...Managing the internationalization process Learning outcomes After reading this chapter, you should be able to: ➤ Understand the motives for internationalization. ➤ Apply the theories underpinning the internationalization process. ➤ Explain the Psychic Distance and Born Global concepts. 5 ➤ Advise a multinational firm on choosing an appropriate entry mode for internationalization. ➤ Advise a multinational firm on de-internationalization. 148 Global strategic development Opening case study Internationalization of a French retailer—Carrefour In 1960, Carrefour opened its first supermarket in France. In 1963, Carrefour invented a new store concept—the hypermarket. The hypermarket concept was novel, and revolutionized the way French people did their shopping. It moved daily shopping from small stores to enormous stores where customers find everything they want under one roof, in addition to selfservice, discount price, and free parking space. The first Carrefour hypermarket store was established at the intersection of five roads—hence the name, Carrefour, which means ‘crossroads’. Carrefour is the leading retailer in Europe and the second largest worldwide, with Exhibit A International development of Carrefour Year Country and mode of entry No. of stores (2009) 1969 1973 1975 1982 1989 1991 1993 1993 1994 1995 1996 1997 1997 1998 1998 2000 Belgium—Carrefour’s first hypermarket outside France Spain Brazil—Carrefour’s first hypermarket in the Americas Argentina Taiwan—Carrefour’s...
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...trend of globalization, more small and medium-sized enterprises have already started international expansion (Knight and Cavusgil, 1996). In the process of economic globalization, the competitive advantage depends largely on the enterprise innovation and the ability to enter into the market quickly. This essay will discuss the globalization process of a manufacturing company located in a G7 economy making high quality agricultural equipment and both the positive and negative features of globalization. The globalization process of the company Although internationalization is a common sense in today’s marketing, however, to discuss the internationalization process of enterprise, it is important to define enterprise internationalization itself clearly. Beamish(1990) defined enterprise internationalization as "the process by which firms both increase their awareness of the direct and indirect influence of international transactions on their future, and establish and conduct transactions with other countries." (Beamish, 1990, p. 77) It can be concluded that there are two most important elements in enterprise internationalization — internal organization and external investment. Welch and Luostarinen(1999) pointed out that “internationalization is the process of increasing involvement in international operations.” Both definitions are process-based which shows the nature of enterprise...
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...The evolution of internationalization There have been a variety of different approaches to explain the internationalization of business activities. They normally concentrate on distinct aspects of the reasons for and results of, enterprises operating in more than one environment and have changed dramatically throughout the last decade. Whereas traditional theories have focused their attention on the internationalization of production and foreign direct investment (FDI) where the multinational enterprise (MNE) played a central role, recent theories have approached internationalization as a process in which firms increase their involvement in international operations adapting their strategies, resources and structure to new investments. The focus of recent theories has centered on small and medium-sized firms (SMEs). In the late 1960s, scholars started to study international business in a historical perspective. Historians established a very fruitful dialogue with applied and development economists who helped to explain quite convincingly why American and British firms went international and how they influenced their home and host economies (Jones, 1986, 2002; Wilkins, 1970, 1991). As pointed out by Geoffrey Jones (2005), internationalization is a rather cumulative process, two powerful explicative factors being technology and networking. A major factor in the history of internationalization is the family firm. So far, however, little attention has been paid to the advantages...
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...SMEs and the Internationalisation Process Giovanni Roncucci Chairman Roncucci&Partners Group April 5th 2016 Agenda Globalisation & Internationalisation Main Characteristics of the Italian System Micro, Small, and Medium Enterprises SMEs and the Italian System Italian SMEs and Internationalisation Business Plan and Budgeting Planning Roncucci & Partners 2 Globalisation & Internationalisation Roncucci & Partners 3 In the last 10-15 years the international context of the global economy changed notably. Market globalisation is one of the variables to be considered as crucial within the critical success factors of every entrepreneurial economic initiative. In this framework the challenge of internationalisation becomes a fundamental tool to sustain and strengthen the competitiveness of an economic system. Roncucci & Partners 4 Commercial Flows of Geographical Areas Table 1 - Volume of International Trade per Geographical Area and Country(a) - From 2009-2013 (price basis=2005, at percentual value) Countries & Areas 2009 2010 Export 2011 2012 2013 2009 2010 Import 2011 2012 2013 EUROPE 38,89 37,97 38,04 37,44 37,11 39,67 38,19 37,41 35,98 35,19 European Union France Germany Italy United Kingdom Spain 35,52 3,63 8,52 2,97 2,82 1,73 34,86 3,49 8,59 2,89 2,76 1,69 34,98 3,41 8,67 2,86 2,84 1,74 34,32 3,32 8,47 2,80 2,63 ...
