STRAMA CH6

Globalization

The linkage between markets that exists across

national borders. The linkage may be economic,

financial, and social-in effect anything that leads

to increased interdependence among nations.

(Henry, 2008)

Levitt 1983

He stated that “A major driving force for convergence between nations is technology. It has created a world in which consumer’s world -wide desire standardized products.”

Douglas and Wind 1987

He said that “Success requires standardized products and global brands; organizations can make greater profits by adapting products and marketing strategies to suit individual markets.”

Firm-Specific Factors

These include the size of the firm and the international

appeal of the organization’s products. Larger firms will

internationalize more than smaller ones but some firms

maybe relatively small but the nature of the products

offering may have an international appeal such as

software products.

Unsolicited Proposals

This proposal may come

about from an organization being approached by

foreign government, distributors or customers.

Bandwagon Effect

Refers to organizations which

follow competitors who have gone international.

Attractiveness of the host country

The market size of

the country and favorable regime towards foreign

direct investment will be alternative to

internationalization.

Global Strategy

Multinational Strategy

International Strategy

Transnational Strategy

Exporting

is where organizations make goods and services in the home country and sell

them in other countries. This is done when an organization wants to limit its resource commitments abroad until it gains more local knowledge and develop capabilities.

Licensing

is another way of entering overseas market without committing a lot of

resources. The organization grants the rights to use its patent, trade mark or intellectual

property to a local company in return for a fee.

Franchising

This is a mode or form of licensing employed by many international companies such as

McDonald’s, Pizza Hut, and Subway etc. The franchiser agrees to transfer a package of

products, systems and services that it has developed to a franchisee for a fee. The franchisee

provides local market knowledge and entrepreneurship.

JOINT VENTURES AND STRATEGIC ALLIANCES

exist when two organizations form a separate independent company in

which they own shares equally. Strategic alliances take place when two or more

separate organizations share some of their resources and capabilities but stop short of

forming a separate organization.

WHOLLY OWNED SUBSIDIARIES

When an organization chooses to have local control over its operations abroad, it will

choose a wholly owned subsidiary as its market entry mode. There are two types of

Foreign Direct Investment (FDI):

1. Greenfield site where the firm sets up a new operation in a foreign country

2. Firm may acquire an existing organization abroad