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The Internationalization Process
Chapter
Key Points
Rationale
Process
Dimensions
Course Content Overview
MOS 4404 International Enterprise
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Professor: Trevor Hunter
Office: FB 303
Office Hours: Tues. 1:30-3:30pm
Office Phone: 519-433-0041 ext. 4338
Class Times: Tuesdays 10:30-11:30 (Lec.)
Thursdays 10:30-12:30
(Case)
Teaching Methodology
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Combination of lectures and cases
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Lectures on Tuesdays, Cases on Thursdays
Cases based on lecture topics used to reinforce
learning
Required Text: International Management,
Beamish, Morrison, Inkpen & Rosenzwieg,
2003, 5th edition
Student Evaluation
Individual work – Case write-ups (two) – 35%
Group Consulting Report (one) – 45%
Individual class participation (ongoing) – 20%
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No mid-term test or final exam – poor way to
evaluate performance
Integrative Consulting Report - a much better
way of measuring understanding
Course Purposes
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Course Perspective:
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Globalization is the pervasive force in our world
and the mechanism through which globalization
occurs is the MNC
Important to examine and understand how
and why MNCs are created and what they do
Course Purposes
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Examine and understand how to manage
MNCs, globalization and the associated
functions of international business
Examine and understand the forces that
affect MNC operations and performance
Learn how to decide when and why a firm
should internationalize and the optimal place
to go
Rationale
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Firms become international in scope for a
variety of reasons:
 Desire for continued growth
 Unsolicited foreign orders
 Domestic market saturation,
 Potential to exploit a new technological
advantage
The dominant reason relates to performance
Process
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Internationalization is the process by which
 Firms increase their awareness of the
influence of international activities on their
future
 Establish and conduct transactions with firms
from other countries.
Process
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International transactions can influence a
firm’s future in both direct and indirect ways.
Business decisions made in one country,
regarding such things as foreign investments
and partnership arrangements, can have
significant impact on a firm in a different
country—and vice versa. The impact of such
decisions may not be immediately and
directly evident.
Process
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Development of an awareness and
appreciation for the role of foreign competition
becomes integral
This is key due to the “Liability of Foreignness”
firms often face when entering new markets
Opportunities exist to turn the liability into an
asset.
Dimensions of Internalization
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Internationalization has both inward-looking
and outward-looking dimensions.
The outward-looking perspective incorporates
an awareness of the nature of competition in
foreign markets
Dimensions of Internalization (cont.)
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Includes the following modes of activities:
 Exporting.
 Acting as licensor to a foreign company.
 Establishing joint ventures outside the
home country with foreign companies.
 Establishing or acquiring wholly owned
businesses outside the home country.
Dimensions of Internalization (cont.)
Similar to the Sequential Approach theory of
internationalization:
 As firms build confidence, experience and
success:
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Existing Business
New Business
Partially Owned
Wholly Owned
(1) Capital Participation
(3) Acquisition
(2) Joint Venture
(4) Greenfield
Dimensions of Internalization (cont.)
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Not all firms do or can follow the sequential
process of internationalization:
 Dependent upon industrial and
environmental conditions
 Need to coordinate operations in many
countries and many value chain activities
Dimensions of Internalization (cont.)
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Internationalization affects firms in equally
important ways from an inward perspective.
The related modes of activity include:
 Importing/sourcing.
 Acting as licensee from a foreign company.
 Establishing joint ventures (JVs) inside the
home country with foreign companies.
 Managing as the wholly owned subsidiary
of a foreign firm
Dimensions of Internalization (cont.)
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Many firms have an appreciation of the global
environment but do not seek out international
opportunities in countries that differ greatly
Questions to explore:
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What products/services can be “global”?
How can a firm know if it has a globally
competitive product?
How can the firm successfully take a product
global?
Dimensions of Internalization (cont.)
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Internationalizing is
Complex
Difficult
Risky
Uncertain
Time consuming
But . . . it can be done and have huge
rewards!
Course Content Overview
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The Global Business Environment
The World of International Trade
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Learning how to find an appropriate location for
international expansion
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What makes risks, opportunities, compatibility etc.
Understanding the international trade environment
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STEP analysis
Comparative and competitive advantage
Course Content Overview
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Managing Export Operations
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To where should the firm expand?
What is the best way to enter a market?
Course Content Overview
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Global Sourcing Strategy
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Is it better to import a good/service or purchase or
produce locally?
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From where?
Degree of integration vs. importing
Organization structure – one plant or many, related or
autonomous?
Where should R&D be located?
Course Content Overview
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Licensing
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Opportunity to leverage technology without costs
of production and distribution
Core vs. periphery
Risks?
Course Content Overview
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The Design and Management of International
Joint Ventures
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Why do them?
Advantages vs. risks
Types of cooperation
Guidelines for successful design and
management
Course Content Overview
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International Strategy Formulation
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How do MNCs formulate product/market strategy
to maximize international competitiveness?
Conflicting pressures to achieve global
efficiencies and be locally responsive
Keeping on track despite all the environmental
influences and uncertainty
Course Content Overview (cont.)
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The Evolving Multinational
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How do MNCs change over time and in response
to environmental factors?
“Base-of-the-pyramid” marketing
Course Content Overview (cont.)
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The Global Manager
Managing the New Global Workforce
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Developing and leveraging global strategic skills
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Manage change, transition, cultural diversity
Work in flexible structures
Fostering and leveraging diversity
Course Content Overview (cont.)
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Strengthening International Government
Relations
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Non-market strategy – a key resource in
overcoming the liability of foreignness
Opportunities exist to turn the liability into an asset