Internationalisation of Business: Theories, Operations and Analysis

This essay delves into the process of internationalisation, a critical aspect of modern business expansion, examining how organizations broaden their operations from domestic to international markets. It explores various theories, including Hymer's theory on foreign direct investment (FDI) and market imperfections, Kogut and Zander's knowledge-based view of TNCs, and Buckley and Casson’s internalisation theory of MNEs. The essay analyzes how these theories explain the dynamics of international business, the role of knowledge transfer, and the strategies organizations employ to increase market share and profitability. It provides real-world examples, such as Apple's use of FDI, to illustrate the practical application of these theories in the global business landscape. The conclusion emphasizes the importance of internationalisation for multinational corporations and the insights these theories provide for effective global operations.

Running head: INTERNATIONALISATION OF BUSINESS
INTERNATIONALISATION OF BUSINESS
Name of the Student
Name of the University
Author Note

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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.

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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.

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The benchmark which has been set for the transfer of technology is related to the
levels of efficiency. The social interaction which take place within the organizations is based
on the transfer of knowledge and the process related to innovation. The ownership related
advantages are able to differentiate the organizations from TNCs. The major points which are
related to the theory are related to ownership advantage which is provided to the firms with
respect to technology transfer and internal knowledge. Market based failure is related to the
transfer of knowledge (Turunen & Nummela, 2017).
Buckley and Casson’s internalisation theory of the MNEs is based on three major
ideas which are being discussed further. The firms aim at maximizing profits in world of the
imperfect markets. The market which is developed for the intermediate products are
imperfect in nature and this is based on a strong incentive in order to develop internal
markets. The process based on internalisation mainly takes place across the national
boundaries which can lead to creation of the MNEs (Yamin & Forsgren, 2015). According to
the theory suggested by Buckley and Casson, the production based on knowledge is
considered to be quite lengthy and it involves the usage of R&D. The uncertainty levels
which are faced by buyers are related to the asymmetry of information. The levels of
internalisation of knowledge are able to generate huge levels of multinationality between the
organizations. Knowledge is considered to be highly important for different organizations
which operate in the industry (Turunen & Nummela, 2017).
The approach which has been taken by Hymer can be easily related to different
multinational organizations in various countries. The organizations depend on the FDI based
activities in order to operate profitably in the industry. FDI based costs are thereby related to
the ways by which organizations can increase the levels of profitability and share in the
market as well. For example, a multinational organization like, Apple can operate profitably
in the industry with help of making investments in different foreign countries in order to

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increase the market share. On the other hand, the evolutionary theory of Buckley and Casson
is based on the levels of knowledge which are transferred among the different organizations
in the industry (Daszkiewicz, 2015).
Conclusion
The essay can be concluded by stating that the process of internationalisation is able
to play a key role in the effective operations of multinational corporations. The international
operations are able to increase their market share and expand their operations in an effective
manner. The theories which have been discussed in essay are able to define the ways by
which different international organizations can take advantage of internationalisation.

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