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...(definitional) 1.1 Historically, the primary motive for U.S. multinationals to produce abroad has been to a) lower costs b) respond more quickly to the marketplace c) avoid trade barriers d) gain tax benefits Ans: b Section: evolution of multinational Level: Easy 1.2 The primary objective of the multinational corporation is to a.) maximize shareholder wealth b) maximize world production c) minimize debt d) minimize the cost of doing business globally Ans: a Section: Multinational Financial Management: Theory and Practice Level: Easy 3. ____________ is defined as the purchase of assets or commodities on one market for immediate resale on another in order to profit form a price discrepancy. a) internationalization b) arbitrage c) financing d) total risk Ans: b Section: evolution of multinational Level: Easy 4. The value of good financial management is ___________ in the global markets because of the much greater probability of market imperfections and multiple tax rates. a) minimized b) neutralized c) enhanced d) arbitraged away Ans: c Section: role of the financial executive Level: Easy 5. When a firm operates globally it offers advantages such as a) greater political power at home b) bless taxes on its profits c) greater negotiating power with foreign minority groups d) greater negotiating power with labor unions Ans: d Section: The rise of the MNC Level: Easy 6. The prime transmitter of...
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...[pic] PRACTICAL SESIONS 1. Introduction We are going to work on the process of internationalization of a specific company and adapt its determinants to major theories of business internationalization at the same time, we will work the attraction of international investment of two country-specific factors. First of all, you must choose that undertaking, which may not be that choosing another schoolmate. You then select two countries where the company is present, if possible, one developed and other non-developed. 1. Tasks The tasks that you must perform will be a word document and a PowerPoint to present it in class. It is a single work consisting of choose a multinational company and based on information in primary and secondary schools about the company, to analyze the following issues as a case study: 1.- Explain briefly the origin and growth of the company. What is the current situation in terms of number of brands, institutions, countries and modalities of expansion? 2.- What specific factors are those who have influenced the internationalization of the tourist company in question? a) What are the competitive advantages of the company that will ensure an international success?-Hymer applied to the company. b) Does kind of industrial organization sector which belongs to the company? (competes under conditions of perfect competition, oligopoly...) What are your main competitors? Is the industry formed by SMEs or multinational...
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...Student's name Instructor's name Course name Date Human Resource Management in Multinational Organizations A Preliminary Research on Self-Initiated Expatriation as Compared to Assigned Expatriation Human resource management in multinational organizations is complex due to the cross-cultural and international aspects related to its nature. This article examines the phenomenon of 'expatriation': choosing to leave one's own country in order to live or work in another, usually for a long period of time. Multinational organizations require a certain level of staff relocation in order to improve their knowledge of emerging markets as well as maximizing their talent resources. In addition to assigned expatriates, meaning those moving to another country following an assignment from their workplace, the article refers to "self-initiated expatriates, meaning people who choose to move to another country on their own. Human resource needs for both kinds of expatriates are unique, and may differ from each other. Self-initiated expatriates may exhibit more motivation to live in a different country and uproot their family for a long period of time, and this motivation may facilitate an easier transition, therefore being less demanding for the human resource management (Mo and Jian-Ming 170-172) Workplace flexibility and the changing nature of work: an introduction This paper examines articles referring to how the changes in the work environment require flexibility on behalf...
