INTERNATIONAL MANAGEMENT

The The internationalizationinternationalization

strategy of the firmsstrategy of the firms

1. The stages of an internationalization strategic analysis:

- internationalization factors- the investigation of the international environment- the diagnosis of the firm

2. The analysis of the strategic alternatives for

internationalization :

- the forms of international involvement

- the ways of adapting to the international market

- the segmentation of the international markets

3. The internationalization strategy of the firm:

- instruments for taking the decision

- the evolution of the internationalization configurations

DETERMINING AN INTERNATIONALIZATION

STRATEGY

Step 1: The analysis of the external factors and company’s potential:

THE STATE AND EVOLUTIONOF THE INTERNATIONAL

ENVIRONMENT

(Opportunities and Threats)

THE DIAGNOSIS OF THE COMPANY

(Strengths and weaknesses)

Looking for relevant information

-The analysis of the needs and the real demand

-The analysis of the competitors

-Determining the entry barriers to the market

-Evaluating the country’s risk

-The firm’s aspirations

-The available resources (surplus or usable capacities)

- Specific advantages regarding:- products- markets- technologies- science (know-how)

The typology of the foreign markets;Degrees of attractiveness

The competence profile of the company

Step 2: Determining the international objectives of the company

-The turnover that should be achieved: the market sectors (divisions)internationally aimed- The targeted development rate- The profitability (internal rate of return) of the invested capital.

Step 3: The analysis of the strategic alternatives

- Direct or indirect export- FDI (Foreign Direct Investment)- Strategic alliances and forms of cooperation.

Steps 4-6: The implementation of the internationalization program

Budget Execution Control

1. THE STAGES (STEPS) OFAN

INTERNATIONALIZATIONSTRATEGIC ANALYSIS

1.1. Factors of internationalization:

A. Environment factors:

- facility of entry to the market

- favorable evolution of the market (demand)

- moderate political risk

- good circumstances of working

- the quality of reception

- the existence of a free – trade area

- the quality of the local resources

- the monetary parities.

B. Company’s strategic reasons:

- surplus productive capacity, low local demand or saturated internal market

- growing credibility of the firm

- possibility of external growth

- facilitating economies of scale

- the prolongation of the product’s life.

1.2 The international environment investigation

A. The essential elements that should be detected:- The needs and the real demand- The competition and the sectors with state monopoly- The entry barriers on the market- The political instability and the risk of the country- The existent technological level.

B. The difficulties of catching relevant information:-The variety and the high number of the international environment components- The dynamics of these components- The quality of the information: is high dependent on the personal presence in the aimed country.

1.3. The diagnosis of the firm

A. Methods of evaluating the internal resources of the company:

- the diagnosis could be accomplished by an external team or by an internal team from the company

- the diagnosis could be a permanent or a circumstantial one

- the diagnosis could be only a quantitative one or also a qualitative one

- the diagnosis could emphasize the present situation or the prospective aspects

- the result of the diagnosis is external subjected to the effect of the prism.

B. The components of evaluating the company’s potential:

- flows

- structures

- capacities.

2. THE ANALYSIS OF THE INTERNATIONALIZATION

STRATEGIC ALTERNATIVES

(OPTIONS)

2.1. The forms of international involvement

- The strategy of direct or indirect export- FDI (Foreign Direct Investment)- The cooperation

2.2. The ways of adapting to the international markets

- Standardization (Normalization)

- Selective Adaptation

- Differentiation

2.3. The division of the international markets

The division criterions used in international trade:

- social and economical variables

- cultural factors

- geographical and geopolitical variables

- behavioral variables.

3. THE DECISION OF THE INTERNATIONALIZATION OF

THE COMPANY

3.1. Instruments for taking the decisionA. Evaluation instruments

Variables Weight Countries

I II III IV V

I. Environment main factors Acceptable (A) or Unacceptable (U): 1. Observing the propriety rights 2. The opening of the market

/ /

U

A

A

A

A

A

A

A

A

A II. The profitability of the operation (high numbers = favorable rank) 1. The invested capital 2. Direct costs 3. The turnover tax 4. The present dimension of the market 5. The dimension of the market (3 – 10 years) 6. The market division: - potential (0-2 years) - future (3 years)

0-5 0-3 0-2 0-4 0-3

0-2

0-2

/ / / / / / /

4 3 2 3 2

2

2

3 1 1 2 1

1

1

3 2 2 4 3 2 2

3 2 2 1 1 1 0

TOTAL / 18 10 18 10

III. Risk (low numbers = favorable rank) 1. Losses in the market division 2. International trade problems 3. Political instability 4. Legislation and regulations 5. Perspectives of regulation (3 – 10 years).

0-4 0-3 0-3 0-4 0-2

/ / / / /

2 0 0 1 0

1 0 1 0 1

3 3 2 4 2

2 3 3 3 2

TOTAL / 3 3 14 13

B. The matrix methodBCG Matrix (Boston Consulting Group) uses

two types of variables:

- the market position

- the growth rate.

McKinsey’s Matrix

- the competitiveness

- the long term attractiveness.

A.D.Little’s Model ("Business Profile Matrix"):

- the position between the competitors

- the level of the industrial maturity.

BALL - LORANGE’s Model:

- the level of predicting the

environmental factors

- the possibility of reacting to random

events.

3.2. The evolution of the internationalization configurations:

Step I - Direct or indirect export

Step II - Workshops or joint-ventures

Step III - Local premises and research laboratories

Step IV - Re-concentration and local extension.