Assessing Internationalisation 3.9.3

Question 1

reasons for targeting, operating in and trading with international markets

Answer 1

To improve profitability- import materials for lower costs, sell products abroad a charge a higher price as it is a exotic product.

To grow- helps stop your total sales from falling by entering new markets, if consumers already have your product and don’t need to buy it again, operating internationally can stop that effecting your business as much.

To reduce risk by diversification- when countries go into recession It can cause profits to fall, countries don’t all go into recession when one does so it keep reduce the risks of recessions.

Question 2

name some methods of entering international markets

Answer 2

exporting- this is a product that is made domestically but sold abroad, an advantages of this is that factories don’t need be built abroad

licensing- a document that allows a firm to sell another firms product for a percentage of revenue. you save money through not having to pay fixed costs of setting up your own store abroad

alliances- companies decide to work together in a market for mutual benefits. This cuts operating costs and can improve capacity utilisation

direct investment- this is where the product is made and sold abroad. this can cut costs through lower labour and material costs in foreign companies (outsourcing).

Question 3

name some factors influencing the attractiveness of a international markets

Answer 3

economic factors- average incomes, GDP, economic growth (things like this are used to predict the future of the economy)

market growth and size- population effects this and if a market is growing, potential for sales growth is high and very attractive

technological development- access to specialised components needed for your product (Netflix and good internet connection

political and social factors- business friendly policies can be attractive for businesses looking to go international (things like reducing tax)

lower resource and labour costs

Question 4

reasons for producing and sourcing more abroad when trading internationally

Answer 4

difference in operating costs- this will be due to things like lower taxes, labour costs, rents.

distance- to make foreign trade viable the extra profits gained must be must be sufficient to offset transport costs by producing locally you can highly reduce transport costs. also if it is a perishable good, having it delivered over long distances could effect quality. (Reduces distance between you and customers)

trading blocs- countries try and encourage cross-border trade by getting rid of tariffs and quotas. Establishing new or expanding old trading blocs can cause some firms to consider increasing production in these countries

Question 5

what is out sourcing

Answer 5

It is to obtain (goods or a service) by contract from an outside supplier. this reduces fixed costs as you don’t have to set up your own firm to do this and can use the firm who is already established and utilise their greater experience and skill in the that line of work.

Question 6

what is sourcing

Answer 6

the process of finding and obtaining suppliers of goods or services

Question 7

what is off shoring

Answer 7

off shoring occurs when a business moves production or any operations to a country abroad, this can be due to lower taxes, labour costs, rents and lowering transport costs

Question 8

what is re shoring

Answer 8

it is when a business closes down operations down abroad and brings them back to their home country.

This may be done because sales are declining due to lack of control over the operation abroad, causing a decline in quality. Another reason this might be done is a desire to compact the supply chain to reduce lead times.

Question 9

influences on buying and selling abroad.

Answer 9

demographic factors- things like population and population growth (more attractive if both of these are high), the age distribution of the country

exchange rates- affects the costs of exports and imports which will effect profitablility

technological development

Question 10

why might a domestic recession influence a firms desire to trade internationally.

Answer 10

countries are not always in recession at the same time. falling domestic demand could be offset by rising demand from an export market that is enjoying a boom

Question 11

why might a firm choose to supply an overseas market by direct investment rather than by exporting

Answer 11

by operating within a country you can avoid import tariffs. Transport costs will be lower, and so will lead will lead times making the business more flexible

Question 12

how might a firm decide whether it should outsource its production

Answer 12

By comparing the various costs of operating at home and operating abroad. Once other factors, such as tax and transport costs have been considered most firms will choose to operate in the lowest cost location

Question 13

what is the impact of internationalisation on the functional areas of a business

Answer 13

Marketing:
consumers want different things from products and services in different parts of the world. Market research may not be enough due to this as you can never truly understand the market like someone who lives there, this may mean you need specialists from the area (links to licensing and joint ventures with local firms)

HR:
need to hire people in the area or understand the culture of the people who live their to maximise success, this can lead to a loss of control and the business not sticking to procedure

Operations:
going international can allow firms to outsource production to lower cost countries, this can be the key to cost minimisation, doing this though can effect the effectiveness of supply chains and put the firm under scrutiny. For internationalisation to be effective in operations, all these need to run smoothly.

Finance:
the finance of the different branches can be hard to control due to the delegation and independence of the branches. This happens even more so in larger business with multiple layers of hierarchy.

Question 14

what are Barlett’s and Ghoshal’a 4 international strategies

Answer 14

global

international

multi-domestic

transnational

Question 15

what are Barlett’s and Ghoshal’s international matrix

Answer 15

Bartlett and Ghoshal identified two competing forces when selecting a appropriate strategy for going international:

Need for local responsiveness: pressure for products to be adapted to suit local tastes (differentiation)

Need for global integration: the extent to which firms need to standardise its offering to benefit from economies of scale and present an identifiable consistent image across the world.

Need for local responsiveness on x axis, Need for global integration on y

https://www.tutor2u.net/business/reference/bartlett-ghoshal-model-international-strategy

Question 16

what are Barlett’s and Ghoshal’s international strategy

Answer 16

(low need for local responsiveness, low need for global integration).

It is a centralised approach to core activities but decentralised activities where scale has little advantage. Each country of operation is encouraged to follow the parent companies strategy but adapt it to suit local needs and tastes.

Question 17

what are Barlett’s and Ghoshal’s global strategy

Answer 17

(low need for local responsiveness, high need for global integration)

Uses a centralised operations to maximise scale advantage. local branches of the firm implement the strategies set by the parent company. little difference in the firms all round the world in the functional areas and strategy

Question 18

what are Barlett’s and Ghoshal’s multi-domestic strategy

Answer 18

(high need for local responsiveness, low need for global integration)

Used to maximise the local responsiveness of each branch of the business. Decision making and strategy is decentralised, is branch is seen as a separate business that does not rely on head office

Question 19

what are Barlett’s and Ghoshal’s transnational strategy

Answer 19

(high need for local responsiveness, high need for global integration)

Used to harness size and local responsiveness. Different branches in each country will be specialised in a particular area competence, but work interdependently to ensure that global demand can be met. All business work to the same strategy and has a centralised decision making process but have different operations dependant on the local area

Question 20

why can operating in different countries be a problem

Answer 20

Diseconomies of scale, especially in terms of co-ordination and communication can damage efficiency, with quality problems and wastage levels rising

Question 21

how should firm decide which strategy to use

Answer 21

Based on the industry in which the firms operates they should determine the extent to which they will need to try to gain global scale for cost reduction and the extent to which products will need to be adapted to suit local tastes