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THE INTERNATIONALIZATION PROCESS

THE INTERNATIONALIZATION PROCESS. Int’l business dynamics Portfolios Cross-border entry decisions Int’l business development Int’l financial management Measuring int’l business performance*. Pressure:. Increasing int’l trade and business links. Trade liberalization. Int’l competition.

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THE INTERNATIONALIZATION PROCESS

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  1. THE INTERNATIONALIZATION PROCESS Int’l business dynamics Portfolios Cross-border entry decisions Int’l business development Int’l financial management Measuring int’l business performance*

  2. Pressure: Increasing int’l trade and business links Trade liberalization Int’l competition All size of firms may face competition from companies worldwide! Recognize critical change factors TO SURVIVE: React rapidly*

  3. International business dynamics • changing int’l environment and organizati-onal response • strategies crossing national border • increased int’l exposure • requiring co-ordination Most firms will never grow to be world wide competitor!*

  4. To be an international player • Critical mass • Gain from taking an international stance • Able to coordinate suppliers, distributors, functions, customers • Lower costs and brand awereness

  5. To be a domestic player • No critical mass • Missing abilities • Exploiting their unimpotance • Serving parts of the markets where • worldwide presence is not neccessary • Too small to interest the largest firms

  6. Bi-polarization: in many industries few large worldwide (regional) competitors lot of small nat’l competitors GROW to critical mass merge, aquisition, alliance Being big is not essential medium size players OTP, MOL Malév (?) Graphisoft Ikarus Sell, close down

  7. r No firm can persist in believing that international competition will not effect them! A local market may be regarded as part of the expanded home market of an international competition!*

  8. Pull factors Push factors expanding market lower cost resources labor regulation higher profitability local market saturation increasing cost low profit internal context: vision, organisational dynamics* Cross-border market entry decisions

  9. External triggers INTERNATIONALISATION Market penetration Industry competition Product extension Meta trends Restricted national market scope Intern’l business development Geographical expansion Product development Organizational dynamics Vision mindset RETRENCHMENT* Internal triggers Figure 2.1. Developing an international business strategy

  10. Left side: some companies may never attempt to enter cross-border markets • restricted geographical scope • misbelieve: not threatened by int’l competition • Right side: decide to pursue int’l business development • if initial int’l development successful: further entry of cross-border market - same steps as in the left • if failure or conditions worsened: retrench (temporary, permanent)*

  11. External triggers Internal triggers Restricted national market scope • META-level • Political • Economic • Ecological • Social • Technological • Organisational • crisis • Corporate • succession • Financial/ • business • performance • Internal • dissent INTERN’LISATION RETRENCHMENT* • INDUSTRY-level • Industry/competi- tive forces • Take-over, merger • Shareholder pressure International business development

  12. 1990: announced agreement to form strategic alliance 1991: exchange of cross-shareholdings Full merger proposed: by 1993 Failure shareholder: terms are unacceptable critics: chairman Gyllenhammer (1971- , style of manegement,preparations secretly, no info) Gyllenhammer forced resign with 4 board members Volvo: uncertain future small domestic market little product range difficulties in existing Volvo-Renault alliance Importance of internal factors!* Volvo-Renault proposed merger

  13. Equelibrium portfolio ST R U C T U R A L PRESSURE FINANCIAL PRESSURE High High adaptation High integration High adaptation Low integration Low adaptation High integration Low adaptation Low integration High Low

  14. Healthy portfolio ST R U C T U R A L I PRESSURE FINANCIAL PRESSURE High Low adaptation Low integration High Low

  15. No financial equilibrium portfolio ST R U C T U R A L I PRESSURE FINANCIAL PRESSURE High Low adaptation High integration High Low

  16. No strategic equelibrium portfolio ST R U C T U R A L I PRESSURE FINANCIAL PRESSURE High High adaptation Low integration High Low

  17. No equelibrium portfolio ST R U C T U R A L I PRESSURE FINANCIAL PRESSURE High High adaptation High integration High adaptation Low integration Low adaptation Low integration High Low

  18. Risk portfolio Predictability High REACTIVITY Low risk Average risk Average risk High risk High Low

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