Internationalization Flashcards
Explain the difference between the Naive and the Realistic approach to internationalization.
Naïve approach: - in essence; world as a single market - standardized products - homogenous markets (and conditions) - similar/same operations worldwide Realistic Approach: - in essence; world as separate markets - recognizes differences between countries - incorporates differences in firm activity - mitigates and leverages differentials
What are the benefits of internationalization?
Scale:
- Greater economies of scale
- Enhanced bargaining power
Supply chains:
- comparative cost advantages across locations e.g. sourcing operations across different locations.
- Integration of research and development sites around the world allows access to a diversity of talent and knowledge clusters.
- experience, and competence across locations.
Customers:
- B2C: customers all over the world
- B2B: multinational businesses themselves
Explain the main differences to decentralized federations, coordinated federations and Centralized Hub Organizations?
Decentralized federations:
- Local subsidiaries self-sufficient & autonomous
- HQ control through appointing subsidiary senior management
- Example: ?
Coordinated Federations:
- Dominant parent in developing technology and products
- Local subsidiaries autonomous in operations and marketing.
- Example: Coca Cola.
Centralized Hub Organization
- Strategy, R&D and production at HQ.
- Local subsidiaries conduct sales and distribution.
- Example: Companies using agents in other countries.
What are non-equity based internationalization/market entry forms? And what are the characteristics of these?
Exporting: o Spot sales o Long-term contracts o Foreign agent / distributor Licensing: o Licensing patents & other IP o Franchising
Characteristics:
Low cost/Low control
What are equity based internationalization/market entry forms? And what are the characteristics of these?
Joint venture: o Marketing & Distribution only o Fully integrated. Wholly owned subsidiary: o Marketing & Distribution only. o Fully integrated
Characteristics:
High costs/High control
What are the fundamental method to decide how to internationalize?
Most important idea is, if we think of organizations as bundles of resources, the method of internationalization is decided by the competences, and either manipulating the resource base through exploitation or exploration.
When to exploit and augment resources?
Use exploitation/integration more if the company has a:
- Strong R&D in home location.
- Strong focus in core business.
- Strong focus on international customers.
Use augmentation/responsiveness more if:
- Strong local knowledge is needed to compete.
- Strong diversification in domestic market.
- Strong business networks needed for operation.
How can the profit mechanisms be used in the decision process of finding a location for internationalization?
When considering links between activity X and the other activities of the firm, it is relevant to consider the firm’s profit mechanisms and if these fits to the new market.
Which of the pairs below can be used to assess generic international strategies?
- Local Responsiveness – Global Integration
- Foreign Direct Investment – Effort
- Alliance Risk – Resource Commitment
- Political Stability – Economic Prosperity
Local Responsiveness – Global Integration
True or False?
Market entry forms can be distinguished by whether they require the firm to hold equity (=own the new venture partially or wholly) or not.
True
Which of the following factors might influence whether a firm enters a new market through exploitation or augmentation of its resource base?
- Availability of resources in the target market
- Dominant profit mechanism of the firm
- The chosen form of market entry
- All of the above
All of the above
True or False?
When assessing internationalization strategies, the extent of resource commitment captures control and costs associated with different market entry forms.
True
