Excerpt
Table of Contents
List of Abbreviations ... IV
List of Figures ... VI
List of Tables ... VII
1 Introduction ... 1
1.1 Problem Statement ... 31.2 Aim of the Work ... 4
1.3 Research Method ... 5
1.4 Structure ... 7
2 Fundamentals of Internationalization Strategies ... 8
2.1 History and Definitions of Strategy ... 8
2.2 Phases of the Strategic Process ... 11
2.3 Types of Strategies ... 14
2.3.1 Corporate Strategy ... 15
2.3.2 Business Strategy ... 16
2.3.3 Intended and Emergent Strategies ... 17
2.3.4 Alternative Views of Strategy ... 19
2.4 Basics of Internationalization ... 20
2.4.1 Definition and Characteristics ... 20
2.4.2 Motives and Drivers for Internationalization ... 22
2.4.3 Benefits of Internationalization ... 25
2.4.4 Stages of Internationalization ... 29
2.5 Process of Market Entry ... 33
2.5.1 Target Markets and Emerging Markets ... 34
2.5.2 Timing of Entry ... 37
2.5.3 Market Entry Strategies ... 40
2.5.4 Export ... 43
2.5.5 Licensing ... 44
2.5.6 Strategic Alliance ... 45
2.5.7 Subsidiaries ... 47
3 Internal and External Factors for Internationalization Strategies ... 48
3.1 Strategic Analysis and Tools ... 48
3.1.1 SWOT-Analysis ... 49
3.1.2 PEST-Analysis ... 51
3.1.3 Porters Five Forces Framework ... 54
3.1.4 Market Research ... 58
3.2 International Economic and Country Analysis ... 61
3.3 Organizational Structures ... 63
3.4 Role of Culture ... 66
3.5 Political Environment and Country Risk ... 69
3.6 Consumer Behaviour ... 71
4 Characteristics of the professional German Football Market ... 74
4.1 The Business of Football ... 74
4.2 Structure of the Professional German Football Market ... 77
4.2.1 The History of Professional German Football ... 77
4.2.2 Facts and Figures of the Bundesliga ... 79
4.2.3 Legal Structure of the Bundesliga ... 81
4.3 Economic Characteristics of professional German Football Companies ... 82
4.3.1 Change of Legal Structures ... 83
4.3.2 Aims of Football Companies ... 84
4.3.3 Internal and External Financing ... 86
5 Case Studies of Internationalization Strategies ... 89
5.1 Selection and Fact Sheets of the Analysed Football Clubs ... 89
5.2 Position in the Internationalization Process ... 91
5.3 Organisational Structure ... 92
5.4 Motives of Internationalization ... 93
5.5 Market Conditions ... 95
5.6 Target Markets ... 97
5.7 Mode of Entry and Timing ... 99
5.8 Strategic Partners ... 101
5.9 Collaboration between Clubs and DFL ... 104
5.9.1 Role of the DFL ... 104
5.9.2 International Subsidies ... 105
5.9.3 International Media Markets and Trends ... 107
5.10 Strategic Success Factors and Risks ... 111
6 Critical Analysis and Recommendation ... 114
7 Conclusion ... 119
8 Appendix ... 122
8.1 Appendix 1: Interview – Alexander Jobst ... 122
8.2 Appendix 2: Interview – Thomas Röttgermann ... 130
8.3 Appendix 3: Interview – Benedikt Scholz ... 142
8.4 Appendix 4: Interview – Christian Seifert ... 152
Bibliography ... VI
List of Abbreviations [Dies ist eine Leseprobe. Verzeichnisse werden nicht angezeigt.]
List of Figures [Dies ist eine Leseprobe. Verzeichnisse werden nicht angezeigt.]
List of Tables [Dies ist eine Leseprobe. Verzeichnisse werden nicht angezeigt.]
[...]
1 Introduction
In the past years, football as a professional sport has moved from being a national culture to real internationalization, which has created a huge business with several dimensions.[1] The ranking of football as a business activity has risen in the economies of those countries where football is promoted as national sport.[2] Football today is an international business, as players are transferred frequently around the globe, international professional leagues are created, and the European Cup finals or the FIFA World Cup finals are top media events.[3] The forces of globalization and advances in communication technology have greatly expanded the potential marketplace for professional sports teams, especially for those whose sports are internationally popular.[4] In Germany, football clubs in the German Bundesliga generate revenue and cost volumes, which go far beyond those of many medium-sized companies.[5] For example the FC Bayern Munich finished the season 2013-14 with a record sales of 528 million Euros.[6] Therefore, the industry can be considered an important economic factor.[7] In addition, more and more sports managers conceive their football clubs as brands that must be managed as such.[8] In particular, the perspective of marketing in the context of strategic management experiences increasing attention.[9] As domestic markets have saturated, sports managers in various fields began to realize that the development of their turnover required more globalized approaches towards foreign markets, since emerging markets as for example in the Far and Middle East display great potential to gain new revenue sources.[10] This is proven by the fact that the most frequent factor driving a move into another country is the need to find new customers in order to create additional turnover and contribution margin.[11] A decision to go international is done by the companies if home markets are stagnating or even in decline.[12] Furthermore, fans all over the world choose a team to support based on personal rather than for geographical reasons.[13] Because of these personal reasons, professional sports managers have to find a strategy to manage and develop their clubs towards the maturity phase in the domestic market.[14] Regarding economic globalization, there is no theory available which is adequate to account fully for these changes and which would allow a reliable prediction of future developments. And, considering the complexity of the phenomenon, it is very unlikely that there will be an adequate theory in the near future.[15] Moreover, not every football club can follow the internationalization strategies of Real Madrid or Manchester United and become a global brand with a worldwide reputation.[16] Nevertheless, professional football clubs can influence their approach creating a global brand, starting from a strong local platform and becoming finally an international brand.[17] For German football clubs many strategies are possible. Internationalization as a form of diversification or market modification is one of the best in this case.[18] A geographic opening strategy could allow the lifecycle of worldwide sports business to begin again.[19] But what strategic approaches are chosen by the clubs during the internationalization process? And what are the internal and external factors, which could influence the internationalization? Furthermore, the question arises which of the approaches will prove most successful considering individual circumstances of a given club?