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...Academic Research Conference (ITARC ), 7 – 8th November, 2012, London.UK. Network-based theories and internationalization of firms: applications to empirical studies Mojtaba Hosseini and Hosseini Dadfar Linkoping University, Sweden Key Words Network based theories, Internationalization, Revised Uppsala Model, ARA-Model, and Network Embeddedness. Abstract By using a topology of the most frequently used network-based theories on the firms’ internationalization; this paper is going to present some recommendations to correctly apply those theories in future internationalization studies. We have identified eight network-based theories that are broadly used in internationalization studies. These theories are Relationship Approach, Social Network Analysis and Network Mapping in American schools, and Industrial Marketing and Purchasing Group (IMP) Interaction Approach, ARA-Model, Network Embeddedness, Revised Uppsala Model and Network-based Internationalization Theory, which are developed by European universities. This paper, will explain these theories, their applications to internationalization and then making some recommendations for the future empirical studies. Figures and tables are used to clarify and summarize the theories and their empirical applications. Introduction Researchers have been using of different basic theories to explain the internationalization of companies. For example, transaction cost approach (TCA) (Anderson 1986; Lee, Koh, and Heo 2011), resource-based...
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...INDEX 1. INTRODUCTION 1.1. 1.2. BACKGROUND ENVIRONMENT OF ENTREPRENEURIAL 2. THE IMPORTANCE OF SMEs 3. ROLE OF ENTREPRENEUR 4. ENTREPRENEURSHIP. International 5. INTERNATIONALIZATION PROCESSES. Theories. 5.1. 5.2. UPSALA MODEL. HECKSCHER-OHLIN MODEL 6. THE PROCESS OF INTERNATIONALIZATION 7. ENTREPRENEURIAL MARKETING 7.1. 7.2. 7.3. SWOT ANALYSIS MARKET ENTRY STRATEGY COOPERATION STRATEGY 8. TARGET COUNTRY 9. GEM 10. GOVERNMENT SUPPORT 11. CONCLUSION 12. RECOMMENDATIONS 13. REFERENCES 1. INTRODUCTION: For this work I decided to open in France Cocoon clothing company, located in Granada, retailing, I have chosen these two countries because they are within the top 5 countries of the European Union in the textiles sector and are two major countries with major fashion catwalks. I chose this company because it is a small company, and is a women's clothing store that has clothes very hard to find in other stores. I chose the fashion industry especially because according to my previous studies I think it's an everchanging industry in terms of fashion and is an area in which the image is very important in Spain. Cocoon is a shop that sold clothing especially at night but you can also find jeans, skirts, blouses, accessories, handbags and more clothing at prices that will chord with our product quality. Cocoon is a very experienced workers and always try to help the customer find what you want, is a company with more than 16 years of experience in this sector. 1.1...
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...world’s major innovations were first introduced in the United States. By 1965 this figure had declined to 55 percent, and the decline continues today. On the other hand, France has made impressive advantage in electrical traction, nuclear power, and aviation. West Germany is a proclaimed leader in chemicals and pharmaceuticals, precision and heavy machinery, heavy electrical goods, metallurgy, and surface transport equipment. Japan leads in optics, solid state physics, engineering, chemistry, and process metallurgy. Eastern Europe and the Soviet Union, the so called come-on [council for mutual economic assistance] countries, generate 30 percent of annual worldwide patient’s applications. However, the United States can regain some of its lost competitive advantages. Through internationalization US firms can often reap benefits from emerging industries and evolutionary technologies developed...
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...EXPANDING ABROAD: MOTIVATIONS & MEANS INTERNATIONAL BUSINESS: It consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations The main characteristics of the international business are: - flow of ideas, services and capital across the world - new choices to consumers - acquisition of a wider variety of products is offered - the mobility of labor, capital and tech is facilitated - new challenging employment opportunities - reallocation of resources, shift of activities to a global level International business has created a network of global links that bind countries, institutions, and individuals with trade, financial markets, technology, and living standards. MULTINATIONAL ENTERPRISE (MNE): is a business –profit or non-profit – that operates in the global arena (across national borders), with no regard to the dimension of the firm The main peculiarity of an MNE is the fact that manage actively and coordinately a set of operations located in different countries. To be true MNE a company must: * have substantial, direct investment in foreign countries (not just the trading relationships of an import-export business) * and actively manage those operations as affecting their strategy and organization The MNE is a recent phenomenon, mostly developed in the post-WW II years. The United Nations has changed...
