Internationalization Flashcards
What is Internationalization?
The internationalization process of a firm is a gradual acquisition, integration, and use of knowledge about foreign markets and operations, and an incrementally increasing commitment to foreign markets. This process is influenced by the characteristics of the firm and the market environment.
Why do Firms Internationalize?
Seeking opportunities for growth through market diversification
Earning higher margins and profits
Gaining new ideas about products, services, and business methods
Serving key customers better that have relocated abroad
Being closer to supply sources and benefiting from global sourcing advantages
Gaining access to lower-cost or better-value factors of production
Developing economies of scale in sourcing, production, marketing, and R&D
Confronting international competitors more effectively or thwarting the growth of competition in the home market
Investing in a potentially rewarding relationship with a foreign partner
What are the Types of Foreign Market Entry Strategies?
Exporting
Producing goods or services in one country and selling them in another country.
Global Sourcing
Buying products or services from other countries
Countertrade
Making payments in kind rather than in cash
Foreign Direct Investment (FDI)
Investing capital in and securing ownership of a facility in a foreign market
Collaborative Ventures
Partnering with another company to invest in a foreign market
Licensing
Allowing a foreign partner to use intellectual property in return for royalties
Franchising
Allowing a foreign partner to use a business model in return for royalties
What are Born Global Firms
Born global firms are an exception to the stages approach to internationalization. These firms internationalize much earlier and faster than firms did in the past, often reaching advanced stages of internationalization within the first few years of their founding
