Reasons for the Internationalisation Process of Companies
I.) Introduction
"Global interdependence is pervasive. It is not only political and military….[but] also environmental…. Perhaps the most important aspect of interdependence however is economic." (Terpstra, 1993, Preface)
Today more and more firms operate internationally and in some cases even globally. In almost all major economies of the world, the significance of domestic and/or foreign-based transnational corporations is increasing. Such corporations, directly or indirectly, account for a large part of world trade in goods and services (cf. Nilsson, Dicken 1996 p.1).
Attempts to theorise such international developments are widespread; therefore, there is no such thing as a "universal" theory. However, the emphasis of most theories tends to be on how businesses should internationalise rather than on why they should do so. Most contributions in literature focus on strategies and structures of international firms but do not explain the reasons of internationalisation.
The main aim of this essay is therefore to give an outline of the reasons why companies choose to go international. Using only relevant theories and different examples from business, it shall be demonstrated that there is not only "one" motive for companies to choose international expansion but that there is a variety of causes depending on the respective internal and external environment of the different companies.
In the following, under II.) there will be an overview of different reasons for companies to choose international expansion; these reasons will be substantiated by different statements and theories from literature and in each case illustrated by relevant examples. Under III.) finally, there will be a conclusion. The expositions of II.) will be analysed and a prospect into the future of globalisation will be made.
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Table of Contents
I.) Introduction
II.) Reasons for internationalisation in theory and examples
III.) Conclusion
Objectives and Topics
This essay aims to provide a comprehensive analysis of the diverse motivations driving companies to pursue international expansion, moving beyond mere strategy to explore the fundamental causes behind global business integration.
- The network approach to firm internationalisation.
- Competitive response to foreign entrants in domestic markets.
- Economic and political shifts fostering global expansion.
- The role of the Internet in accelerating international activities.
- Cost-effective production and economies of scale as primary incentives.
Excerpts from the Book
II.) Reasons for internationalisation in theory and examples
Throughout literature, there are manifold suggestions for reasons why companies choose or should choose to internationalise their market activities.
Often the main reason for internationalisation is stated as the need of companies to be able to stay competitive in their respective environment. This theoretical approach is often referred to as the "network approach". The theory examines the process of internationalisation by applying a network perspective (cf. Johanson & Vahlne, 1990). Internationalisation is defined as developing networks of business relationships in other countries through extension, penetration and integration (Johanson & Mattsson 1988). Extension refers to investments in networks that are new to the firm, whereas penetration means developing positions and increasing resource commitments in networks which the firm already is involved with. Integration can be understood as the co-ordination of different national networks. Thus, if the relationships between firms are seen as a network, it can be argued that firms internationalise because other firms in their (inter) national network are doing so.
Summary of Chapters
I.) Introduction: This chapter introduces the growing significance of international and global business, identifying the research gap regarding the "why" of internationalisation and outlining the essay's intent to explore diverse motives.
II.) Reasons for internationalisation in theory and examples: This section provides a detailed analysis of various theoretical and practical drivers, including network connections, competitive retaliation, changing global economic climates, and the transformative impact of the Internet.
III.) Conclusion: The final chapter synthesizes the main motives identified, reiterates the necessity of international adaptation for long-term competitiveness, and reflects on the potential obsolescence of traditional internationalisation models due to new technologies.
Keywords
Internationalisation, Globalisation, Network Approach, Economies of Scale, Internet, Competitive Advantage, Market Expansion, Multinational Corporations, Foreign Investment, Strategic Management, Outsourcing, Trade, Retaliation, Industrial Systems, Market Development.
Frequently Asked Questions
What is the core focus of this essay?
The essay explores the underlying reasons why companies decide to expand internationally, shifting the focus from "how" firms internationalise to "why" they choose to do so.
What are the central thematic areas covered?
The main themes include the network approach to business, the impact of the Internet on market access, the necessity of competitive retaliation, and the pursuit of economies of scale.
What is the primary research goal?
The goal is to demonstrate that there is no single universal motive for international expansion, but rather a variety of causes shaped by internal and external environments.
Which scientific approaches are applied?
The study utilizes literature reviews on internationalisation theories, such as the "network approach," and supplements these with contemporary business examples like Volkswagen, Michelin, and Nike.
What content is discussed in the main body?
The main body examines factors like market saturation, the opening of Eastern European markets, cost-effective production, and how new technologies like the Internet enable firms to reach global markets.
Which keywords characterize this work?
Key terms include Internationalisation, Globalisation, Network Approach, Economies of Scale, and Internet, reflecting the transition from traditional to digital-era business strategy.
How does the network model categorize firms?
The model categorizes firms into "early starters," "late starters," "lonely internationals," and "internationals among others," based on the firm's own level of internationalisation and that of its surrounding network.
Why is the Internet considered a game-changer?
The Internet allows even small firms to act internationally from their inception, significantly lowering the risks and costs typically associated with entering foreign markets.
What does the case of Michelin vs. Goodyear illustrate?
It demonstrates how global companies can use indirect retaliation—such as price adjustments in a competitor's "profit sanctuary"—to defend their home markets against aggressive entry.
- Quote paper
- Harald Ebner (Author), 2001, Reasons for the Internationalisation Process of Companies, Munich, GRIN Verlag, https://www.grin.com/document/102543
