Theories Of Internationalization In International Business
Recommended: Theories and models of internationalization
Multinational companies can grow through availability of capital, which is much more mobile than labour. Companies can therefore establish subsidiary companies in a country where cheap labour and raw material inputs are located. Companies are able to expand by supplementing nationally endowed assets acquiring, developing and integrating strategically important assets located in other countries, thereby making their nation of origins somewhat less significant. Knowing how to adapt and change can be beneficial too, because there can be growth in certain areas of activities while cutting back on areas proving to be unprofitable. Therefore there is an advantaged for companies to acquire businesses operating overseas markets.
What are the pros and cons of adopting internationally? Answer: Adopting internationally has become popular over the years. Many families choose to adopt internationally because of the shorter time period.
To operate international business, top managers in a company have to learn global strategy and implement them. A new company can use strategy of the host company such as partnerships with other countries, acquiring companies in other countries and owning franchises and patents of other countries (World Financial Watch, 2013). Companies definitely encounter global competition and market changes. Who will survive in such a market? The companies, which select a global supply chain and vendors and monitor threats in the market place, will operate successfully and gain competitive advantage (Wisma, 2013).
1.0 Introduction The main objectives of this report is to identify and critically evaluate the strategies used by a chosen Multinational Company (MNC) to internationalize. Firstly, this report will clearly analyzed the current internalization strategies that being used by the chosen Multinational Company (MNC) which is Lenovo Group Limited and its relationship with the theory of internalization. Secondly, a relevant of internalization strategies will be proposed in this report which is suitable for the internalization of Lenovo Group Limited.
The international business offers the possibility of exploiting three resources of the competitive advantage, unavailable for the national companies: global efficiencies, the multinational flexibility and worldwide learning process (Lovas and Ghoshal, 2000, pp. 875-896). According to Laura Diaconu, in order to reach equilibrium, the multinationals often adopts one of the four alternative strategies: the national, multidomestic, transnational or global strategy. International strategy will be adopted by companies that aim to leverage their core competencies by expanding into foreign markets. The international strategy has low local responsiveness and also low concern about cost reduction.
In 1974, Delhaize took its first step of internationalization by entering the US market. He progressively acquired market shares in US and continued its internationalization process by entering Southeastern Europe in the early 1990s, and the Indonesian market in 1997. In this section we will try to understand the pressures that pushed Delhaize to internationalize. George Yip provides a framework to analyze the “globalization drivers” that are most likely to influence a company’s decisions to expend its business internationally. The four drivers of internationalization that he identified are: market drivers, cost drivers, government drivers and competitive drivers.
The previous model, considers that companies internationalize only from a certain point of life, after having already obtained a certain amount of experience and maturity. However, the model presented below proposes a different internationalization process logic, which is increasingly adopted in the current context. Therefore appears the accelerated internationalization process; which considers that companies are born globalized or internationalized (Freeman et al., 2009).
Transnational Corporations (TNCs) firstly were called just international businesses, to recognize them from firms that worked in local or national markets. At that point for a long time, the term multinational corporations were connected to the firms that worked in a few diverse national markets. As worldwide markets and generation structures have developed, the final term has gotten to be transnational corporations, where the preface trans means to go beyond. In last years, Transnational Corporations (TNCs) have been the fundamental engines supporting the extension of worldwide free enterprise.
Where the transnational corporations are enterprises that deal with productivity and other activities outside mother land, lead by an international management team and follow an international strategy with the goal of defending stockholders interests rather than national interests. Transnational companies are the most met on an international scale using three major strategies : • Point strategy • Simple integration • Complexe integration Globalization doesn’t only manifest on an economic level, it affects culture, social life, political life as well as technology development since intergration made direct contact and exchange between countries, societies and economies. Where the population is the key influence upon national economy, it is the population who demands the level of production and its quality and at the same time it is the key factor for market development. Globalizing markets offerd population a larger variety of products as well as better quality than national products, example: • Textiles • Sports shoes • Electronics • Vehicles • Construction equipment
Most of these firms are Committed in exporting to international markets, raising capital on foreign exchange markets and have started developing their brand beyond China. An example of this is the Beijing based family run firm - Sunrise Technologies. The company’s recent Boom on the UK’s Alternative Investment Market (AIM) in order to raise the needed capital to develop and promote its Mulberry Tea brand beyond China. China’s development shows that the present body of literature on Internationalization theory is inadequate when explaining internationalization in a Chinese context. Prior to developing a conceptual framework that may be applied to the internationalization of Chinese firms, it is first cardinal to understand their present internationalization process.
“The International business, instead of detaching from our business, is now additive to our business.” (Michael Casey). In reference to Michael Casey’s quote, today the definition and basis of a successful company is how far it has reached internationally; whether having Foreign Direct Investment (FDI) in one or multiple countries, or branching out their existing home based business to host countries. International business focuses on the difference of culture, language, rules regulations and the legal system of a host and home country. Moreover, for a company to reach the stage of international success, studies and strategies have to be prepared to ensure that all challenges are overcome and that barriers are shattered.
32. Katarzyna Twarowska, M. K. (2013). INTERNATIONAL BUSINESS STRATEGY REASONS AND FORMS OF EXPANSION INTO FOREIGN . Knowledge Management and Innovation ,
Multinational corporations can be defined as enterprises operating in several countries but are managed from their home country. Generally, any company that acquires a quarter of its revenue from operations outside of its home country is considered to be a multinational corporation. Today the multinational corporations have a radical effect on the economic system all over the world. This is due to the growth of international business of the multinationals, which has tremendous effect on the traditional forms of international trade and capital flows for economies at large. In the world economy they create a powerful force.
In the past few years, Multinational Corporation has become the most important character in globalization topic. Multinational corporation means an organization that owns sale their goods or service to more than single countries are rising at this age, moreover, these corporations almost come from developed countries (Allen Sens, 2012). In 20 to 21 centuries, considerably multinational corporations have chosen developing countries like China or India for continuous their business. However, is it bring economic benefit to developing country or make that worse? The aim of this essay is to examine some arguments for and against of multinational corporations in developing country
Economic Perspective Globalisation is explained in several perspectives for this research – Economic, Social and so on. In terms of Economic Perspective, Anderton (2008) stated that the globalisation brings financial opportunities to have an equal treatment of economic welfare to everyone in the world. Alain Anderton (2008, p.602) provides the most frequent economic discussion in terms of globalisation. This can be related to the research questions of the research and help to develop the questions further. He provides two main economical questions.
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