1.1 Problem Statement
Looking at the diversity of literature there has been empirical work attempting to the topic. Various research studies focus on individual disciplines like marketing, sponsoring, management, merchandising, brand building and many more. In the work by Kai Taichmann, “Strategie und Erfolg von Fußballunternehmen” no overlap with regards to this work is assumed as by means of an empirical model the correlation between strategic decisions and success is examined but not in terms of the aspect of internationalization. The same applies to the work by Bernd Sontag “Strategische Erfolgsfaktoren professioneller Sportorganisationen”. Other studies, such as the work by Daniel Weimar, “Bewertung von Fußballclubs – Eine Untersuchung zur Anwendung von Vergleichswertverfahren für die Bewertung deutscher Fußball-Bundesligaclubs”, the study by Sandra Feldmann, “Bewertung von Sportmarken - Messung und Wirkungen der Markenstärke von Fußballbundesligavereinen” or the work by Frank Schumann, “Professionalisierungstendenzen im deutschen Fußball aus sportökonomischer Sicht” focus only marginally on the topic of this thesis, leaving out the analysis of professional German football clubs and their strategic approaches while internationalizing entirely. Solely the working paper by Jonas Puck and Thorsten Wirth, “Die Internationalisierung des FC Bayern München”, deals with the same topic presenting various internationalization measures of Bayern Munich on fifteen pages. The same applies to the work by Phillip Schlösser, “Fußballklubs als Global Player” where the internationalization measures of European top clubs like FC Barcelona, Real Madrid and Manchester United are presented but not the strategic approaches of professional German football clubs. It can be noted, that partial aspects of internationalization were examined in existing literature, however, the specialization on internationalizing strategies of professional German Bundesliga football clubs constitutes a novelty and therefore does not depict a conflict regarding the scientific potential.
1.2 Aim of the Work
This thesis aims to analyse professional German football clubs and their strategic approaches while internationalizing, providing a profound insight into the topic: “Analysis of strategic success factors in the internationalization process of professional German football clubs”. The primary research question of this work is why, where and when professional German football clubs are entering foreign markets and which strategic processes have to be considered during the internationalization process, furthermore, which are successful? In addition, this study strives toward a better understanding of internationalization strategies of professional German football clubs analysing how they are internally structured as well as which internal and external factors could influence the internationalization? In order to evaluate the different strategic approaches “strategy profiles” for selected clubs are going to be considered based on structured quantitative interviews and compared as case studies. In this thesis, the research focuses on selected German Bundesliga clubs. Due to their financially weaker situation and lack of international importance, clubs from the Bundesliga 2 will not be considered. The mentioned selected clubs are Borussia Dortmund GmbH & Co. KGaA, FC Gelsenkirchen-Schalke 04 e.V. and VfL Wolfsburg-Fußball GmbH. In addition, in order to analyse the collaboration between the clubs and the German Football Association (DFL Deutsche Fußball Liga GmbH), the relationship between the clubs and the DFL will be examined.
1.3 Research Method
The overall research question of this thesis is why, where and when professional German football clubs are entering foreign markets? With the help of primary literature, secondary literature, as well as the collection of empirical data by means of structured quantitative interviews, the primary research question is going to be answered. By conducting interviews, it is possible to gather valid and reliable data that is relevant to the research question, while an interview is defined as a purposeful discussion between two or more people.[20] Essentially, asking purposeful questions combined with careful listening is of major importance while conducting interviews, as the author is able to explore answers further.[21] As it is stated in theory, managers are more likely to agree to be interviewed, rather than complete a questionnaire, especially when the interview topic is considered to be interesting and relevant to their current work.[22] Additionally, the situation of an interview also provides the opportunity for interviewers to receive feedback and personal assurance about the way in which information will be used.[23] For the structured interviews with experts the author of this thesis developed an interviewer administered questionnaire guiding through the different interviews. Each interviewed expert was asked to respond to the same set of questions in a predetermined order.[24] The approach, time duration and target group was as follows:
- Guided face-to-face interview with the help of questionnaires
- Time per interview 30 to 40 minutes
- Target group: CEO/Director/Head of Corporate Development, Business Development or Marketing
Trying to build a broad opinion profile and to create a better possibility of comparison at a uniform level, interviews with experts from the recently most successful and aspiring German Bundesliga clubs were conducted. The questioned experts are listed in table 1. The international relevance as well as the current position in the Bundesliga were additional factors for selecting the mentioned club officials. Additionally, to analyse the interdependence between the clubs and the DFL an interview with the CEO of the DFL was conducted. Due to the financially weaker situation and lack of international importance, clubs from the Bundesliga 2 were not considered.
