Summary Book Managing Internationalization KULeuven MBA ()

CHAPTER 2: INITIATION OF INTERNATIONALIZATION

Internationalization motives

Internationalization motives = the fundamental reasons – proactive and reactive – for
internationalization

Pro-active motives are

- Profit and growth goals
- Managerial urge
- Technology competence/unique product
- Foreign market opportunities
- Economies of scale
o Boston Consulting Group showed that a doubling of output can reduce
production costs by up to: 30%
- Tax benefits

Reactive motives are
- Competitive pressure
- Excess capacity
- Extend sales of seasonal products
- Proximity to international customers/psychological distance
o Psychic distance = the individual manager's perception of the differences
between the home and the foreign markets
o
- Domestic market: small and saturated
- Unsolicited foreign orders

Triggers of export initiation (change agents)

International triggers = internal or external events taking place to initiate internationalization

Internal triggers

- Perceptive management
- Specific internal event
- Importing inward internationalization
o Outward internationalization = exports as a preceding activity for later entries
in foreign markets
o Inward internationalization = imports as a preceding activity for later entries in
foreign markets




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,External triggers

- Market demand
- Network partners
- Competing firms
- Trade associations and other outside experts
o Export agents (qualify as experts in global marketing)
o Governments
o Chamber of commerce
o Banks and other financial institutions
- Financing

Information search and translation

______ are perhaps the most critical factor in the initiation of the internationalization process
in the SME

- Information and knowledge

At the most basic level, knowledge is created by: individuals

Internationalization barriers/risks

Barriers hindering internationalization initiation

Factors that hinder the initiation of internationalization

- Insufficient finances
- Insufficient market knowledge
- Lack of foreign market connections
- Lack of export commitments
- Lack of foreign channels of distribution
- Lack of productive capacity to dedicate to foreign markets
- Cost escalation due to high export manufacturing, distribution and financing
expenditures
- Management emphasis on developing domestic markets

Barriers hindering the further process of internationalization

The critical barriers in the process of internationalization may be divided into:

General market risks (1)

- Comparative market distance (= language and cultural differences)
- Adaptation to foreign markets
- Competition from other firms in foreign markets
- Adapting products and services to new local conditions
- Difficulties in finding the right distributor in foreign markets
- Differences in product specifications in foreign markets
- Complexity of shipping services to overseas buyers




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,Commercial risks (2)

- Exchange rate fluctuations when contracts are made in a foreign currency
- Failure of export customers to pay due to contract dispute, bankruptcy, refusal to
accept the product or fraud
- Delays and/ or damaged in the export shipment and the distribution process
- Difficulties in obtaining export financing

Political risks (3)
- Complexity of trade documentation
- Foreign government restrictions
- National export policy
- Lack of tax incentives for companies that export
- Civil strife, revolution, wars disrupting foreign markets

De-internationalization

De-internationalization = a process where the multinational company shifts to lower
international presence

Other

What was Blake Mycoskie's biggest challenge when he started up TOMS Shoes in Santa
Monica in 2006?
- He did not own the company's production facilities

Global strategy options include:
- Multiple withdrawal
- Individual withdrawal
- Global strategy
- Multi-domestic

The main reason(s) for Elvis Presley Enterprises' (EPE) internationalization was/were:
- Creating long-term profit for EPE and maintaining Graceland

To succeed in global marketing, the firm has to:

- Overcome export barriers

Among the main reactive reasons for Haier's Group internationalization was/were:
- The competitive pressures and the saturation of its domestic market

Following its declining profits throughout the 1990s, BT's new defensive strategy has meant
that the company had to:
- Withdraw from multiple interdependent international markets

In international marketing, brands:
- Personify quality and consistency across markets

The expression 'globalization of production' suggests that:
- Many organizations base individual productive activities at the optimal world locations
for the particular activities
- Many products are assembled in one country from parts that may have been
produced in a number of countries



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, Compared to LSEs, SMEs often experience a low degree of interdependence between
markets.
- True

If equipment for production is not fully utilized, firms may:

- See expansion in international markets as a possibility for distributing fixed costs

Westhead et al. (2002) found the following main reasons for firms starting to export

- Being contacted by foreign customers who place orders
- One of order (no continuous exporting)
- The availability of foreign market information
- Part of the growth objective of the firm
- Export markets are actively targeted by the key founder/owner/manager

The results of the Westhead et al. (2002) study showed that the bigger the firm:

- The more likely it would be to cite proactive stimuli/motives

Japanese firms are known to exploit foreign market opportunities primarily by using:

- Penetration pricing strategies

____ is the fundamental reason for exporting

- Making money

Forsman et al (2002) showed that the three most important triggers for starting up operations
internationally were

- Management's interest in internationalization
- Foreign inquiries about the company's products and services
- Inadequate demand in the whole markets




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