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Reasons for Entering International Markets

1.4 Exporting, International Trade and International Business

Associate Prof. Nitin Kumar 2013-14

Associate Prof. Nitin Kumar 2013-14

Growth

Why should a firm enter International markets?

Why should a firm enter International markets?

Associate Prof. Nitin Kumar 2013-14

Associate Prof. Nitin Kumar 2013-14

Profitability Growth Growth

Profitability Achieving economies of scale

Why should a firm enter International markets?

Why should a firm enter International markets?

Associate Prof. Nitin Kumar 2013-14

Associate Prof. Nitin Kumar 2013-14

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Profitability Growth Achieving economies of scale Growth

Profitability Achieving economies of scale

Why should a firm enter International markets?

Risk Spread

Why should a firm enter International markets?

Risk Spread

Access to imported inputs

Associate Prof. Nitin Kumar 2013-14

Associate Prof. Nitin Kumar 2013-14

Profitability Growth Achieving economies of scale Growth

Profitability Achieving economies of scale

Why should a firm enter International markets?

Risk Spread

Why should a firm enter International markets?

Risk Spread

Access to imported inputs Uniqueness of Product or services

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Marketing opportunities due to Life cycle

Access to imported inputs Uniqueness of Product or services

Associate Prof. Nitin Kumar 2013-14 10

Profitability Growth Achieving economies of scale

Dimensions of IB

Spreading R&D costs

Why should a firm enter International markets?

Risk Spread

Marketing opportunities due to Life cycle

Access to imported inputs Uniqueness of Product or services

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Globalization of MARKET PRESENCE

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Dimensions of IB

Dimensions of IB

The extent to which a company targets customers in all major markets within its industry throughout the world.
Associate Prof. Nitin Kumar 2013-14

Example: IBM with over 40% of its sales coming from outside USA.
Associate Prof. Nitin Kumar 2013-14

Globalization of MARKET PRESENCE

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Globalization of MARKET PRESENCE

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Dimensions of IB

Dimensions of IB

The extent to which a company is accessing the most optimal locations for the performance of various activities in its supply chain.
Globalization of MARKET PRESENCE
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Globalization of SUPPLY CHAIN

Globalization of SUPPLY CHAIN

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Scope of IB
Example: Toyota produces about 1/3 of its cars in affiliates spread over America, Europe and Asia.

Scope of IB
Globalization of CAPITAL

Globalization of SUPPLY CHAIN

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Globalization of SUPPLY CHAIN

Associate Prof. Nitin Kumar 2013-14

Globalization of MARKET PRESENCE

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Dimensions of IB
Globalization of CAPITAL

Dimensions of IB
Globalization of CAPITAL

-Example: -Access to optimal sources of capital on a worldwide basis.

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-China.com (an ISP) is listed on Nasdaq although its Market base and operations are centered primarily around HK and China.
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Dimensions of IB
Globalization of CAPITAL

Dimensions of IB
The ability of the company to understand and integrate diversity across cultures and markets.
Globalization of CORPORATE MINDSET Globalization of MARKET PRESENCE

Globalization of CORPORATE MINDSET Globalization of SUPPLY CHAIN

Associate Prof. Nitin Kumar 2013-14

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Associate Prof. Nitin Kumar 2013-14

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Example:

Dimensions of IB

Stages of Internationalization Process The internationalization process typically has 4 stages in the increasing order of:
1. Commitment, 2. Risk, 3. Control, and 4. Earning Potential.
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Highly Globalized Human Capital, Strong Worldwide Corporate Culture, and Diverse composition of leadership in terms of nationality.
Globalization of CORPORATE MINDSET

Associate Prof. Nitin Kumar 2013-14

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Stages of Internationalization Process

Stage 1. No regular export activities. Stage 2. Export via independent representatives (agents). Stage 3. Establishment of one or more sales subsidiaries. Stage 4. Establishment of production facilities abroad.
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