Firm Internationalisation, De-internationalisation and Re-internationalisation

Question 1

What is firm internationalisation? Briefly discuss each of the dimensions of internationalisation as described by Welch and Luostarinen (1988).

Answer 1

Internationalisation is the firm’s process of initiating and maintaining its involvement in international business activities.

1. Foreign operation methods - How:
   - Agents, subsidiaries, licensing, franchising, management contracts
2. Sales objects - What:
   - Goods, services, know-how, systems
3. Target markets - Where:
   - Political / cultural / physical distance differences
4. Organisational capacity:
   - Organisational structure: Export department, international division
   - Personnel: International skills and experience, training
   - Finance

Question 2

‘There is a wide range of potential paths any firm might take in internationalization’ (Welch and Luostarinen, 1988). Based on this statement, explain the pattern of internationalisation. Provide examples.

Answer 2

The pattern of internationalisation is a process of evolutionary, sequential build-up of foreign commitments over time.

Swedish and Finnish companies do this by building up activities in foreign markets, whereas other companies use foreign direct investments.

Question 3

What is firm de-internationalisation? Is de-internalisation always a bad decision? Why?

Answer 3

De-internationalisation is any voluntary or forced actions that reduce a company’s engagement in or exposure to current cross-border activities.

De-internationalisation is not always a bad decision as it is a natural outcome of internationalisation since companies do not live forever. Furthermore, if an international company is experiencing low profits it is better to leave the market.

Question 4

Why do firms re-internationalise? Briefly discuss the process of re-internationalisation.

Answer 4

Re-internationalisation is the re-engagement in international operations by firms which have previously exited.

Key drivers of international re-entry:

• The assets and liabilities are generated by international activity prior to exit
• The outcome of the processes of exit
• Time-out and attempted re-entry
• The array of new, internationally relevant influences that come to bear on a company’s situation during the period beyond the exit

The process of re-internationalisation:

• New company and domestic operations
• International start
• Complete international withdrawal
  
  • Company ceases operations
  • Company sold: new owners
  • Company maintains domestic operations
• Re-internationalisation