Chapter 1 Flashcards
Internationalization (strategic int. marketing)
What is internationalization
the cross-border business activities of a company
What activities does internationalization refer to?
-import
-export
-establishing sales
-establishing production facilities
What is globalization?
-increase in international integration of national economies and cross border activities of companies
What are objectives/motives of internationalization?
1 maximize profit
-personal motivations of
management
-creation of competitive advantage: value creation: cost reduction, overall increase in value; value distribution
-utilization of competitive advantage
Reasons for engagement abroad
-sales: develop new sales markets,
establish/expand company
offices, competitive situation,
proximity to customer
-procurement: development of
procurement markets, good local
supplier situation
-production: establishment /expansion production facilities and branch for outsourcing activities
general: use of better framework conditions, additional pillar of operations during crisis, better exchange rate better R&D abroad
What are market entry strategies?
organizational paths that company chooses when offering products or services in foreign markets
What are methods of market entry strategies?
-export alliances: indirect exports, export syndicates/export consortia, direct exports
-provision of services abroad: direct investment (fully controlled foreign companies, international joint ventures), international contracts (licensing agreements, franchising, made-to-order production, management agreements)
What is the eclectic theory framework ?
Ownership advantages, Location advantages, Internationalization incentive advantages.
-framework used by companies to determine to pursue foreign direct investment
Whats questions to ask for ownership advantage?
-Do I have a strong brand name with great reputation?
-Do I have the capital resources?
-Do I have the management and organizational and technological capabilities?
-Can I achieve economies of scale?
If no, then remain domestic
What questions to ask for location advantages?
-Does the new location have availability of cheaper raw material, low cost skilled labor, lower rental & tax rates?
If no, Export from home country
What are question to ask for internationalization advantage?
-Can I avoid search and negotiation costs
-Can I protect company’s rep?
-Can I ensure product quality?
-Can I avoid problems when I draft renegotiating contracts?
If no, then consider licensing
What are disadvantages of Dunning’s eclectic theory?
- no explanation of strategic approach (doesn’t explain why companies choose different market strategies at the same time)
-theory doesn’t apply to service companies
What are forms of international market entry strategy?
-exports
-direct investment
-mergers and acquisition
-cooperations
What are exports?
- a good or service sold abroad
What are the two forms of export?
-direct export
-indirect export
When is export unsuitable?
-low level demand for product
-a company already has monopolistic market position
-company has problems raising capital
-political or legal conditions prohibit production
Advantages of export as market entry strategy?
limited knowledge of foreign market is required
Disadvantages of export as market entry strategy?
-increased capital commitment and costs (establishment of export department, foreign sales department)
-increased need for qualified personnel
-increase of foreign specific risks
What are export communities?
-voluntary associations of legally and economically independent companies interested in exporting.
-transitional stage between indirect and direct exports
What are direct investments?
-cross-border investments intended to influence business activities of existing or new company
-serve to establish and expand production facilities abroad
-take the form of joint ventures
What are fixed assets
tangibles (e.g. property, equipment)
What are two types of joint ventures?
-contractual joint venture
-equity joint venture
What are equity joint ventures?
bilateral cooperation that results from establishment of new, independent company
What are contractual joint ventures?
classified as cooperations
-there is no merger of companies. purely agreements under the law of obligations