Table 1: Alphabetical Order of Experts (own table)
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1.4 Structure
The following chapter gives a brief overview of the structure of this thesis. After the introduction in chapter one, the reader is introduced to the common theories and terms related to strategy and internationalization in chapter two. Furthermore, an overview of academic research and state of the art definitions of strategy with regard to numerous companies from various countries and business sectors as well as the fundamentals of internationalization are given. Chapter three describes which internal and external factors have to be taken into consideration while internationalizing, giving examples of specific strategic and environmental analysis tools. Chapter four focusses on the general characteristics of the football business as well as on the specific characteristics of the professional German football market. In the following chapter, chapter five, the conducted structured quantitative interviews with experts are evaluated, focussing on the primary research question of this thesis, why, where and when professional German football clubs are internationalizing? Moreover, the strategic processes during internationalization are presented. While chapter six critically analyses the outcomes of the structured quantitative interviews also giving a recommendation, a final conclusion is drawn in chapter seven.
2 Fundamentals of Internationalization Strategies
In the following chapters the reader is introduced to the theories and terms related to strategy and internationalization, with regard to different companies from various countries and business sectors. Therefore, chapter two gives a general overview of academic research and state of the art definitions of strategy as well as different strategies by academic researchers. In addition, the fundamentals of internationalization strategies like characteristics, motives, benefits and stages as well as the process of market entry in the general strategic context are going to be explained.
2.1 History and Definitions of Strategy
The history of strategic management can be traced back several thousand years. In ancient China, about 500 BC, strategist and philosopher Sun Tzu offered thoughts on strategy that continue to be studied carefully by business and military leaders today.[25] Sun Tzu’s best-known work “The Art of War” emphasized the creative and deceptive aspects of strategy.[26] The origin of the word strategy derives from the Greek word “strategos”, which refers to ancient “generalship”.[27] Perhaps the most famous example of strategy in historic times revolves around the Trojan horse according to the legend where Greek soldiers wanted to find a way to enter the gates of Troy and attack the city from inside.[28] In the early twentieth century, automobile maker Henry Ford emerged as one of the pioneers of strategic management among industrial leaders, as he organized assembly lines in order to creating mass-produced automobiles lowering costs dramatically.[29] Though, military strategy and business strategy share a number of common concepts and principles, the most basic being the distinction between strategy and tactics. While strategy is the overall plan for deploying resources to establish a favourable position a tactic is a scheme for a specific action.[30] By looking at recent academic studies and scientific literature it can be asserted, that there is not the one and only, neither a right nor wrong definition of strategy. Strategy remains one of the most contested and ill-defined concepts in management theory.[31] Instead, strategy has based on its origin many possibilities of differentiation and is linked with numerous different aspects in the field of academic research and global business. Since, many famous academics have done intensive research on the topic in the past decades the practice and concept of strategy has a multitude of meanings as well as definitions.[32] Costas Markides, a London Business School professor provides the overview, that there is general agreement that every company needs a strategy – either explicit or implicit, but that there is little agreement as to what strategy really is.33] Within the academic circles, it is not easy to identify two researchers who share the exactly same definition of “strategy” while this leads in return to differences in the opinion on the content and process of developing strategy.[34] Various dictionaries give a general but not specific definition, where for example strategy is defined as: [35]1 a (1): the science and art of employing the political, economic, psychological, and military forces of a nation or group of nations to afford the maximum support to adopted policies in peace or war (2): the science and art of military command exercise to meet the enemy in combat under advantageous conditionsb: a variety of or instance of the us of strategy. 2 a: a careful plan or method: a clever stratagem b: the art of devising or employing plans or stratagems toward a goal.
