chapter 1 the internationalization process key points rationale process dimensions course content...

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