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International Business Strategy PDF

   

Added on  2020-12-29

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INTERNATIONAL BUSINESS STRATEGY

INTERNATIONAL BUSINESS STRATEGYGrowing interest in the area of internationalization has been witnessed from last twodecades. Despite extensive use of the term, internationalization has been described as theoutward movement of operations of the firms. According to Piercy and Turnbull,internationalization has been referred as the process of increasing the involvement ininternational operations. However, the word internationalization has a universally acceptabledefinition, which remains elusive with varied interpretations found in the writings (Zou andCavusgil, 2002). For instance, one view takes into consideration internationalization as a patternof investment in the foreign markets on the basis of logical economic analysis of ownership,internationalization and advantage of the location. On the other hand, another view of takes intoaccount internationalization as a continuous process of evaluation, where increase in theoperations of the firms is regarded as the function of market commitment as well as improvedknowledge. Internationalization theory has relationship with the theory of the firm. There are severalauthors who have taken their step forward to assess the phenomenon of rapid internationalizationof the organizations in different sectors i.e. hi-technology industries to arts and crafts. In additionto this, these authors have determined some entrepreneurial competences as the main driver ofcompetitive advantage like a focused approach in conducting business, having a global vision,skills to identify opportunities related to technology and to take advantage of them. As perCoviello and Joes, the studies related to internationalization have failed to integrate researchfrom the field of international business and entrepreneurship (Kling and Gofeman, 2003). Thus, acloser investigation is required in regards with the theories of internationalization so as to offeran insight in bridging this gap. There is one major contribution towards this theory is made bythe Uppsala Internationalization Model, which can be drawn by the work being published byCarlson, Johanson and Vahlne. According to this model, companies increase their involvementtowards the international market gradually and because of the lack of knowledge they facesproblem in entering into a culturally distant markets. Further, companies takes into considerationa sequence i.e. from lower to higher side of the commitment mode of operation and stepstowards the successively greater psychic distance. 1

The Uppsala model is being influenced by the work of Penrose in relation with thegrowth of firms. The Psychic distance was referred as the factors that prevents or disturbs theflow of information amid the firm and its market. It encompasses factors like culture, languageand many more. Further to illustrate the incremental nature of the process, Johanson and Vahlneformulated a dynamic model wherein the result of one cycle is viewed as providing the input forthe subsequent cycle. Four stages in the firm internationalization process have been establishedby them. They suggested that firstly, the companies are required to preoccupy their business inthe home market during their initial stages and there should be no regular export activities. Soonafter consolidation of their presence in the home market, they must step forward across bordersby exporting through agents (Beechler and Yang, 1994). At the third stage, companies commitstheir resource in the global markets through establishment of oversea sale subsidiary ad finally,in the last stage, the firms get an entitlement of foreign production facilities. This prepositionhave been improved with the time and in the year 1990, they have integrated their work. The difference between state and change aspects of internationalization has provided thebasic structure of the Uppsala Model. The former takes into account foreign market commitmentand knowledge in regards with the foreign market and activities. On the other hand, changeaspects encompass decisions to commit resources and engage in foreign activities. The principleassumption here is that decision related to commitment and the way current activities areperformed are influenced by market knowledge and market commitment (Rosenzweig andSingh, 1991). Figure 1: The model basic concept2

(Johanson and Vahlne, 2006).According to Johanson and Vahlne, the market commitment concept is mainly composedof two factors i.e. the amount of resources committed and the degree of commitment. Resourcescommitted define the size of the investment in the market including investment in organization,human resources, marketing and many other areas. The degree of commitment can be explainedas the difficulty of searching an alternative use of the resources and transferring these resourcesinto the other alternatives. The degree of commitment will be greater, if there is more specializedresource available in the specific market. Talking in relation with market knowledge, it is beingdefined as the level of appreciating the market environment. The knowledge related to marketmay be specific or in general sense (Johanson and Vahlne, 2006). Throwing light towards thegeneral knowledge, it is related with the marketing methods and concepts such as commonfeatures, taste, attitude and perception of certain clients. Whereas, specific knowledge concernspeculiar feature of a particular market i.e. its cultural patterns, business climate, structure of themarket and characteristics of individual firms and their personnel. In addition to this, it also paysattention on varied ways of acquiring learning through personal experience and being taught. In the Uppsala model, more emphasis is being given on the experimental knowledge andit is based on the assumption that this kind of knowledge helps in perceiving as well asformulating opportunities. Consequently, it can be said that both general as well as specificknowledge is required while entering into the foreign market and making commitment to amarket. Market specific information can be gathered only through gaining experience in thatspecific market. On contrary, general information can be availed and transferred from onemarket to another market. The Uppsala model is based on the assumption that there is a directrelationship amid market knowledge and commitment. Furthermore, Knowledge is beingregarded as a human resource; the better knowledge about the market, more valuable will be theresource and better commitment to a specific market (Alston, Eggerston and North, 1996).Speaking in volume in relation with the change aspects, it includes current activities andcommitment decisions. As per the model, current activities play a significant role because of theseveral reasons. The very first reason is information can be gathered by experience from businessactivities. A discussed above, seeking help through experience companies can perceive as well asdetermine opportunities that lead them towards market commitment. The Uppsala model has laidmore attention towards current activities as it stimulates the firms to go head. Thus, it was quite3

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