Lecture 2A and 2B Flashcards
what are the 4 theories of internationalization
Uppsala model
Transaction costs analysis
Network model
Born global model
What are the 4 stages of the Uppsala model
- Irregular/sporadic export
- Export via independent representatives (Export modes)
- Establishment of a foreign sales subsidiary
- Foreign production/manufacturing units
How does the Uppsala operate for market entry strategy’s
- companies begin operations abroad in markets which are fairly close geographically (waterfall approach)
- companies only think about neighbor markets and countries
- Enter the market through small incremental steps
- Companies are able to expand into multiple markets and select markets to operate in.
What are the exceptions to the use of incremental steps
- LSE with large resources can take larger steps (shower approach)
- Experience from one market may be generalizable
what is psychic distance
Differences in languages, culture and political system which can disturb the flow of information between the firm and the market
what are some strategies to reduce psychic distance
- Hiring an international consulting firm to provide all relevant information to enter the market
- Information technology (using the internet)
what are some disadvantages using the Uppsala model
- Too deterministic - assumes linear progression and oversimplifying the internationalization process
- Assumption of gradual learning- learning curve may not be smooth and incremental
- Static nature - may not effectively capture the dynamic and rapidly changing nature of international business environments
- Ignores intermediaries between different country markets - most suppliers will be from a different country.
- Psychic distance has decreased - products can now be sold across the world due to the internet and information technologies
what is the transaction cost analysis model
A firm will tend to expand until the cost of organizing an extra transaction within the firm will become equal to the cost of carrying out the same transition by means of an exchange on the open market.
A firm will perform it’s activities at lower costs through establishing internal management control implementation systems and rely on intermediaries for exportation as long as it it cost effective.
What are the limitations of TCA
- Narrow assumptions of human nature and assumes trust, and good working relationships
- Excludes internal transaction costs - ignores costs between head office and its branch
- Relevance of ‘intermediate’ forms of SME’s Not all firms are able to build factories or establish it’s subsidiary in another foreign country
- Importance of ‘production costs’ is understated - transaction costs are overstated
what is the network model
The relationship of a firm in a domestic market can be used as bridges to other networks in other countries
what are the characteristics of the network model
- Individual firms are dependent on resources controlled by other firms
- Access to resources is gained through the network
- Entering an pre-established network may be difficult due to the network already being built
- The personal relationships between the firms will be important
What is a born global company
born global companies are companies which have started operating in multiple countries at once
what are the characteristics of a born global company
- SME with less than 500 employees
- Annual sales under 100 million
- Reliance on technology
- managed by entrepreneurial visionaries
what are some factors which support born globals
- Advances and speed in information technology
- advances in technological production
- Role in Niche Markets
- Flexibility of SME
what are the factors which a firm must look at to gain a competitive advantage
The MACRO environment
The MESSO environment
The MIRCO environment
