developing, producing and selling products and services in
most countries and regions of the world.
the world, but often limited to a certain region (e.g. Europe).
half of its total sales come from outside its home
come from outside its home continent.
-exploit the knowledge of the headquarters (home organizations) through worldwide diffusion (learning) and adaptations
-transfer knowledge and ‘best practices’ from any of its markets and use them in other international markets
-Reverse Knowledge Flow
-Lateral Knowledge Flow
-relationship management network
-standardized worldwide technology
-global cost drivers
barriers such as import taxes, safety regulations, customs costs
products, assured supply and service systems, uniform
characteristics and global pricing
chain, including suppliers, customers, inter-departmental, which
helps to reduce market uncertainties
, which leads to more homogeneity in the demand and usage
rest of the world” approach anymore. Products& services
diffuse over the countries at the same time (Apple)
homogenous cultures who desire similar kinds of products
AND at the same time with others
communication methods make it easier for people to
search for products and access them.
companies to expand their operations and benefit from
higher volume / lowers costs / synergy
Although globalization prevails, people still keep their
grouping of countries into regional clusters based on
geographic proximity (the European Union, EU or the North
American Free Trade Agreement, NAFTA)
-Trade barriers that are removed from individual countries
are reproduced for a region and a set of countries.
differences and with a hint of ethnocentrism promoting
barriers to standardization / global market concept
operations to other country/countries.
-technology competence/unique product
-foreign market opportunities/market information
-economies of scale
-domestic market:small and saturated
-unsolicited foreign orders
-extend sales of seasonal products
-proximity to international customers/psychological distance
-specific internal event
-importing as inward internationalization
-outside experts (export banks, agents, governments)
-lack of foreign market connections
-lack of export commitment
-Lack of capital to finance
expansion into foreign markets
-Lack of productive capacity to
dedicate to foreign markets
-Lack of foreign channels of
-Management emphasis on
developing domestic markets
-Cost escalation due to high
distribution and financing
• Language and cultural differences
• Difficulties in finding the right distributor
• Differences in product specifications
• Complexity of shipping services
• Failure of export customers to pay due to contract
disputes, bankruptcy, refusal to accept product or fraud
• Delays and/or damage in the export shipment and
• Difficulties in obtaining export financing-
• Foreign exchange controls
• High foreign tariffs
• Civil strife, revolution and wars
• Lack of tax incentives
• National export policy
• High value of domestic currency relative to export markets
• Complexity of trade documentation
-Diversify overseas markets
-Insure risks when possible
-Export credit insurance
-Structure export business so that buyer bears most risk
-Exchange rate risk management
forward contracts, future contracts, swaps and options–
-Transaction cost Analysis Model (TCA)
-the Network Model
-Companies initially tend to expand their operations into
geographically close countries.
-They follow a sequential pattern of entry with progressively
deepening their commitment to each market.
– Export via independent reps (export modes)
– Establishment of foreign sales subsidiary
– Foreign production/manufacturing units
deepening of commitment to each market
commitments and can take larger internationalisation steps
– When market conditions are stable and homogeneous, relevant
market knowledge can be gained other than by experience
– When firm has considerable experience from markets with similar
conditions, it can be generalised to specific market – Experiential knowledge can be obtained through grafting which
means acquire local units that has necessary market knowledge
– Too deterministic (foreign market conditions are sometimes such
that you cannot plan and follow these steps one after another) – Leapfrogging- entering ‘distant’ markets in terms of psychic distance
at an early stage – Globalization- Psychic distance decreased
seller, which is explained by opportunistic behaviour is
• The friction between buyer and seller arises due to
• A party to an exchange has the potential to behave
opportunistically (i.e., engage in self-seeking interest
behaviour with guile, lying, stealing, or violating
• It is a theory which predicts that a firm will perform
internally those activities it can undertake at lower
cost through establishing an internal (‘hierarchical’)
management control and implementation system while
relying on the market for activities in which
independent outsiders (such as export intermediaries,
agents or distributors) have a cost advantage.
• Focussed on [lowering] the cost of transactions caused
through friction between buyers and sellers
+ ex post costs (monitoring + enforcement costs)
Firms internalize (vertically integrate) to reduce transaction
buyer and seller is higher than through an internal hierarchical
system then the firm should internalize
opportunistic, or zero-sum game. Firms can turn it into winwin
situation between them and their partners.
• Model excludes “internal” transaction costs. There can also
be high friction costs between the head office and its sales
• Model is not applicable for SMEs. As mostly lacking resources
and knowledge, they are confined to externalization, building
trust-based relationships with their partners.
• Model focuses on transaction costs, and ignores “production
cost, such as R&D, manufacturing.
• THUS, most efficient choice of internationalization
mode is one that will minimize the sum of production
and transaction costs.
domestic network can be used as bridges to other networks in other
countries. So firstly domestic, then internationalized firm.
between several business actors.
Actors are autonomous and their relationships to each other are
flexible and may alter accordingly to rapid changes in the
is dependent on resources controlled by other firms.
any preceding long term internationalization period.
in the international market
produce, distribute service/products in international trade while
earning rising returns on its resources
industries with the value that it creates both for BtoB and BtoC
The state of competition and profit potential in an
industry depends on five basic competitive forces:
new entrants, suppliers, buyers, substitutes, and
existing market competitors.
superior quality and lower costs than its domestic and international