Internationalization Perspectives and Theories

Internationalization
The process that an organization goes through to be an international (and ultimately a global) company
Lee and Carter (2005)

Occurs when the firm expands its R&D, production, selling and other business activities into international markets May occur in a continuous fashion or maybe a relatively discrete process Not always a smooth path of development de-internationalization can occur at any time

Internationalization Motives
Proactive motives
Profits and growth goals Managerial urge Technology competence Unique product Foreign market opportunities Economies of scale Tax benefits

Reactive motives
Competitive pressures Domestic market small and saturated Overproduction/excess capacity Unsolicited foreign orders Extend sales of seasonal products Proximity to international customers/psychological distance

Internationalization of a Firm: Main Approaches

The Stage Models Approach Network Approach Born Global Approach

Internationalization Approaches: The Stage Models (1)

Process of internationalization is 'incremental', 'gradual' and 'sequential' Commitment increases as experience and learning build up
Stage 1: No regular export activity Stage 2: Export via independent representative Stage 3: Establish own sales subsidiaries Stage 4: Overseas manufacturing

Internationalisation Approaches: The Network Perspective(2)

Articulates how organizations make use of business networks as a 'mechanism' to internationalization The networks may comprise customers, customers' customers, competitors, suppliers, suppliers' suppliers, distributors, agents and consultants Similar to the 'Stages' model in that commitment is built up when expertise, knowledge and experience improve Offer a clearer explanation of 'how' organizations can make a 'step change' in the internationalization process

Internationalization Approaches: The Born Globals(3)

Recent increase in the number of 'instant international' or 'born global' companies Is defined as a firm that from its inception pursues a vision of becoming global and globalizes rapidly without any preceding long term domestic or internationalization period Does not follow traditional approach of internationalization Often have 'global outlook' from the beginning; and derive a large proportion of sales from international activities

Enabling factors for 'born global':

Shortened PLC
Increasing role of niche markets Fast-changing consumer preferences Flexibility of SMEs Advances in affordable production technologies

Advances and speed in information technology

Global networks