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*07/16/96*##Internationalization(sometimes shortened to "I18N , meaning "I - eighteen letters -N") is the process of planning and implementing products and services so that they can easily be adapted to specific local languages and cultures, a process called localization .
Globalizationis a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.
Both of them are forms of marketization
The debate: Is internationalization good or bad? And for whom?
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*07/16/96*##Outward internationalization concerns the practices and strategies that an enterprise undertakes to dispose of its outputs abroad (e.g. exports, R&D activities abroad)Inward internationalization deals with the activities related to the procurement of inputs (products/services and capital) from markets abroad (e.g. imports, foreign capital financing)The two categories are not isolated from each other
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*07/16/96*##Development of regional economic integration between countries (e.g. EU, NAFTA, ASEAN) Increasing international cooperation between firmsIncreasing homogenization of consumer tastes worldwide (?)Increasing mobility worldwide between capital, management and labour
Dissolution of former Soviet Union group of countriesDeclining trade and investment barriersAdvanced information, technological, communication and transportation systems These (last) three appear to be the most important reasons driving internationalization nowadays
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Higher sales / profitsNew marketsUnique product (& value to the customer)Technological know-howGood information on foreign marketsNetworks in foreign marketsManagements urge for internationalizationPursuit of economies of scale (experience effects)Leveraging core competencies worldwideReputation/brand name of a firmAccess worldwide to technology/technological know-how, factors of production (location economies), capitalRisk diversification & economies of scopeSeek lower taxesPursuit of international learning
Tax-related benefits offered by (home/host) governmentPressures from competition at homePressures from competition abroad Saturated demand at homeFollow the client
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*07/16/96*##Internationalization presents significant challenges due to differences across countries in political, economic/technological, legal, cultural, social and religious systems
Political systems may fall towards the collectivism vs. individualism spectrum
democracy vs. totalitarianism spectrum
Economic systems may fall towards the market or state-directed economy spectrum
Legal systems are different (e.g. code vs. common law) and may affect international activities of the firm in aspects such asProperty rightsIntellectual propertyProduct safety and liability
Economic development between countries is different. Internationalized firms should consider aspects such as GNP per capita, GNP growth, degree of privatization, deregulation etc.
Level of education in a country is also significant (e.g. Japan since 1945)
Geography of country can be important landlocked countries may grow slower than coastal countries; tropical countries may grow slower than those in the temperate zone
Economic growth appears to be strong in countries that are committed to a free market system and strong property rights
Religion affects ethical standards and beliefs towards consumption, business and entrepreneurship in any countryE.g. the protestant work ethic supports the fundamental beliefs of capitalismIslam is mainly concerned with social justice and is critical of those who earn profit through the exploitation of others
*07/16/96*##The attractiveness of a country as a market/investment site depends on balancing the likely benefits against the costs & risksBenefits/costs (munificence: opportunities for growth / hostility of a country): depend on size of the marketpurchasing powergrowth prospects (& economic system and property rights regime)level of competitionpolitical payoffs required for market accesssupporting infrastructurecost of adhering to local laws/regulationspsychic distance (Johanson & Vahlne, 1977)
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*07/16/96*##Exports (trade)Foreign direct investment (FDI)FDI occurs when a firm invests directly in value-added activities in a foreign countryOnce a firm engages in FDI, it becomes a multinational (MNE)Foreign portfolio investment is investment in foreign financial instruments whereby no significant equity stake in a foreign business entity takes place
14 (Foreign Direct Investment - FDI)
(Licensing) ( )(Joint Ventures - JVs)(wholly-owned subsidiaries - WOS)/
*07/16/96*##Licensing (franchising) represents a hybrid between exports and FDIIn licensing we have the exporting of intangiblesFDI can be joint ventures (strategic alliances) or wholly owned subsidiariesFDI can occur through mergers/acquisitions or greenfield investments
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*07/16/96*##An enterprise (a) comprising entities in two or more countries, regardless of their legal form and fields of activities of those entities, (b) which operates under a system of decision-making permitting coherent policies and a common strategy through one or more decision-making centres, in which the entities are so linked , by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the activities of the others, and, in particular, to share knowledge, resources and responsibilities with others.
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17(Licensing)(Joint Ventures - JVs)(wholly-owned subsidiaries - WOS)
*07/16/96*##AdvantagesLow costsMay help a firm achieve experience curve (scale) and location economiesDisadvantagesLack of controlLack of involvement in the foreign market
18 (Licensing-Franchising) (Licensing)(Joint Ventures - JVs)(wholly-owned subsidiaries - WOS)
*07/16/96*##AdvantagesNo development costs and risks associated with opening a foreign marketSpeed of opening-up a foreign marketDisadvantagesLimited control over value-added activities required for realizing experience curve and location economies (achieved through FDI)The firm cannot efficiently coordinate strategic moves across countriesRisk associated with licensing know-how
19(Join Ventures)(Licensing)(Joint Ventures - JVs)(wholly-owned subsidiaries - WOS)
*07/16/96*##AdvantagesBenefit from a local partners knowledgeShare the development costs and risks of opening a foreign marketPolitically acceptableDisadvantagesGive control over critical competencies to foreign partnersNo tight control compared with WOS (lack of global strategic coordination)May be hard to manage over time
20(Wholly-Owned Subsidiaries)(Licensing)(Joint Ventures - JVs)(wholly-owned subsidiaries - WOS)
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*07/16/96*##AdvantagesControl and protection of valuable core competenciesAbility to engage in international strategic coordination, and realize location and experience economiesDisadvantagesHigh costExposure to high risk (dangers: confiscation, expropriation, domestication)
21 (Jarillo & Martinez, 1990)
*07/16/96*##Within the MNE system subsidiaries may have varying levels of discretion/ autonomy/ decision-making powerThis is also influenced by characteristics of the host market, the industry and competencies of the subsidiaryTherefore we can have typologies of subsidiary roles
22 (Bartlett & Ghoshal,1986)
Philips (UK)Ericsson (Australia)Panasonic (Germany)Proctor & Gamble (Austria, ESP, NL& Belgium)
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*07/16/96*##International: first stage, export (down left)Multi-domestic: focus on areas (down right)Global strategy: emphasis on the product (up left)Glocal: matrix with different areas segmentation, combined with products segmentation, forming a matrix (centre). (2x2 matrix)Transational: more functions, product groups, customer groups are transforming glocal to a network of local places that has no hierarchy, by the fact more and more people are responsible for more tasks and interact together
Large entrepreneurial multinationalCan tap into pockets of innovation, technology, and markets located around the worldDevelops extensive systems to encourage organizat