Internationalisation Flashcards
first mover advantage and disadvantage
Adv: strong brand, capture demand and build sales volume, tie customers, establish social ties
Disadv: time spent for do’s and don’s, building infrastructure, train customers
Foreign Direct Investment (FDI)
- Acquisition: quick, obstructs competitors, local experience <> varies in success, may overpay, synergies may take a while, difficult integration
- Greenfield: more control, fewer cultural issues <> slow, obstructed by competitors
- Joint Venture: middle ground solution <> partner choice is crucial, legal & cultural constraints
(4. Licensing: low investments, low risk, overcomes restrictive barriers <> lack of control, may create competitor, reduces flexibility)
Reshoring
when a company decides to bring back its business operations -> reduce cost, improve quality control, respond to changing markets
OLI Paradigm (Dunning)
Ownership Advantage (O)
-> specific advantages that a company possesses -> capable of outperforming competitors
Location advantage (L)
-> Benefits a company can gain from being physically present in a country (market size, demand, resources
Internationalisation Advantage (I)
-> Firm’s ability to coordinates, control, manage its foreign operations directly
Internationalisation Process Model (UPPSALA Model)
Explains how firms grow and expand internationally
1. Incremental steps -> first in a nearby country then further away
2. Market knowledge -> First acquire knowledge of the market
3. Learning by doing -> Expansion driven by learning from previous international activities
4. Market Commitment -> Establishing subsidiaries or Joint Ventures with growing confidence
5. Firm-specific advantages -> Ownership advantage gives confidence to expand
6. Psychic Distance -> perceived cultural distance influences willingness to expand
CAUTION: only applicable in small/medium sized manufacturing companies, that are at the initial stage of internationalization -> market-seeking firms