Accordingly, strategy is a complex concept that includes many different processes and methods within an organization. Strategies do not happen just by themselves even more, strategy involves people, especially the managers who decide and implement strategy.[36] Therefore, strategy always begins with a chosen purpose, the idea of human activity directed towards a presumed known end.[37] In the 1960s – in the context of the development of academic research in the field of strategy – the term strategy was introduced to the field of Business Administration at American universities especially at Harvard Business School, where the first original research activities took place.[38] Considering the conventional understanding of strategy and looking at the most influential researchers in this field, this results in the following varying definitions. Michael E. Porter, one of the leading strategy theorists states that: “competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value”.[39] Porter transferred ideas from industrial economics to the teaching of strategy and explained with the help of the reference framework developed by him, how to establish competitive advantage and success differences between companies.[40] In addition, Porter argues that the corporate strategist´s goal is to find a position in the market where his or her company can best defend itself against the collective industry forces or can influence them in its favour.[41] On the other hand Alfred Chandler, also one of the leading academic researchers in the field of strategy declares that: “Strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals”.[42] In addition, Harry Igor Ansoff, also an academic researcher in the field of strategy, developed strategic management to a technology with the help of different tools.[43] These tools include the SWOT analysis as well as the product market matrix and sophisticated phase models, which led to the fact, that Ansoff became a pioneer in strategic planning.[44] Henry Mintzberg, another renowned researcher in the field of strategy, proposes to define strategy in general as “a pattern in a stream of decisions. In other words, when a series of decisions related to some aspect of organization exhibits some consistency over time, a strategy will be considered to have formed”.[45] Mintzberg uses the word “pattern” to allow for the fact that strategies do not always follow a deliberately chosen and logical plan, but can emerge in ad hoc ways.[46] Sometimes strategies reflect a series of incremental decisions that only cohere into a recognisable pattern or strategy after some time.[47] Summarized and simply stated, strategy is management’s action plan for running the business by positioning the firm in such a way that it sells more products or services as the competitor to improve the company’s financial and market performance.[48] Strategies are supposed to give each department, unit and individual throughout the organization a sense of direction and a path to achieving good performance, financial or otherwise.[49] Conferring to Porter, strategy should be chosen in the manner that it best suits the company’s strength and can at least be countered by competitors.[50] However, strategy needs to be approached from a variety of perspectives rather than adopting a single perspective at the expense of all others, good strategies have to achieve a fine balance between seemingly divergent views.[51]
2.2 Phases of the Strategic Process
The managerial process of crafting and executing a company´s strategy consists of five interrelated and integrated phases as it is shown in figure 1.[52] What can be seen is that the strategic process is a process allowing to be continuously updated and revised.
Figure 1: The Strategy-Making, Strategy-Executing Process (ow figure, adapted from Thompson, A. A., Strickland, A. J., Gamble, J. E., 2010, p. 24.).
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Based on the strategy components a strategy is built on a vision, mission and business objectives while the task of strategic management is to convey the vision into the mission.[53] The business objectives are based on the mission, which in turn are resulting into strategic programs (see figure 2).[54] A strategic vision describes the route a company intends to take in developing and strengthening its business and lays out the company´s strategic course in preparing for the future.[55] The vision is the image that a business must have of its aim and goals before it sets out to reach them, a statement which points the firm in the direction of where it would be in the years to come.[56] It is also important to recognize that visions reflect a firm’s value and aspiration and are intended to capture the heart and mind of each employee and hopefully, many of its other stakeholders.[57] Terminology such as “world-class manufacturer”, a “quality organization”, a “provider of legendary service” and a “stimulating, rewarding place to work” might well appear.[58] A vision empowers and helps people in making smart choices and excites them to reach for what they truly desire.[59] Conclusively, Russel Ackoff states that: “An organization without a shared vision of what it wants to be is like a traveller without a destination. It has no way of determining whether it is making progress.”[60]
Figure 2: Stages of Strategic Development (own figure, adapted from Griffin, R. W., Pustay, M. W. 2015, p. 338).
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Beyond, a mission relates to goals, and refers to the overriding purpose of the organisation, meaning what is the firm’s business and what is the reason for existence.[61] It is stated, that strategic planning begins with identification of the organization’s mission as stakeholders can be aligned with the organization’s desired direction.[62] The Mission is the set of goals and purposes that the members of an organization and other major stakeholders agree to achieve.[63] Missions are often written down in the form of mission statements.[64] Thus, mission statements are tangible proclamations whose content is likely to capture aspects of how organizations see themselves as well as how they want others to perceive them.[65] Furthermore, a mission statement should not commit a firm to what it must do in order to survive but to what it chooses to do in order to thrive.[66] Many writers suggest that a strong sense of mission and corporate purpose is important for an organization’s’ success as it motivate employees internally.[67] According to Russel Ackoff a good mission statement has five characteristics: (1) a formulation of objectives enabling progress towards them to be measured; (2) differentiating the company from its competitors; (3) defining the business that the company wants to be in; (4) is relevant to all stakeholders in the firm, not just shareholders and managers; and (5) is exciting and inspiring.[68] If a mission is to be meaningful, however, the organization’s strategy, and the way that its members behave in practice, should be compatible with it; if they are, then this can lead to superior motivation and financial performance, while if they are not, it can lead to disappointment.[69] Summarizing the two just mentioned aspects, the distinction between a strategic vision and a mission statement defines that a strategic vision portrays a company´s future business scope (“where we are going”), whereas a company´s mission typically describes its present business and purpose (“who we are, what we do, and why we are here”).[70]
2.3 Types of Strategies
