Internationalisation of business PDF

Running head: INTERNATIONALISATION OF BUSINESS
INTERNATIONALISATION OF BUSINESS
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Author Note

INTERNATIONALISATION OF BUSINESS1
Introduction
Internationalisation is considered to be a process which is based on the expansion of
business operations. The process of internationalisation is considered to be high interest to the
modern organizations. The operations of organizations begin in a domestic manner and
further the internationalisation is able to provide opportunities based on expansion of their
operations to new areas. The reasons that are related to internationalisation of different
organizations are different for different organizations (Acocella, 2016). The
internationalisation based process is thereby able to affect the business based landscape in
different countries.
The essay will be based on the different theories which are related to the
internationalisation process of modern organizations. The theories are mainly related to the
ways by which organizations are able to expand their operations from the domestic to
international markets.
Evaluation of different internationalisation business operations
According to Costa, Soares and de Sousa (2016), Hymer had completed a study which
was based on the international production based process. No specific theory has been
suggested based on internationalisation before Hymer’s theory. This was a first modern
theory which was related to the international operations of different organizations. Foreign
direct investment or FDI was considered to be a different type of international capital based
theory. However, the approach which was taken by Hymer was not based on the international
capital theory. On the other hand, it was mainly related to the industrial organization based
theory.

INTERNATIONALISATION OF BUSINESS2
According to the theory which has been proposed by Hymer, the domestic firms have
advantage over the foreign organizations in some of the markets. The major reason being that
the domestic firms are able to understand the local business environment in a better way as
compared to the international organizations. A major comparison was made by Hymer
between foreign direct investment and the financial investment. FDI is able to provide
effective opportunities to the organizations so that they are able to control the levels of
investment. The differences which are evident between the interest rates are considered to be
important factors which are able to affect the fund based flow between the home country and
the foreign country (Daszkiewicz, 2015).
The major contribution which was thereby provided by Hymer in the theory related to
internationalisation include, the communication costs, information based costs, regulation
costs. Another contribution which was provided by Hymer’s theory is related to the
willingness of organizations to bear costs related to FDI as it is able to increase their share in
the market and the profitability levels. The major driver of FDI as explained by Hymer is the
level of imperfection within the market (Johanson & Mattsson, 2015).
According to Reddy (2014), Kogut and Zander’s theory of TNCs is related to the
knowledge-based view of the organization which is able to define the boundaries of the firm.
According to this theory, knowledge has been considered to be a commodity that can be
transferred across the borders. The transfer of knowledge across the borders is also
considered to be quite difficult sometimes. The theory is also able to state that the TNCs can
exist in effective manner as compared to the other organizations. The TNC are thereby
defined as social communities which can serve as mechanisms required for the creation as
well as transformation of the knowledge.