The classic internationalisation process
Export through an agent or distributor => Export through a sales rep or a sales and logistics subsidiary => Local assembly or packaging => Foreign direct investment
From a passive exporter to and active marketeer
- gradual process
- Learning and experience curve
What influences the choice of an export market?
- vicinity (location)
- cultural identification
- past experience
- opportunity (e.g. an export contract)
- rational analysis – market research (?)
Traditional motivations - market entry
- Need to secure key supplies
- Market-seeking behavior
- Access to low-cost factors
Emerging motivations
- Scale economies
- Increasing R&D investments
- Shortening product life-cycles
=> global interconnected structures - Scanning opportunities and learning on a global scale
- Competitive positioning (cross-subsidization)
Born global Phenomenon
“Instant international”
“Micronational”
“International new venture”
Greenfield
Creating a new operation in a foreign country from the ground up
Where to locate - which analysis
Scanning, detailed analysis
Scanning location
- compare available statistics
- Long list of countries
- take into account business critical variables
- Quantitative information
Detailed analysis
- Short list of countries
- visits to the countries together with local distributors, interviews with analysts, evaluation of possible partners
- Qualitative information
Escalation of commitment
The longer and more resources are invested in the analysis of a given alternative, the more probable it becomes to choose for that alternative, regardless of its merits
too much invested to quit
The assessment of alternative countries/markets must contemplate
- Opportunities for sales expansion
- Needs of allocation of resources
- Risks
- Costs
Information for decision - Opportunities for sales expansion
Assessment of
- economic and
- demographic variables, such as
- product obsolescense,
- prices,
- competitors,
- social inequalities,
- cultural factors,
- consumer tastes.
Information for decision - Needs of allocation of resources
- labour costs,
- availability of technicians,
- loyalty of agentsand distributors,
- quality of infrastructures,
- transports and communications,
- availablity of warehousing,
- government attitudes (national and municipal).
Information for decision - risks
Assessment of political risk, forex risk, operational risk, regulatory risk, legal risk (litigation, independence and effectiveness of courts of justice).
Which resource allocation decision is essential to the success of internationalization
- Human resources
- Technical resources
- Financial resources
- Company infrastructure
3 Decisions - Location factors
- location of sales, production, and administrative and auxiliary services, such as R&D
- Sequence for entering different countries
- portion of resources and efforts to allocate to each country where they operate