What all strategies have in common is the fact that for a period of some years, they determine the success potentials, which the company must either maintain or newly construct.[71] However, differentiating planning levels within the company and different issues addressed mean that there are distinct types of strategies.[72] Inside an organisation and next to the superordinate level of the corporate philosophy and the subordinate level of the operation level, strategies can exist at two main levels, which are briefly described in the following chapters.[73]
2.3.1 Corporate Strategy
Corporate strategies mainly give answers to the question in what areas the company will operate and which market-related interdependencies and synergies between business units are taken into account.[74] On the basis of the purpose of the company and corporate identity, corporate strategies include aspects of resource allocation between different strategic business units.[75] In the beginning of academic work on corporate strategies the dominant idea was to match the firm’s processes and resources to the market demands.[76] Without a good fit between the firm and its markets engagements the resulting inefficiencies would reduce profit and threaten the firm’s survival.[77] The corporate strategy sets out future market positions.[78] This is typically expressed as a target market share but it may also include qualitative statements related to a target market product image. In addition, the corporate strategy sets investment budgets for the businesses or at least specifies investment priorities.[79] Related to the definition of corporate strategy it can be said, that a company´s strategy is management´s action plan for running the business and conducting operations.[80] Corporate strategy decisions include investment in diversification, vertical integration, acquisitions and new venture; the allocation of resources between the different businesses of the firm; and divestments.[81] In choosing a corporate strategy, the management of a company is in effect saying why they decided among all the many different ways for the chosen strategy, as they have decided to employ this combination of competitive and operating approaches to move the company in the intended direction, strengthening its market position and competitiveness, boosting performance.[82] The strategic choices a company makes are seldomly easy decisions, and some of them may turn out to be wrong but that is not an excuse for not deciding on a concrete course of action, which is indispensable.[83] The overall question referring to the corporate strategy is how the company, as a corporate parent, adds value to their various lines of business?8[84]
2.3.2 Business Strategy
Next to the corporate strategy, a business strategy concerns the actions and approaches crafted to produce successful performance in one specific line of business.[85] It concerns the individual business lines or units in a company, internal strengths and weaknesses, external threats and opportunities, and the creation and implementation of strategies that link the two to the advantage of the company.[86] In addition, business strategies typically concern issues such as innovation, appropriate scale and response to competitors’ moves[87] In accordance with the criteria which have been used to define the different businesses within the corporate strategy, the individual business strategies are produced either for product groups, for customer groups, for regional markets or for different combinations of these three.[88] The business strategy not only determines the generic competitive strategy but also identifies the competitive advantages for the offer.[89] This serves to make the chosen generic strategy more detailed so that it can be used to position the company amongst its market competitors.[90] While the labels for business strategies differ across the various typologies, a common feature of all the proposed strategy classifications is that they most clearly identify companies that operate at one end or the other of a strategy.[91] Two critical questions that business strategy must address are (1) How the firm will achieve its objectives today? and (2) How the firm plans to compete in the future?[92]
2.3.3 Intended and Emergent Strategies
In addition to the just mentioned types of strategies, further theories have been developed by researchers. For example Mintzberg and Waters argue, that the process of strategy needs to be viewed from a wider perspective so that the variety of ways in which strategies actually take shape can be considered.[93] They state that organizations often only concentrate on the formal process of analysis, formulation, planning and implementation but that many intended strategies often are not realized (Mintzberg suggest only 10-30% of intended strategy is realised[94]).[95] Some strategies may be planned, at least in their first stages, but many more just simply emerge in an organization without being consciously intended or being deliberate acts.[96] According to Mintzberg and Waters there are five different ways strategy can develop, which are presented in figure 3.
Figure 3: Types of Strategies (own figure, adapted Mintzberg, H., Waters, J. A., 1985, p. 258.)
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In Mintzberg and Waters theory three different results appear: (1) Intended strategies that get realized, which are called deliberate strategies; (2) Intended strategies that do not get realized, which are called non-realized strategies; and (3) realized strategies that were never intended in the sense that an organization awakens and finds itself with a strategy.[97] In addition, there can be emergent strategies, which are unplanned strategies that arise in response to unexpected opportunities.[98] Intended strategy is less a product of rational deliberation and more an outcome of negotiation, bargaining and compromise among the many individuals and groups involved in the process.[99] In this case, strategic management is operated as an unconscious process.[100] Emergent strategies are the result of deliberate decisions to marshal and focus resources in order to pursue a new direction, modifying or replacing some aspects of earlier strategic intent, a process which Mintzberg refers to as strategic learning.[101] However, an emergent strategy is a pattern of action that develops over time in an organization in the absence of a specific mission and goals, or despite a mission and goals.[102] The difference between the deliberate strategy and the emergent strategy is the absence of intention from the implementing organization.[103] This has led some firms to rely on a strategy formation process of planned emergence whereby businesses formally plan but maintain significant flexibility to adjust strategies as necessary to react to their often-changing environments.[104]
2.3.4 Alternative Views of Strategy
In 1996, Michael Porter published a Harvard Business Review article titled “What is strategy?” In this article Porter specified that in the quest for productivity, quality, and speed a remarkable number of management tools and techniques have been spawned which lead to the fact, that operational effectiveness is seen as strategy and that the implicit strategy model of the past decades has to be rediscovered.[105] For Porter competitive strategy is “about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value”.[106] In addition Porter stated that also strategic continuity does not imply a static view of competition.[107] A company must continually improve its operational effectiveness and actively try to shift the productivity frontier; at the same time, there needs to be on-going effort to extend its uniqueness while strengthening the fit among its activities.[108] Therefore, Porter pointed out some major differences, which can be seen in the following table 2. However, various other definitions of strategy exist, while in regards to the topic of this thesis only the fundamental definitions of strategy are going to be explained.
