Managing
Internationalization
Process
International Business
Strategy
301LON
Unit: 6 Knowledgecast:1
Module Learning Outcomes
• Demonstrate a sound appreciation of current
strategic management concepts
• Communicate an in-depth understanding of the
complexity of the environment and its applications
on decision-making process
• Assess current developments in the organisational
environment and alternative responses related to
strategy
INTERNATIONALIZATION
•
TRADING
•
SOURCING
•
INVESTMENTS
•
OTHER VALUE
ADDING ACTIVITY
ACROSS NATIONAL
BORDERS
Evolving Mentality
Strategies Emerging from the Integration Responsiveness
Global
International
Transnational
Multinational
Refer to U2KI
Internationalization
Decisions and Motive
Firm’s decision to internationalize
Organisational factors
Decision
maker
characteristics
Foreign
travel a &
experience
abroad
Foreign
language
proficiency
Decision
maker
background
Personal
character
Firm specific
factors
Firm size
International
appeal
Environmental factors
Unsolicited
proposals
e.g VW in
China
e. g Ekomate
in UK & US
Bandwagon
effect
e. g US
Telecom.
Cpy in
Mexico
e.g Foreign
bank in
China
Attractivene
ss of host
country
Internationalization Process
TIMING OF MARKET ENTRY
When a firm in approached by a customer
When competing firms enter into and important
market
When market is growing very fast
Other key strategic reason for timing-First mover Advantage
5 generic advantages
Cost advantage
Pre-emption of geographic space
Technological advantage
Differentiation advantage
Political advantage
Internationalization Process
OBTACLES TO INTERNATIONALIZATION
OBJECTIVE
•Liabilities of foreignness
difference in norms and rules
•Liabilities of expansion
Problems of increased transportation, communication and
coordination
•Liabilities of smallness
resource limitation due to size of organisation
•Liabilities of newness
Level of barriers to entry
Internationalization Process
OBTACLES TO INTERNATIONALIZATION
SUBJECTIVE
•Perception of Managers
Psychic Distance
The distance that is perceived to exist between characteristics
of firm’s home country and a foreign country with which the
firm is, or is contemplating doing business or investment
Child et al. 2009
................may be high of low
Internationalization Process
OBTACLES TO INTERNATIONALIZATION
Managerial perception of Psychic
Distance
Cultural differences
Geographical distance
Language
Religion
Education /literacy level
Level of industrial development
Logistics infrastructure
Political system
Legal system
Government regulation
Internationalization Process
Internationalization through decreasing Psychic Distance
Stage 1) no regular export activities;
Stage 2) export activities via independent
representatives or agents;
Stage 3) the establishment of
an overseas subsidiary;
Stage 4) overseas production
and
manufacturing
units.
Johanson and Wiedershiem-Paul, 1975
Internationalization Path
Uppsala Model
Market
Knowledge
Leads
to
Market
Commitment
Market
Knowledge
Leads
to
more
Market
Commitment
AND SO ON
Johanson and Vahlne, 1977
Leads to
more
The Uppsala Model suggests
that a firm’s international
expansion is a gradual
process dependent on
experimental knowledge and
incremental step.
It assumes that firms proceed
along the internationalization
path in the form of logical
steps based on gradual
acquisition and use of
information gathered in
foreign market and
operations.
Knowledgecast Summary
• Demonstrate a sound appreciation of current strategic
management concepts
• Communicate an in-depth understanding of the complexity
of the environment and its applications on decision-making
process
• Assess current developments in the organisational
environment and alternative responses related to strategy
Seminar
Regular Assignment
Group Presentation on Environmental audit
Group Activity
Regular Assignment
Group Presentation on Environmental audit