chapter 1 the internationalization process key points rationale process dimensions course content...
TRANSCRIPT
Chapter 1The Internationalization Process
Key PointsRationaleProcess DimensionsCourse Content Overview
MOS 4404 International Enterprise Professor: Trevor Hunter Office: FB 303 Office Hours: Wednesdays 1:30-3:30pm Office Phone: 519-433-0041 ext. 4338 Class Times: Mondays 10:30 – 11:30
Wednesdays 10:30 – 12:30
Teaching Methodology
Combination of lectures and cases Lectures on Mondays, cases on Wednesdays Cases based on lecture topics used to reinforce
learning Required Text: International Management,
Beamish, Morrison, Inkpen & Rosenzwieg, 2003, 5th edition
Student Evaluation
Individual work – Case write-ups (two) – 40%
Group Consulting Presentation (one) – 40%
Individual class participation (ongoing) – 20%
No mid-term test or final exam – poor way to evaluate performance
Integrative Consulting Report - a much better way of measuring understanding
Course Purposes
Course Perspective: Globalization is the pervasive force in our world
and the mechanism through which globalization occurs is the MNC
Important to examine and understand how and why MNCs are created, what they do and how the different entry modes should be managed
Course Purposes
Examine and understand how to manage MNCs, internationalization and the issues associated with international business
Question 1: Should we internationalize?
Strategic: MOS 4410
Question 2: Where is the
best place to go?
Analysis: MOS 2285
Question 3:How should we
enter?
Action:MOS 4404
Rationale
Firms become international in scope for a variety of reasons: Desire for continued growth Unsolicited foreign orders Domestic market saturation, Potential to exploit a new technological
advantage The dominant reason relates to performance
Process Internationalization is the process by which
Enter new countries to take advantage of that country’s relative comparative advantage
Establish and conduct transactions with firms or customers from other countries.
Firms increase their awareness of the influence of international activities on their future
Process
Firms internationalize to take advantage of a country’s relative comparative advantage Firms internationalize due to market expansion
or efficiency drivers Market expansion – sell the same thing to more
people Efficiency – get what they need (raw materials,
labour, skills, investment) cheaper
Process
By internationalizing firms improve their performance (i.e. increase profits) by either increasing sales volumes (market expansion) or reducing their costs (efficiency)
Internationalizing is not as easy as it seems and depending upon why the firm internationalizes or where it goes, the method may be different and must correspond
Process
Decision tointernationalize
ME
ECountry Entry Mode
Environmental
Factors
CorporateCapabilities
Ability toInternationalize
Ability to ManageMarket Entry
Process
Development of an awareness and appreciation for the role of foreign competition becomes integral
This is key due to the “Liability of Foreignness” firms often face when entering new markets
Opportunities exist to turn the liability into an asset.
Dimensions of Internalization
Internationalization has both inward-looking and outward-looking dimensions.
The outward-looking perspective incorporates an awareness of the nature of competition in foreign markets
Dimensions of Internalization (cont.) Includes the following modes of activities:
Exporting.Acting as licensor to a foreign company.Establishing joint ventures outside the
home country with foreign companies.Establishing or acquiring wholly owned
businesses outside the home country.
Dimensions of Internalization (cont.) Similar to the Sequential Approach theory of
internationalization: As firms build confidence, experience and
success:
Existing Business
New Business
Partially Owned Wholly Owned
(1) Capital Participation
(2) Joint Venture
(3) Acquisition
(4) Greenfield
Dimensions of Internalization (cont.) Not all firms do or can follow the sequential
process of internationalization:Dependent upon industrial and
environmental conditionsNeed to coordinate operations in many
countries and many value chain activities
Dimensions of Internalization (cont.) Internationalization affects firms in equally
important ways from an inward perspective. The related modes of activity include:
Importing/sourcing. Acting as licensee from a foreign company. Establishing joint ventures (JVs) inside the
home country with foreign companies. Managing as the wholly owned subsidiary
of a foreign firm
Dimensions of Internalization (cont.) Many firms have an appreciation of the global
environment but do not seek out international opportunities in countries that differ greatly
Questions to explore: What products/services can be “global”? How can a firm know if it has a globally
competitive product? How can the firm successfully take a product
global?
Course Content Overview
The Global Business Environment The World of International Trade
Learning how to find an appropriate location for international expansion What makes risks, opportunities, compatibility etc.
Understanding the international trade environment STEP analysis Comparative and competitive advantage
Course Content Overview
Managing Export Operations To where should the firm expand? What is the best way to enter a market?
Course Content Overview
Global Sourcing Strategy Is it better to import a good/service or purchase or
produce locally? From where? Degree of integration vs. importing Organization structure – one plant or many, related or
autonomous? Where should R&D be located?
Course Content Overview
Licensing Opportunity to leverage technology without costs
of production and distribution Core vs. periphery Risks?
Course Content Overview
The Design and Management of International Joint Ventures Why do them? Advantages vs. risks Types of cooperation Guidelines for successful design and
management
Course Content Overview
International Strategy Formulation How do MNCs formulate product/market strategy
to maximize international competitiveness? Conflicting pressures to achieve global
efficiencies and be locally responsive Keeping on track despite all the environmental
influences and uncertainty
Course Content Overview (cont.) The Evolving Multinational
How do MNCs change over time and in response to environmental factors?
“Base-of-the-pyramid” marketing
Course Content Overview (cont.) The Global Manager Managing the New Global Workforce
Developing and leveraging global strategic skills Manage change, transition, cultural diversity Work in flexible structures
Fostering and leveraging diversity
Course Content Overview (cont.) Strengthening International Government
Relations Non-market strategy – a key resource in
overcoming the liability of foreignness Opportunities exist to turn the liability into an asset