Table 2: Alternative Views of Strategy (own table, adapted from Porter, M. E., 1996, p. 74.)
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2.4 Basics of Internationalization
Chapter 2.3 proposed types of strategy in a domestic context. But to what extent does this structure relate to strategic planning in the international context? Are there further types of strategies? Therefore, chapter 2.4 describes the definition and characteristics, motives and drivers, benefits and stages in an international context of strategy.
2.4.1 Definition and Characteristics
The strategy of internationalization raises the question of the firm’s objective and the aspects of the firm’s performance that the firm seeks to improve through internationalization.[109] Internationalization is interpreted and used in different ways in different countries and by different stakeholders and advocates the use of the term “international, intercultural and global”.[110] As with many other academic concepts, definitions of internationalization are according to Thompson et al. contested, incoherent, inconsistent and varied.[111] However, internationalization can be defined as a strategy through which a firm expands the sales of its goods or services across the boarder of global regions and countries into different geographic locations or markets.[112] Additionally, for Hitt et al. internationalization is defined as an expanding across country borders into geographic locations that are new to the firm.[113] The key element in internationalization is the notion of the relationship between or among nations and cultural identities, thereby implying that nation-state and culture are preserved.[114] When a business expands outside its home market, it needs to internationalize its core business strategy.[115] The first and most important step in internationalizing the core business strategy is to select the geographic markets in which to compete.[116] Based on this, Khojastehpour and Johns define internationalization as entering an international market through the adaption of the organization’s processes, transfer of knowledge and opportunities to reach these new markets.[117] Alternatively Calof and Beamish define internationalization strategy as: “the process of adapting firms operations, strategy, structure, resource, etc. to international environments”.[118] To put it in a simple term, internationalization is a strategy through which the firm sells its goods or services outside its domestic market.[119] However, firms using an international strategy become quite diversified geographically as they compete in numerous countries or regions outside their domestic market. In other cases, firms engage in less international diversification in that they only compete in a small number of markets outside their “home” market.[120] Typically, a company will start to compete internationally by entering just one or maybe a selected few foreign markets while competing on a truly global scale comes later, after the company has established operations on several continents and is racing against rivals for global market leadership.[121] This is proven by the fact according to Yip and Hult, that a global strategy has three separate components which include developing the core strategy, being the basis of sustainable strategy advantage, internationalizing the core strategy, through international expansion of activities and adaption of the core strategy, and finally, globalizing the international strategy by integrating the strategy across countries.[122] By doing this motives and drivers for the companies have to appear, which are going to be explained in the following chapter.
2.4.2 Motives and Drivers for Internationalization
In addition to various risks and challenges that are not considered in detail in this work, many general competitive pressures increase internationalization while the motives and drivers for internationalization can be very diverse.[123] Generally, the decision to go international is based on an actual opportunity, rather than a decision to search for global investment opportunities.[124] Thus, advantages should appear to international business activities that cause firms to consider taking the risk of entering foreign markets.[125] Raymond Vernon noted, that engaging in an international strategy has the potential to help a firm extend the life cycle of its products.[126] According to Macharzina and Wolf, there are three main categories which are economic versus non-economic motives, defensive versus offensive motives and resource-oriented, production-oriented and sales oriented motives.[127] An offensive motive is to seize market opportunities in foreign countries through trade or investment, while a defensive motive is to protect and hold a firm’s market power or competitive position in the face of threats from domestic rivalry or changes in government policies.[128] Conferring to Shenkar and Luo, also market motives, economic motives, and strategic motives whereby economic motives apply when firms expand internationally to increase their return through higher revenues or lower cost.[129] In addition, as more and more evidence shows, companies that globalize achieve better competitive and financial performance.[130] Conferring to Michael Porter he argues, that any company’s ability to compete in the international arena is based mainly on an interrelated set of location advantages in its home country.[131] A high level of pressure in its home base pushes the firm to innovate and to upgrade systematically.[132] However, companies gain advantage against world’s best competitors because of pressure and challenge while they benefit from having strong domestic rivals, aggressive homebased suppliers, and demanding local customers.[133] In addition, companies should not relay on “natural” short-term advantages like e.g. low labour cost, a large domestic market or favourable exchange rates because replication by rival firms is usually easy to achieve.[134] In contrast, long-term competitive advantage is achieved by acts of innovation.[135] According to Grünig and Morschett, seven driving factors appear, which can lead a company to go international. Each of these may have single effect, or in combination with one or more of the others.[136] These drivers are:[137]
- Need to find new customers
- Need to realize cost economies
- Access to low cost raw materials and labour
[…]
[1] Cf. Desbordes, M. (2007), p. 3.
