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:
Trade liberalization
Int’l competition
Increasing int’l
trade and
business links
All size of firms may face competition from
companies worldwide!
Recognize critical change factors
TO SURVIVE:
React rapidly*
2
International business dynamics
• changing int’l environment and organizational response
• strategies crossing national border
• increased int’l exposure
• requiring co-ordination
Most firms will never grow to be world wide
competitor!*
3
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
4
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
5
Bi-polarization:
few large
worldwide (regional)
competitors
in many industries
GROW to critical mass
lot of small nat’l
competitors
Being big is not essential
merge, aquisition,
alliance
medium size
players
OTP, MOL
Malév (?)
Ikarus
Graphisoft
Sell, close down
6
No firm can persist
in believing
r
that international competition
will not effect them!
A local market
may be regarded
as part of the expanded home market
of an international competition!*
7
Cross-border market entry
decisions
Pull factors
expanding market
lower cost
resources
labor
regulation
higher profitability
Push factors
local market saturation
increasing cost
low profit
internal context: vision, organisational dynamics*
8
External triggers
INTERNATIONALISATION
Market
penetration
Product
extension
Industry
competition
Meta trends
Restricted
Intern’l
national
business
development
market scope
Geographical
expansion
Product
development
Organizational
dynamics
Vision
mindset
RETRENCHMENT*
Internal triggers
Figure 2.1. Developing an international business strategy
9
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)*
10
External
triggers
Restricted
national
market
scope
Internal
triggers
META-level
•
• Political
• Economic
•
• Ecological
• Social
• Technological INTERN’LISATION RETRENCHMENT*•
INDUSTRY-level
•Industry/competitive forces
•Take-over, merger
•Shareholder
pressure
International
business
development
Organisational
crisis
Corporate
succession
Financial/
business
performance
• Internal
dissent
11
Volvo-Renault proposed merger
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!*
12
Equelibrium portfolio
S
T
R
U
C
T
U
R
A
L
P
R
E
S
S
U
R
E
FINANCIAL PRESSURE
High adaptation
High adaptation
High integration
Low integration
Low adaptation
Low adaptation
High integration
Low integration
High
High
Low
13
Healthy portfolio
S
T
R
U
C
T
U
R
A
L
I
FINANCIAL PRESSURE
P
R
E
S
S
U
R
E
High
Low adaptation
Low integration
High
Low
14
No financial equilibrium portfolio
S
T
R
U
C
T
U
R
A
L
I
P
R
E
S
S
U
R
E
FINANCIAL PRESSURE
High
Low adaptation
High integration
High
Low
15
No strategic equelibrium portfolio
S
T
R
U
C
T
U
R
A
L
I
FINANCIAL PRESSURE
High
High adaptation
Low integration
P
R
E
S
S
U
R
E
High
Low
16
No equelibrium portfolio
S
T
R
U
C
T
U
R
A
L
I
FINANCIAL PRESSURE
High adaptation
High adaptation
High integration
Low integration
P
R
E
S
S
U
R
E
High
Low adaptation
Low integration
High
Low
17
Risk portfolio
Predictability
R
E
A
C
T
I
V
I
T
Y
High
High
Low
Average
risk
risk
Average
High
risk
risk
Low
18