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...who have been successful in their home market (such as Primark) will find themselves competing with foreign businesses which are much bigger and more successful. However, International expansion offers businesses the opportunity to become recognised on a global scale, for example, companies such as Coco Cola, McDonalds and Microsoft could not have achieved global leadership within their industry without expanding abroad, therefore International expansion offers international reputation which is necessary when wanting to become a leader. Internationalization Theory The Uppsala model (a.k.a the Stage Model) is an important theory that explains how firms expand abroad, under this model, internationalization is seen as an incremental process whereby firms increase their international involvement in a stepwise manner (Bhardwaj et al 2011). The Uppsala model is based on two assumptions: (i) the resource-based theory and (ii) the incremental process (Forsgren 2002). Under the resource-based theory, Anderson and Kheam (1996) explain that for some firms, their lack of knowledge of foreign markets constitutes a major hurdle to their expansion plans and adds to their “market uncertainty”. To reduce this...
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...Throughout this essay the internationalization process will be examined in depth and supported by evidence from the organisation known as ‘British Petroleum’. The purpose of this assignment is to grasp a comprehensive understanding of the critical aspects of British Petroleum’s internationalization process, the implications it holds for the international business environment and achieving their internationalization objectives through contemporary context. Overview of organisation When discussing globalization it is critical to emphasis the importance a multinational corporation holds over the international business environment. A Multinational corporation (MNC) is an organisation that has registered facilities and assets in business endeavors in more than one country. MNC’s are highlighted for their success in incorporating products, ideas and cultures from more than one country in order to achieve a common goal. With reference to the definition of a MNC, British Petroleum (BP) is undoubtedly a MNC as it undergoes its business ventures throughout the entire world and in countries such as China, Australia, Canada and Mexico. A key aspect of MNC’s is to multi nationalize every aspect of your organisation when aiming to expand internationally, BP are successful in ensuring that every branch of BP around the world has the common sustainable goals. BP has a direct correlation in Foreign Direct Investment (FDI). A FDI is when an organisation finances into production or business...
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...The Uppsala model is the most accepted paradigm regarding internationalization process of the firms. This model is based on the behavioural theory of the firm (Cyert and March, 1963); inspired by Cyert and March (1963) and Penrose (1959), the model describes the internationalisation process as slow, sequential and gradual, since it represents the firm’s gradual establishment in, integration of, and knowledge about foreign market. Zara and the Inditex group have made use of certain steps to make sure that their firm maintained a competitive advantage in the business environment. When a firm starts entering into foreign market, the first step or the stage chosen by the firm is to start export with the that country, as the firm has no knowedge, information of the resources in that country. In this stage the firm will gain no market experience. Initially, Zara followed the Uppsala Internationalization Model by first entering geographically close markets before advancing to more distant markets. For instance, Zara established a flagship store in a strategic location to build recognition and with the objective of obtaining market information and accumulating experience. The knowledge obtained would then guide Zara to open more stores in that nation (Lopez and Ying 2009). After obtain the experience that useful for operating locally, Zara added the number of its own stores in adjoining areas. This pattern of market expansion is called as “oil stain” by Inditex. The main reason that...
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...Project Scenario: You are a member of the ‘Global Strategy Team’ in a Firm planning for growth through global expansion. Your team has been asked to consider expanding into “new” international markets. You must prepare a report explaining the motives of internationalisation, the current strategies and how the expansion would fit into the firm’s global expansion plan. The second stage would be to choose a potential market and assess its prospects. You must then make suggestions as to the best means of entering that market and the appropriate organisation structure to manage the global expansion. Requirements: You are required to prepare a report of 2,000 words that addresses the theoretical and practical problems associated with the Board’s decision to expand overseas. Suggestions: 1. Choose a local company with which you are familiar, looking up its basic details on the company website, as well as other sources like the The EDGE, Malaysian Business, Wall Street Journal, financial Times and Fortune websites. You may also want to look at the industry by searching the Library’s statistics collection. 2. Choose a market to-date that has NOT been exploited by your company. a. What is the theory that best explain the motives of internationalisation? b. What is the justification of entering that particular market? c. What strategy (international, localisation, global or transnational) is most appropriate? d. What are the recommendations: i. The appropriate entry mode including...
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