Unit 9.3 (not in paper 3)

Question 1

What has caused greater internalisation?

Answer 1

• Trade agreements
• Improvements in technology
• Improvements in transport

Question 2

Why is selling abroad more attractive?

Answer 2

• Larger target population -> opportunities for fast growth esp emerging economies eg India
• The opportunity to reduce risk -> if one sales market fall, they may be compensated by rising sales elsewhere

Question 3

Methods of entering international markets

Answer 3

• Exporting -> low level of commitment + low risk
• Licensing -> risk taken by firm that buys the license
• Alliances -> gives access to local expertise + shares risk but involves sharing profits too
• Direct investment -> greatest level of commitment from the domestic business, requires high funds + high risk

Question 4

Benefits of being a multinational:

Answer 4

• Direct access to local markets, overcome trade barriers
• Production closer to local customers, may improve speed of responses, may reduce environmental impact of transporting
• May involve subsidies from local gov, which helps reduce costs
• Spreads risks of being dependent on one country

Question 5

Influences of buying or selling abroad:

Answer 5

• Pressure to grow
• Pressure for low costs
• Availability of suitable resources locally

Question 6

Risks of internationalisation:

Answer 6

• Cultural differences
• Differences in negotiating + decisions making style
• Ethical standards
• Anti – globalisation feelings (local cultures are destroyed + big multinationals are exploiting local employees + businesses)
• Instability of the country

Question 7

Impact of internationalisation on the functions of the business

Answer 7

• Market research activities as wants to find out more about new markets + segments
• R&D as business develops new products for overseas market
• Have more access to far more suppliers all over the world, lower transport costs
• Production -> lower costs, better skills + availability of resources
• HR -> how + where to recruit, the rewards offered + how best to manage people

Question 8

Bartlett and Ghoshal

Answer 8

Local responsiveness (meeting requirements) vs global integration (how important to standardise product in order to operate efficiently)

Low LR + Low GI = international eg Mcdonalds -> from the centre
Low LR + high GI = global eg Pzifer -> products fairly standardised
High LR + Low GI = multi domestic eg Nestle -> strategy for every country
High LR + High GI = transnational eg Starbucks -> collaborate all around the world w each other