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What motivates companies to expand their operations internationally?
- The need to secure key supplies (e.g., Aluminum, rubber plantations, and oil fields)
- Market-seeking behavior
- Access low-cost factors (i.e., labor and capital)
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Explain market-seeking behavior as a motivation for international expansion?
- A trigger to expand based on a company's intrinsic advantage giving it a competitive advantage in offshore markets
- Common in tech and brand recognition
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What are the means in which a firm may expand their overseas presence?
- Through modes such as...
- Exports
- Licensing
- Joint ventures
- Wholly owned subsidiaries
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How do firms expand their overseas presence through exporting?
They do it in stages by first doing minor exports, establish production in the new location, and then set-up exports from that location.
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What are management mentalities?
Their embedded attitudes, assumptions, and beliefs
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What is a multinational enterprise (MNE)?
Companies that have substantial, direct investment in foreign countries and actively manage and regard those operations as integral parts of the company, both strategically and organizationally.
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What are the stages of an internationalization process?
- Development in home market with minor exports
- Production facilities setup in new country to compete more effectively
- The new subsidiaries become exporters and newer developed countries become importers
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What set of motivational factors emerge after MNEs already have international sales and production operations?
- Increasing scale economies
- Ballooning R&D investments
- Shortening product life cycles
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Explain an MNE's global scanning and learning capability as a factor to its international strategy.
A company whose international strategy was triggered by a technological or marketing advantage could enhance that advantage through the scanning and learning potential inherent in its worldwide network of operations.
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What is a benefit of already being a multinational enterprise?
Competitive positioning
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What are some prerequisites for internationalization?
- Foreign countries that provide the motivation for the company to invest there
- Strategic competencies to counteract relative unfamiliarity with foreign markets
- Organizational capabilities to achieve better returns from leveraging its strategic strengths internally
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What is the Uppsala model?
- A learning model of internationalization
- Commits resources to the foreign market and gains market knowledge
- This market knowledge allows the company to evaluate current activities and determine further commitments
- The cycle repeats
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How can you shortcut the Uppsala model?
Invest in or acquire local partners to build up market knowledge
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How would you describe wholly owned subsidiaries as an approach to foreign market strategy?
High level of control required over foreign activities and a high amount of resources committed to the foreign market
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How would you describe joint ventures and exporting as an approach to foreign market strategy?
Moderate level of control over foreign activities and moderate amount of resources committed
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How would you describe franchising and licensing as an approach to foreign market strategy?
Moderate level of control over foreign activities and low amount of resources committed
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How would you describe indirect exporting as an approach to foreign market strategy?
Low level of control over foreign activities and low amount of resources committed
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Describe the international mentality.
When the company's overseas operations act as distant outposts whose main role is to support the domestic parent company in different ways (e.g., contributing incremental sales, domestic manufacturing operations).
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What is the multinational mentality?
It is a more flexible approach to a company's international operations by modifying their products, strategies and even management practices country by country.
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What is a global mentality?
Thinking in terms of creating products for a world market and manufacturing them on a global scale in a few highly efficient plants, often at the corporate center.
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What is the transnational mentality?
- When a company becomes more responsive to local needs while capturing the benefits of global efficiency.
- Resources and activities are dispersed by specialized, to achieve efficiency and flexibility at the same time.
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