Business’s choice of entry modes in international market and its advantages and disadvantages Introduction Well known companies like Nike, Microsoft, Sony, Shell Group are just some of the big companies that went global and expanded their trading around the world, they are large businesses that operate internationally in many countries. Development of worldwide integration urges companies to reach out international markets and interact with foreign customers. Businesses focus on fulfilling the demand of the market by its products or services, besides their target is increasing profit, in order achieve these goals they favor to expand their work in a foreign market. Other reasons to internationalize their business may be to become …show more content…
How these modes were established and by whom will be defined in the following part. In 1977 Swedish researchers at Uppsala University came up with a model/theory how businesses should grow their activities in foreign market, this model explains that companies should select an entry mode by taking into consideration their own resources and exploring costs, and risks based on market nature. (Johanson and Vahnle, 2009) Researchers at Uppsala University in their empirical study found that Swedish firms mostly started their process of internationalization by exporting, initially companies had agents that represented them in foreign market, but these firms exported in countries that had little differentiation in culture, language and political systems from their home country, this was labeled in their model as physically close countries. Uppsala Model considers two types of knowledge objective and experience based knowledge, the model describes that after first entrance in foreign market businesses understands how to work in external country, and later they step by step increase level of internationalization to physically distant countries. (Johanson and Vahnle, 2009) But, can Uppsala model be applied to services? This model was mainly reliable for manufacturing industries; a paper with contrary arguments was published in 2008, providing two variables; environment-related and service specific, to question whether Uppsala model can be used for service
Stages of company Internationalization (Uppsala Model) 1. International Marketing – Ethnocentric Orientation 2. Multinational Marketing – Poly centric Orientation 3. Global marketing – Geocentric Orientation 4. Transnational Marketing – Glocal
In recent decades, internationalization has been more and more common in over the world. This is a great opportunity and challenge that many businesses can earn a lots new experiences and practice themselves when they work in a new environment. Also, internationalization is a good way for companies expand their power and reputation. So these companies or organizations might improve themselves with new knowledge which they learn from foreign countries in order to gain more profits and benefits.
The rapid pace of Globalization has led to a change in the global economy during the past several decades; it is believe that factors such as trade liberalisation, access to cheaper labour and resources, similarity of consumer demand around the world, and advances in technology and communication has widened the market of consumption, investment as well as production on a global scale. These globalization driven factors created new challenges and global competition for businesses around the world thus as a response many companies decided to expand their operation across national borders in order to be competitive. A company that operates their business in at least one country other than its country is called Multinational
This is beneficial to the company as it gives the business a stronger reputation around the world. The more international a company is, the more recognition it accrues. For example take Nike and Hyba, which are both athletic apparel companies. Instantly, Nike stands out because of the hype it gives off and the fact that almost everyone knows that brand since it is located all around the world. On the other hand, Hyba is only located in Canada. Thus, when given an American for example the opportunity to choose from the two brands, they are more likely to choose Nike as they would probably have heard of it, been to their stores and/or never heard of Hyba before. After Bean There, Drunk That expands to Finland and continues to grow, it becomes easier for them to expand to other countries. Thus, their chances of expanding to the rest of the world is higher once success is obtained one country at a time as progress does take
International marketing is an exceedingly difficult and challenging activity for a multinational corporation (MNC) marketer. According to Cateora, Gilly, and Graham (2013), “international marketing is the performance of business activities designed to plan, price, promote, and direct flow of the companies goods and services to consumers of users in more than one nation for profit” (p. 10). International marketing strategies and its efficiency assists in the expansion of an organization. The development of global markets was established by the needs of the consumer. Marketing strategies are extremely important to a firm when they decided to move out of the domestic arena. Accepting and applying
Consequently, these organizations are trying to reach new consumers to increase their customer base. The second most common motive is the opportunity of producing or offering a service cheaper in another company. This leads to a cost advantage. In addition, the companies can gain advantage in economy of scale and scope. Therefore, they safe production costs by producing a higher amount of their products, which is the third frequently used motive regarding to Nelly and Wach (2014, p.12). All motives are aiming to reduce the cost of production or finding new customers.
it is the most traditional and well established form of operating in foreign market. it is the marketing and sale of goods or services produced in a country to another country. (Hill,2009)
Globalization is the establishment of economic, political, social, military, scientific or environmental interdependence that span worldwide distances (Steiner). This process has evolved for hundreds of years. However, this trend has rapidly increased over the last century, primarily due the forces of an ever changing society, government, and business environment. Corporations are expanding their business operations all over the world and are evolving into multinational corporations. Companies choose to invest capital for starting, acquiring, or expanding their enterprise to another country predominately for a few factors. Investing capital in a foreign nation can lead to growth. By entering a new market, a new segment of consumers can be reached, leading to new potential customers (Steiner). In addition, corporations can seek efficiencies in a foreign nation. With different resources located all around the world, as well as, generally less strict regulations on business in developing countries, multinational corporations can take advantage of cheaper labor, economies of scale, and other resourcing efficiencies to reduce their overall costs (Steiner).
International marketing is an important factor in serving organizations to develop into becoming globally competitive. Companies who operate within domestic markets purely are having difficulties competing with a global organization. Therefore, what does it take to move an organization globally? According to Cateora, Gilly, and Graham (2013), “international marketing is the performance of business activities designed to plan, price, promote, and direct flow of the companies goods and services to consumers of users in more than one nation for profit” (p. 10). International marketing strategies and its effectiveness assists in the expansion of an organization. The development of global markets was
Organizations or firms will have many reasons why its imperial for the businesses to penetrate or enter global market, some of these reasons will include to increase profit margin, increase sales, expand the scope of the business at a global scale, and increase market competitiveness (Winters, 2015). To effectively accomplish the global business goals and objectives by any firm, the company will require an extensive detailed comprehensive global strategy to effectively accomplish their business goals.
◦ incremental → usually for small companies with fewer resources that wants to lower their risk preclude economies of scale.
It is vital to understand the internationalization process of small to medium-sized enterprise (SMEs) for them to compete internationally. There are various international approaches that companies can adopt in the process of internationalization. For example, Uppsala Internalization Model (U-Model), The Network Theory, Dunning’s Electric Paradigm and Transaction Cost Theory.
enables these industries to internationalize (Johanson and Mattsson 1988). Additionally, there is no recent research focusing on these industries after the globalization of services and the enhanced importance of services in the World and in Sweden. Finally, a case study approach has not been conducted yet in this matter. The Dissertation
Internationalization of the business nowadays apparently became a trend for the organizations to expand their market position and gain the competitive advantage among their contemporaries. The extent and nature of business activities are almost as diverse and comprehensive as the totality of the social and economic interest of a man. Various business activities acknowledged the opportunities that the internationalization may deliver. Through their ability and capacity to expand their business operations, internationalization is highly possible. For most of the time, the high degree of the competition under the umbrella of an industry and the number of competitors that are engaged in the
An international entry mode is an institutional agreement necessary for the entry of a company’s products, technology and human capital into a foreign country or market.