Theories of Internationalization in International Business

International Business
Theories of internationalization
business
Student name

International Business 1
Contents
Introduction....................................................................................................................2
Dunning eclectric paradigm Theory...............................................................................2
Kruger’s First mover advantage theory..........................................................................4
Vernon’s product lifecycle theory..................................................................................5
Comparison based on advantages between theories......................................................7
Comparison based on disadvantage between theories...................................................9
Conclusion....................................................................................................................10

International Business 2
Introduction
International business highlights those business activities, which are done across national
borders. It majorly focuses on the purchasing and selling of the goods, commodities, and the
services outside the geographical borders. In international business aspect there are numerous
benefits to the nation and firms such as, It encourage the nation to obtain the foreign
exchange, it also helps country to enhance its development prospects and further making
opportunities for employment (Cassiman, and Golovko, 2011). Other than this, it helps in
improving the profits of the organisations by selling products in nation where cost is high.
Lastly, international businesses helps organisation in enhancing the vision as it makes them
more aggressive and diversified (Shenkar, Luo, and Chi, 2014).
Dunning eclectric paradigm Theory
(Source: MBN, 2019)
This theory is based on the conceptual framework given by the eclectric paradigm, which
represents the improvement, and highlighting on all others transactions cost theory, including
the core business and its locations factors. This theory is also known as OLI model or OLI
structure (Dunning, 2013). This concept highlights that the trades are made within an

International Business 3
organization if the operation cost on the free market are complex than the inner costs. This
entire process is known as Internationalization (Verbeke, 2013).
In ownership: Ownership specifically highlights about the competitive advantage of the
companies who are engaged in foreign direct investment. In this if, an enterprise is having a
greater competitive advantage they will surely be more engaged in the foreign productions
(Dunning, 2015). Likewise, Amazon prime, there major competitive advantage is an
extremely efficient and accurate along with the fastest speed are their major priority.
Customers getting guarantee two days shipping on all products, which are the prime eligible.
Their competitive advantage is based on two major aspects one is the customers’ conditions
and secondly, encourages more purchases. Due to its speedy delivery as a competitive
advantage amazon as widely available in the foreign production.
Location advantages: In this, there must be some kind of locality benefit in the market, in
which the corporation is trying to enter. In this, the host company offers the competitive
advantages to make it valuable to undertake foreign direct investment. Likewise, Netherlands
is in amongst the greatest economies like UK and Germany, which are present because of the
presence of cheap raw material, low earnings and trained labour (Lundan, 2012). Similarly, in
china there are more of value chain activities abroad through FDI, due to the cheap raw
material, skilled labour and with the special taxes and tariffs. Lastly, the management should
look for the location advantage then id their yes; they should perform certain value chain
activities either through licencing or through FDI (Siddiqui, et al 2012)
Internationalization advantages: In this, The Company can be benefited through a
partnership arrangement such as licencing or the joint ventures (Andersson, Evers, and
Kuivalainen, 2014). In this, the firms have to organize themselves in creation and exploitation
of their core competencies. In this, if the company having a greater net benefits of
internalizing cross-border, they are more likely to prefer being engaged in foreign production
itself (Ferreira, Pinto, Serra, and Filipe, 2011). Example related to the internationalization
advantage is, apple, which wants to uphold control over its knowledge, copyrights,
industrialized processes and lastly the superiority of its products. Another example is of 18
Alcoa, have also internationalized its operations instead of handling by the outside
independent supplier are- firstly, they want to minimize dissemination of knowledge about its
aluminium refining operations. Secondly, due to internationalization provides them the best
returns and allows then to minimize the cost of operations. Thirdly, Alcoa wants to relate