Strategic International Marketing Flashcards
Internationalization
This is the cross-border business activities of a company. This can refer to anything from importing and exporting goods and services to establishing sales and production facilities abroad.
In order for modern companies to be successful in the long term
they must expand their growth potential, enter into strategic alliances, or relocate their production to other countries, often with lower wage levels.
Internationalization represents a unique challenge for businesses:
On the one hand, they benefit from cultivating a global market for their products, but on the other hand, they face an increase in competitive pressure.
the fundamental objective of any company
is to maximize profits.
Internationalization:
- Definition: Cross-border business activities of a company.
- Importance: Increases economic opportunities, access to new markets, and growth potential.
Internationalization of Competition:
- Definition: Leads to lasting changes in the global economy, increases competitive pressure on companies.
- Impacts: Necessitates strategic alliances, production relocation, and expansion into foreign markets.
Benefits of Internationalization:
- Increased growth potential.
- Access to new markets.
- Strategic alliances and production efficiencies.
Challenges of Internationalization:
- Higher competitive pressure.
- Cultural and regulatory barriers.
- Operational complexities.
Forms of Internationalization Activities:
- Importing/exporting goods and services.
- Establishing sales/production facilities abroad.
- Entering strategic alliances/partnerships.
- Direct investments (wholly-owned subsidiaries, acquisitions).
Examples of Internationalization Activities:
- Importing cars from overseas markets.
- Establishing manufacturing plants in foreign countries.
- Forming joint ventures with local companies.
- Acquiring foreign competitors.
Primary Motives for Internationalization:
- Exploiting domestic competitive advantages.
- 2. Creating new competitive advantages.
- 3. Improving competitive position by influencing competitors’ value creation.
- Exploiting domestic competitive advantages.
Management-Induced Motives:
- Personal: Increasing salary, job security.
- Immaterial: Desire for self-fulfillment, prestige, power.
Common Reasons for Expanding Internationally (Surveys):
- Development of new sales markets.
- Development of low-cost purchasing markets.
Additional Motives for Internationalization:
- Exploiting domestic competitive advantages abroad.
- Creating new competitive advantages.
- Improving competitive position by influencing competitors’ value creation negatively.
Market Entry Strategies:
- Definition: Organizational paths chosen by companies when entering foreign markets.
- Importance: Determines how products/services are introduced into foreign markets and impacts success.
Dunning’s Eclectic Theory:
- Components: Ownership-specific advantages, location-specific advantages, internalization incentive advantages.
- Explanation: Determines a company’s international market entry strategies based on these factors.
Components of Dunning’s Eclectic Theory:
- Ownership-specific advantages.
- 2. Location-specific advantages.
- 3. Internalization incentive advantages.
- Ownership-specific advantages.
Advantages of Internalization:
- Avoiding search and negotiation costs.
- Protecting reputation.
- Ensuring product quality.
- Avoiding contract-related problems.
Export:
- Definition: Goods or services sold abroad.
- Types: Direct (delivered directly to foreign customers/intermediaries) and indirect (supplied to domestic intermediaries for market development abroad).
Conditions Suitable for Exports:
- Low foreign demand, monopolistic market position, difficulties raising capital, political/legal constraints in target country.
Advantages of Direct Exports:
- Minimize foreign market risks, require limited foreign market knowledge, advantageous for first-time market entry.
Disadvantages of Direct Exports:
- Additional costs, increased need for expertise, higher capital commitment and foreign-specific risks.
Advantages of Indirect Exports:
- Require less commitment, suitable for small companies.
Disadvantages of Indirect Exports:
- Lack of contact with foreign markets/customers, limited development of internationalization strategies.
Direct Investments:
- Definition: Cross-border investments influencing business activities of existing/newly-established companies. - Significance: Shift from international trade to local production, sustainable internationalization strategy.
Joint Ventures
- Definition: Cooperative arrangements between companies pursuing specific business objectives.
- Types: Equity joint ventures (establish independent company) and contractual joint ventures (cooperation without independent entity).
Merger:
- Definition: Economic and legal combination of two companies into one entity.
- Types: Merger through absorption (one company loses legal independence) and merger by consolidation (both companies maintain legal independence).
Acquisition:
- Definition: One company takes over ownership rights of another without necessarily merging into one legal entity.
- Difference from merger: Acquiring company gains control without target company losing legal personality.
Types of Company Acquisitions:
- Horizontal: Similar industries, resource allocation.
- Vertical: Supplier-customer relationship, service depth, transaction cost reduction.
- Concentric: Unrelated product ranges, technical/marketing similarities.
- Conglomerate: Different industries, diversification.
Significance of Conglomerate Acquisitions (Late 1980s):
- Popular for diversification strategies, spreading risk, and expanding business interests.
Corporate Cooperations:
- Definition: Mergers maintaining legal/economic independence with restrictions imposed in certain areas.
- Difference from mergers: Independence of participating companies maintained.
Forms of Corporate Cooperation:
- Strategic alliances: Based on capital-related or contractual cooperation elements.
- Contractual joint ventures: Involving agreements under the law of obligations.
Reasons for Forming Strategic Alliances:
- Improved access to difficult markets.
- Enhanced capabilities through innovation.
- Financial benefits (economies of scale, reduced costs).
- Improved delivery capability.