[2] Cf. Dolles, H., Söderman, S. (2005), p. 5.
[3] Cf. Beech, J., Chadwick, S. (2007), p. 7 f.
[4] Cf. Kerr, B. (2008), p. 245.
[5] Cf. Teichmann, K. (2007), p. V.
[6] Cf. FC Bayern München AG (2015a).
[7] Cf. Sontag, B. (2012), p. 8.
[8] Cf. Leeds, A.M., von Allmen, P. (2014), p. 7 f.
[9] Cf. Meffert, H., Burmann, C., Kirchgeorg, M. (2012), p. 89.
[10] Cf. Desbordes, M. (2007), p. 1.
[11] Cf. Barney, J., Hesterly, W. (2012), p. 310 ff.
[12] Cf. Grünig, R., Morschett, D. (2012), p. 28
[13] Cf. Lewis, C. (2001), p. 23.
[14] Cf. Desbordes, M. (2007), p. 4.
[15]Cf. Grünig, R., Morschett, D. (2012), p. 1.
[16]Cf.Hamil, S., Chadwick, S. (2010), p. 8.
[17]Cf. Richelieu, A., Lopez, S., Desbordes, M. (2008), p. 24.
[18]Cf. Bairner, A. (2001), p. 34.
[19]Cf. Desbordes, M. (2007), p. 5.
[20] Cf. Kahn, R., Cannel, C. (1957), p. 54 ff.
[21] Cf. Saunders, M., Lewis, P., Thornhill, A. (2009), p. 318.
[22]Cf. North, D. J., Leigh, R., Gough, J. (1983), p. 111 ff.
[23]Cf. Saunders, M., Lewis, P., Thornhill, A. (2009), p. 324.
[24] Cf. deVaus, D. A. (2002), p. 94 ff.
[25] Cf. Spender, J. C. (2014), p. 22.
[26] Cf. Clements, J. (2012), p. 2.
[27] Cf. Hungenberg , H. (2014), p. 4.
[28] Cf. Saylor (2014).
[29] Cf. Gottfredson, M., Caruso, L. (2006), p. 57.
[30] Cf. Grant, R. M., Jordan, J. (2012), p. 13.
[31] Cf. McGee, J., Thomas, H., Wilson, D. (2005), p. 5.
[32] Cf. Eacott, S. (2008), p. 354.
[33] Cf. Markides, C. (2012), p. 80.
[34] Cf. ebd. (2012), p. 80.
[35] Cf. Merriam-Websters´s (2014).
[36] Cf. Johnson, G., Whittington, R., Scholes, K. (2012), p. 11.
[37] Cf. Spender, J. C. (2014), p. 4.
[38] Cf. Hugenberg, H. (2014), p. 4.
[39] Porter, M. E. (1979), p. 137.
[40] Cf. Schuh, G., Kampker, A. (2011), p. 65
[41] Cf. Thompson, J., Martin, F. (2010), p.10.
[42] Ansoff, I. H. (1965), p. 65.
[43] Cf. Braun, M. R., Latham, S. F. (2014), p. 3.
[44] Cf. Besanko, D., Dranove, D., Sanley, M., Schaefer, S. (2007), p.1.
[45] Mintzberg, H. (1977), p. 28.
[46] Cf. Mintzberg, H., Waters, J. (1994), p. 12.
[47] Cf. Johnson G., Whittington, R., Scholes, K. (2012), p. 3.
[48] Cf. Kipley, D., Lewis, A. (2011), p.2.
[49] Cf. Guillén; M. F., Garcia-Canal, E. (2013), p. 17.
[50] Cf. Koob, C. (2014), p. 128.
[51] Cf. Markides, C. (2012), p. 80.
[52] Cf. Thompson, A. A., Strickland, A. J., Gamble, J. E., (2010), p. 24.
[53] Cf. Johnson et al. (2012), p. 5.
[54] Cf. Brecht, U. (2005), p. 34.
[55] Cf. Ireland, R. D., Hoskisson, R. E., Hitt, M. A. (2007), p. 13 f.
[56] Cf. Kipley, D., Lewis, A. (2011), p. 19.
[57] Cf. Hitt, M. A., Hoskisson, R. E., Ireland, R. D., (1994), p. 19.
[58] Cf. Thompson, J., Scott, M., Martin, F. (2014), p. 77.
[59] Cf. Verma, H. V. (2009), p. 154.
[60] Ackoff, R. L. (1994), p. 169.
[61] Cf. Johnson et al. (2012), p. 7.
[62] Cf. Palmer, T. B., Short, J. C., (2008), p. 454.
[63] Cf. Haberberg, A., Rieple, A. (2008), p. 55.
[64] Cf. Barney, J. B., Hesterly, W. S. (2010), p. 5.
[65] Cf. Palmer, T. B., Short, J. C., (2008), p. 454.
[66] Cf. Ackoff, R. L. (1986), p. 38
[67] Cf. Haberberg, A., Rieple, A. (2008), p. 56
[68] Cf. Ackoff, R. L. (1986), p. 39 f.
[69] Cf. Bart, C. K., Bontis, M., Taggar, S. (2001), p. 21 f.
