INTERNATIONAL MARKETING: Lecture 2

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INTERNATIONAL MARKETINGLecture 2

• Internationalization and
• why to internationalize?
• February 2009

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DEFINING INTERNATIONALIZATION
Any international economic activity/cooperation ta
king place across borders!
A multidimensional process of increased
involvement of input and output activities
beyond national borders
INPUTS
OUTPUTS

• procurement
• materials
• workforce

• sales
• marketing
• services

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INTERNATIONALIZATION AS A PROCESS

• Its not a race! Different levels of involvement
  in the international environment.

INDIVIDUAL EXPORT ACTIVITIES
FLAGSTORE, REPRESENTATIVE OFFICE
LICENSING FRANCHIZING
GREENFIELD BROWNFILED INVESTMENT
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MOTIVES FOR INTERNATIONALIZATION
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INTERNATIONALIZATION THEORIES

• Traditional market approach developing sources,
  capabilities and competencies for building
  competitive advantage (Penrose, 1959 Prahalad
  Hamel, 1990)
• Life-cycle theory (Vernon)
• Uppsala model step by step internationalization
• Transaction cost-based internationalization
  coming with the optimal transaction cost
  structure
• Dunning eclectic paradigm OLI
• Network theory

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Product life-cycle theory

• Traditionally believed that firms began exporting
  when reaching the maturity stage of the product
  life-cycle
• Out-dated theory!

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Uppsala model
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Uppsala model

• Firms begin international activity in nearby
  markets and only gradually move into more distant
  markets
• Enter through successive stages
• Stage 1 No regular export activities sporadic
  exporting
• Stage 2 Export via independent representatives
• Stage 3 Establishment of a foreign sales
  subsidiary
• Stage 4 Foreign manufacturing
• Not valid for all industries! A bit old-fashioned
  BUT...

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Transaction cost model
Source Hollensen, Global marketing 4e, Pearson
Education 2008.
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Network theory
Source Hollensen, Global marketing 4e, Pearson
Education 2008.
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BORN GLOBALS

• SMEs with fewer than 500 employees
• Rely on cutting edge technology in developing
  unique product or process innovations
• Usually managed by entrepreneurial visionaries
• decision maker has a large influence over the
  type of internationalisation followed

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FACTORS OF BORN GLOBALS RISING

• Growing importance of niche markets
• Advances in process/technology production
• Flexibility of SMEs/Born Globals
• Global Networks
• Advances in information technology
• Internet born globals

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IF YOU WANT TO INTERNATIONALIZE, YOU NEED TO BE
COMPETITIVE

• What are your competitive advantages?
• Will customers/buyers realize them?

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FIRST RULE OF INTERNATIONALIZATION

• BE COMPETITIVE!
• BE PROACTIVE!

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ANALYZING THE ENVIRONMENT
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Analytical tools and approaches

• Macro level
• Porters diamond
• PEST analysis
• SWOT analysis
• Industry level
• Porters 5 forces
• Competitive positioning
• C analysis

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NATIONAL LEVEL OF COMPETITIVENESS PORTERS
DIAMOND
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PEST ANALYSIS 1/3
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PEST ANALYSIS 2/3
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PEST ANALYSIS 3/3
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INDUSTRY LEVEL

• Competition analysis in an industry C analysis
  Porters approach
• Analyze
• Market competitors
• Suppliers
• Buyers
• Substitutes
• New entrants

vs.
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PORTERS 5 FORCES
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EXAMPLE Slovene retail market
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