International Business Strategy 301LON

Managing Internationalization

Process

Unit: 6 Knowledgecast:1

• Demonstrate a sound appreciation of current strategic management concepts

• Communicate an in-depth understanding of the complexity of the environment and its applications on decision-making process

• Assess current developments in the organisational environment and alternative responses related to strategy

Module Learning Outcomes

INTERNATIONALIZATION

• TRADING • SOURCING

• INVESTMENTS

• OTHER VALUE ADDING ACTIVITY ACROSS NATIONAL BORDERS?

International

Global Transnational

Multinational

Evolving MentalityStrategies Emerging from the Integration Responsiveness

Refer to U2KI

Internationalization

Decisions and Motive Firm’s decision to internationalize

Organisational factors Environmental factors

Decision maker

characteristics

Firm specific factors Unsolicited

proposalsBandwagon

effect

Attractiveness of host country

Foreign travel a & experience abroad

Foreign language proficiency

Decision maker backgroundPersonal character

Firm size

International appeal

e.g VW in China

e. g Ekomate in UK & US

e. g US Telecom. Cpy in Mexico

e.g Foreign bank in China

Internationalization Process

TIMING OF MARKET ENTRY

When a firm in approached by a customer

When competing firms enter into and important market

When market is growing very fast

Other key strategic reason for timing-First mover Advantage Cost advantage

Pre-emption of geographic space Technological advantage

Differentiation advantage Political advantage

5 generic advantages

Internationalization Process

OBTACLES TO INTERNATIONALIZATIONOBJECTIVE

• Liabilities of foreignnessdifference in norms and rules

• Liabilities of expansionProblems of increased transportation, communication and

coordination

• Liabilities of smallnessresource limitation due to size of organisation

• Liabilities of newnessLevel of barriers to entry

Internationalization Process

OBTACLES TO INTERNATIONALIZATIONSUBJECTIVE

• Perception of ManagersPsychic DistanceThe distance that is perceived to exist between characteristics of firm’s home country and a foreign country with which the firm is, or is contemplating doing business or investment

Child et al. 2009

................may be high of low

Internationalization Process

OBTACLES TO INTERNATIONALIZATION

Managerial perception of Psychic Distance

Cultural differences Geographical distance Language Religion Education /literacy level Level of industrial development Logistics infrastructure Political system Legal system Government regulation

Internationalization Process

Internationalization through decreasing Psychic Distance

Stage 1) no regular export activities;

Stage 2) export activities via independent representatives or agents;

Stage 3) the establishment of an overseas subsidiary;

Stage 4) overseas production and manufacturing units.

Johanson and Wiedershiem-Paul, 1975

Internationalization Path

Uppsala ModelMarket Knowledge

Market Commitment

Leads to

Leads to more

Market Knowledge

Leads to more

Market Commitment

AND SO ON

The Uppsala Model suggests that a firm’s

international expansion is a gradual process dependent on experimental knowledge

and incremental step. It assumes that firms

proceed along the internationalization path in

the form of logical steps based on gradual

acquisition and use of information gathered in

foreign market and operations.

Johanson and Vahlne, 1977

• Demonstrate a sound appreciation of current strategic management concepts

• Communicate an in-depth understanding of the complexity of the environment and its applications on decision-making process

• Assess current developments in the organisational environment and alternative responses related to strategy

Knowledgecast Summary

Regular Assignment

Group Presentation on Environmental audit

Seminar

Group Activity

Regular Assignment

Group Presentation on Environmental audit