[70] Cf. Thompson, A. A., Strickland, A. J., Gamble J. E. (2010), p.28.
[71] Cf. Hungenberg, H. (2014), p. 15.
[72] Cf. Thompson, J., Martin, F. (2010), p.10.
[73] Cf. Johnson et al. (2012), p. 6.
[74] Cf. Carpenter, M. A., Sanders, W. G. (2009), p. 10 f.
[75] Cf. Meffert, H., Burmann, C., Kirchgeorg, M.(2008), p. 253.
[76] Cf. Spender, C. J. (2014), p. 22.
[77] Cf. ebd. (2014), p. 23.
[78] Cf. Hill, C., Jones, G. (2008), p. 18.
[79] Cf. Grünig, R., Morschett, D. (2012), p. 54.
[80] Cf. Porter, M. E. (1980), p. 5 ff.
[81] Cf. Porter, M. E. (1980), p. 34 ff.
[82] Cf. Grant, R. M., Jordan, J. (2012), p. 18.
[83] Cf. Thompson et al. (2010), p. 6.
[84] Cf. Markides, C. (2004), p. 7.
[85] Cf. Carpenter, M. A., Sanders, W. G. (2009), p.12.
[86] Cf. Thompson et al. (2010), p. 39.
[87] Cf. Crainer, S., Dearlove, D. (2014), p. 2.
[88] Cf. Johnson et al. (2012), p. 7.
[89] Cf. Grünig, R., Morschett, D. (2012), p. 54.
[90] Cf. Grünig, R., Morschett, D. (2012), p. 55.
[91] Cf. Langfield-Smith, K. (1997), p. 209 f.
[92] Cf. Carpenter, M. A., Sanders, W. G. (2009), p.11.
[93] Cf. Mintzberg, H., Waters, J. A. (1985), p. 258.
[94] Cf. Grant, R. M., Jordan, J. (2012), p. 23.
[95] Cf. Mintzberg, H. (1977), p. 30.
[96] Cf. McGee, J. Thomas, H. Wilson, D. (2005), p. 11.
[97] Cf. Mintzberg, H. (1977), p. 30.
[98] Cf. Koob, C. (2014), p. 108.
[99] Cf. Grant, R. M., Jordan, J. (2012), p. 23.
[100] Cf. Hungenberg, H. (2014), p. 12.
[101] Cf. Kipley, D., Lewis, A. (2011), p. 174.
[102] Cf. Knight, J. (2004), p. 5. ff.
[103] Cf. Moncrieff, J. (1999), p. 273.
[104] Cf. Mintzberg, H., Waters, J. A. (1985), p. 259.
[105] Cf. McGee et al. (2005), p. 11.
[106] Cf. Grant, R. M. (2003), p. 514 ff.
[107] Cf. Porter, M. E. (1996), p. 61 ff.
[108] Porter, M. E. (1996), p. 64.
[109] Cf. Porter, M. E. (1996), p. 678.
[110] Cf. Porter, M. E. (1996), p. 678.
[111] Cf. Thompson et al. (2014), p. 424.
[112] Cf. Ireland, R. D., Hoskisson, R. E., Hitt, M. A. (2007), p. 251.
[113] Cf. Hitt et al. (1994), p. 302.
[114] Cf. OECD (2008), p. 236.
[115] Cf. McGee et al. (2012), p. 161.
[116] Cf. Yip, G. S., Hult, T. M. (2012), p. 5.
[117] Cf. Khojastehpour, M., Johns, R. (2014), p. 239.
[118] Calof, J. L., Beamish, P. W. (1995), p. 153.
[119] Cf. Arregle, J. L., Naldi, L., Nordqvist, M., Hitt, M. A. (1999), p. 1115 ff.
[120] Cf. Hitt, M. A., Ireland, R. D., Hoskisson, R. E. (2015), p. 229.
[121] Cf. Thomsen et al. (2010), p. 208.
[122] Cf. Yip, G. S., Hult, T. M. (2012), p. 4.
[123] Cf. Daniels, J. D., Radebaugh, L. H., Sullivan, D. P. (2015), p. 58 f.
[124] Cf. Ghauri, P. (2000), p. 10.
[125] Cf. Glowik, M. (2009), p. 72.
[126] Cf. Venon, R. (1996), p. 190.
[127] Cf. Macharzina, K., Wolf, J. (2008), p. 936.
[128] Cf. Shenkar, D., Luo, Y. (2008), p. 12.
[129] Cf. ebd. (2008), p. 12. ff.
[130] Cf. Yip, G. S., Hult, T. M. (2012), p. 1.
[131] Cf. Raymond, L., St-Pierre, J., Uwizeyemungu, S., Ding, T. L. (2014), p. 231.
[132] Cf. Verbeke, A. (2009), p. 101.
[133] Cf. Porter, M. E. (1990), p. 73.
[134] Cf. Verbeke, A. (2009), p. 102.
[135] Cf. Porter, M. E. (1990), p. 75.
[136] Cf. Grünig, R., Morschett, D. (2012), p. 27.
[137] Cf. ebd. (2012), p. 28 ff.