Internationalisation Flashcards
What is proactive internationalisation?
Looking to evolve a business model through value creation in non-home locations
What is reactive internationalisation?
Adapting in response to environmental pressures upon the business which push the firm to operate in non-home locations
Why go international/drivers and motives?
Porter’s Diamond -
Firm strategy
demand conditions
related and supporting industries
factor conditions
What are factor conditions?
Factor conditions include the nation’s production resources, including infrastructure, labor force, land, and natural resources.
Drivers of internationalisation?
Market demand, potential for cost advantages, government pressure and inducements, and the need to respond to competitor moves
What are the reasons to go international?
Better international legal framework - less risky to deal with unfamiliar partners
Improvements in communications
Success of BRICs, and rise of MINTs generating new opportunities
Reasons against internationalisation?
Trade barriers still exist, certain companies are not welcome in some countries (Huawei in US)
Many countries protect their leading companies from takeover by foregin competitors.
International strategy considerations
Market drivers
Cost drivers
Competitive drivers
Government drivers
What are market drivers for internationalisation?
Similar customer needs
Global customers
transferable marketing
What are government drivers for internationalisation?
trade policies
technical standards
host government policies
what are competitive drivers for internationalisation?
interdependence between countries
competitors’ global strategies
what are cost drivers for internationalisation?
scale economies
country-specific differences
favourable logistics
Why is it difficult to enter and survive in a foreign market?
They start with a liability of foreign-ness and face additional costs of doing business as dont have relationships with customers, suppliers and authorities which local companies will
What is the value of Porter’s diamond?
To identify the extent to which companies can build on home-based advantages in relation to others internationally.
International Value Systems
Cost advantages - labour and transportation costs, communication costs, taxation and investment incentives.
Unique local capabilities - such as expanding into countries where can form relationships with universities and research labs
How to enter foregin markets/Entry strategies
Export
Licensing and franchising
joint venture
wholly owned subsidiaries
What is exportation (entry strategy)
Advantage of requiring relatively less resources and risks while offering speedy entry and possiblities to fully exploit production economies in prevailining facilities
Disadvantage - transportation costs and possibility that products can be
low tradability, broad competitive advantage
What is licensing and franchining (entry strategy)
contractual agreement where a local firm receives the right to exploit a product technology or a service concept commerically for a fee over a period of time.
Advantages of licensing and franchising
Resource commitments can be kept low as local partners bear the primary financial and political risks while entry can be relatively quick
Disadvantage of licensing and franchising
Potential lack of control over technologies and product and service quality
low tradability and narrow competitive advantage
Market selection/where to compete?
The CAGE framework
What is the CAGE framework
Talks about the cultural distance, administrative distance, geographical distance and economic distance between home and host country
What are demand conditions?
the size and nature of the customer base for products
what are related and supporting industries
upstream and downstream industries that facilitate innovation through exchanging ideas
what is a joint venture
a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task
high tradability, narrow competitive advantage
what is a wholly owned subsidiary
a corporation with 100% shares held by another corporation, the parent company
high tradability, broad competitive advantage
How to compete in foreign markets/geographic advantage
Global strategy
Transnational Strategy
International Strategy
Multidomestic strategy
Global strategy
Geogrpahically centralised value chain for standardised products
Economies of scale
Cross-cultural learning
Transnational Strategy
Geographically dispersed stages of a unified value chain
Move material, people, ideas across national boundaries
International Strategy
Centralised core competencies with minimum local adjustments
Import/export or licence existing products
Mutlidomestic strategy
Geographically dispersed core competencies with extensive local adjustments
Franchise, joint venture, subsidiaries
