managing internationalization process
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International Business Strategy 301REN
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
InternationalizationDecisions and Motive
Firm’s decision to internationalize
Organisational factors Environmental factors
Decision maker
characteristicsFirm specific
factors Unsolicited proposals
Bandwagon 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 ProcessTIMING 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 ProcessOBTACLES TO INTERNATIONALIZATION
OBJECTIVE
• Liabilities of foreignnessdifference in norms and rules
• Liabilities of expansionProblems of increased transportation, communication and
coordination
• Liabilities o smallnessresource limitation due to size of organisation
• Liabilities of newnessLevel of barriers to entry
Internationalization ProcessOBTACLES TO INTERNATIONALIZATION
SUBJECTIVE
• 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 ProcessOBTACLES 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 ProcessInternationalization 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 PathUppsala Model
Market 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 ActivityRegular Assignment
Group Presentation on Environmental audit
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