types of Ordinary Shares

Ordinary shares are issued to the General public, and these shares are entitled to receive dividend declared by the company. Ordinary shares can be classified into three classes in term of issuance. It is to be noted that after issuance of ordinary shares, all types of ordinary shares become ordinary shares.

1.    Initial Ordinary Shares

Ordinary shares are initially issued to General public against public subscription (deposit of funds). The people apply for these shares against initial public offer made by the companies in the newspaper. The people apply through prospectus (document carries application for shares used by companies’ for shares)

2.    Right Shares

Right share are issued to existing shareholder in proportion to shares held by them. The unaccepted or unsubscribed right shares by existing equity holder may be issued to other investors by stock exchange. Right shares become ordinary shares, once these are issued.

3.    Bonus Shares

Bonus shares are issued to existing shareholder in lieu of cash dividend. These shares become ordinary shares once issued.

Types of Financial Audits

Types of Financial Audits

Financial audit can be broadly categorized into External audit, internal audit, Government audit, & Tax audit.

1.    External Audit

External audit is conducted by the commercial auditor and these auditors are appointed by the equity holder or shareholder. External audit is conducted as per the requirement of international auditing standards. External auditor issue a report over the accuracy of financial statement.

2.    Internal Audit

Internal audit is conducted by the internal auditor. Internal audit is appointed by the management. Internal audit is conducted to check compliance of financial rules/policies by finance department during the processing of financial transactions. Internal Auditor submits report to management.

3.    Government Audit

Audit of various public departments is conducted by the government audit department. Government auditor checks, whether or not, the funds have been utilized as per Government prescribed rules. Government auditor submits report to legislative body.

4.    Tax Audit

Audit tax is performed by the tax department. Tax audit is conducted to calculate the tax payable by the company. Companies may try to understate their income to save tax; therefore tax audit is conducted to assess actual income of companies.

Types of Simple Price Index

Types of Simple Price Index

1.    Simple Aggregative Price Index

Simple aggregative price index may be calculated by the following formula

Price Index = ∑Pn / ∑Po x 100

Pn= current aggregative Price

Po= Base aggregative price

2.    Simple Price Relative Index

Simple price relative index may be calculated by the following formula

Simple price index = 1/k x ∑[pn/po]

Types of weighted Price Index

Weighted price index is calculated by assigning weight (importance) to prices , famous weighted price index includes lasper price index & Paasche Price Index

1.    Lasper Price Index

Lasper price index is calculated by the following formula

Price index = [∑Pnqo/∑Poqo] x 100

Prices are weighted by the base quantity of the commodities.

2.    Paasche Price Index

Paasche price index is calculated with following formula

Price index = [∑Pn x qn/∑Po x qn] x 100

Prices are weighted with the current quantity i.e. both current prices & base prices are weighted with the base quantity.

Types of money Standard

Types of money Standard

1.    Commodity Standard

Commodity was first standard adopted by the world; however, it could not survive for number of limitation like durability, divisibility, storage issues.

2.    Metallic Standard

Metal were used as money standard and coins of copper & iron were designed and created by different countries. Scarcity on this metal was the basic governing idea to use as standard of money, but later with the development of mining scarcity was removed and it resulted in devaluing those coins.

3.    Bimetallism

Under bimetallism both Gold & silver coins were introduced and price of silver was established in relation to gold. It means silver and gold standard value was established and in accordance of this value either golf or silver coin were developed.

4.    Gold Standard

Under Gold Standard only gold coins were used for transaction both at domestic & international level. There were number of disadvantages associated with gold coins transport ability, chance of stolen, scarcity of gold.

5.    Representative Money

The age of representative money & currency notes started. In modern world representative money is used.

Types of Money Demand

 Types of Money Demand

Money demand types or motives can be classified into three classes i.e. Transaction motive, precautionary demand, speculative Demand.

1.    Transactional Demand

People need money for day to day transactions, because money is a medium of exchange. People need money both for personal consumption and for business exchanges.

2.    Precautionary Demand

Precautionary demand for money included the future accidental expenditure i.e. health etc. precautionary demand of money is both for personal and business reasons, there are number of unexpected event can happen in real life.

3.    Speculative Demand

Speculative demand is to get benefit or profit from an opportunity and for such benefit one must have liquid cash in hand

Types of National Income

Types of National Income 

1.    Gross National Product

GNP is the value of all goods & service produced during the year. GNP is used to determine the output level of national economy and therefore may be deemed national income or output. There are linked relationship between output, income, expenditure .Therefore GNP can calculated by using three method i.e. production methods, expenditure method, and income method.

2.    Gross Domestic Product

GNP also include income from export, some people believe that this should be excluded from national income, because this is an external source of income. And therefore by deducting the net income from export, we can get Gross domestic product.

3.    National Income

National income is concept of people income earned during the year. It is important to notes that NNP takes into account business taxes, but these taxes not form part of income of people, therefore these taxes should be excluded.

Similarly subsidies provided by Government is kind of income, but this income does not reflected in GNP, and therefore these should also be added to income of people.

4.    Personal Income

Personal income again relates to income of people, GNP does not take into account transfer payment as national income, while for people, these are income, therefore while calculating personal income, and transfer payment should be included.

Undistributed profit & taxes on profit have not received to people as income, so these both are also excluded from the national income for calculating personal income.

Types of Direct Tax

Types of Direct Tax

Types of direct tax include progressive tax, regressive tax, Digressive tax, proportional Tax.

1.    Progressive Tax

Tax which increases with the increase of income are regarded as progressive tax. It is based on the principal equality. Under progressive taxation system income is divided into different slabs and there is different tax rate for each slab.

2.    Regressive Taxation

Regressive taxation the tax rate falls with increase of income. It means this taxation system put more burdens on the poor and has more relief for the rich people.

3.    Digressive Taxation

Under digressive taxation system the tax rate does not increase proportional to the income increase , in this tax system , tax rate increase up to certain income level and then it become fixed .

4.    Proportional Taxation

Under proportional taxation everyone will pay tax proportional to its income. It means there is little relief for poor people and everyone in the society will pay the tax with same rate. It is kind of fixed rate of tax for all income group.

Types of Indict Taxes

Types of Indict Taxes

Types of indirect tax include Specific tax, Ad valorem Tax and value added tax.

1.    Specific Tax

Under specific tax system tax is imposed on the bases of measurement or weight. For example excise duty on cement is imposed on per ton production of cement. Specific tax is easy to understand and impose.

2.    Ad Valorem Tax

Ad valorem tax is such tax which is imposed on the value of good, for example custom duty normally imposed on the value of goods. This tax system is bit difficult to implement because of difficulties in determining the value.

3.    Value Added Tax

Value added tax is imposed on value addition i.e. input tax is deducted from the output tax. it is important that input tax is imposed on purchase while output tax is imposed on sales. Therefore tax is paid only on net value addition.