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Big Picture C Uloa
Big Picture C Uloa
Week 6-7: Unit Learning Outcomes (ULO): At the end of the unit, you are expected to:
a. Learn and understand the various theories of international trade and explain the
various strategies on firm’s internationalization process;
b. Know and distinguish political into legal aspects of international business and
identify respectively the different risks associated on it; and
c. Understand and explain exchange rate and its system and identify the participant
in the monetary and financial systems.
Big Picture in Focus: ULOa. Learn and understand the various theories of
international trade and explain the various strategies on firm’s
internationalization process.
Essential Knowledge
In this unit you are going to learn the theories of international trade and the
internationalization of the firm. This unit will highlight theories that explain on why do
nations trade and how internationalizing firm gain, enhance, and sustain competitive
advantage. Please note that you are not limited to exclusively refer to these resources.
Thus, you are expected to utilize other books, research articles and other resources that
are available in the university’s library e.g. ebrary, search.proquest.com etc., and even
online tutorial websites.
3. Internationalizing Firm
Internationalization process model describe how companies expand abroad.
According to this model, internationalization takes place in incremental stages over a long
period. Initially and without much analysis or planning, firms begin exporting, the simplest
foreign market entry strategy. As they become more knowledgeable, firms gradually
progress to foreign direct investment (FDI), the most complex entry strategy. The
relatively slow nature of internationalization often results from managers’ uncertainty and
uneasiness about how to proceed. They lack information about foreign markets and
experience with cross-border transactions. The progression from exporting to FDI
coincides with increasing levels of both risk and control. The gradual, incremental model
of internationalization is illustrated by the following patterns:
“Preoccupied with business in its home market, the firm starts out
with a domestic focus. Management may be unable or unwilling to
start doing international business because of concerns over its
readiness or perceived obstacles in foreign markets. Eventually, the
firm advances to the pre-export stage, often because it receives
unsolicited product orders from abroad. In this stage, management
investigates the feasibility of undertaking international business.
Later, the firm advances to the experimental involvement stage by
initiating limited international activity, typically through basic
exporting. As managers begin to view foreign expansion more
favorably, they undertake active involvement in international
business. This occurs through the systematic exploration of
international options and the commitment of resources and
managerial time to achieve international success. Management may
finally advance to the committed involvement stage. This stage is
characterized by genuine interest and commitment of resources to
making international business a key part of the firm’s profit-making
and value-chain activities. In this stage, the firm targets numerous
foreign markets through various entry modes, especially FDI.”
Self-Help: You can also refer to the sources below to help you further
understand the lesson
Cavusgil, S.T., Knight, G., & Riesenberger, J. (2017). Intenational business: the new
realities. (4th Ed.). England: Pearson Education Limited
Hariharaputhrian, S. (n.d.). International business. India: Banglore University
Sinha, P.K. & Mittal, V. (2012). International business. Lovely professional University,
New Delhi India: Excel Private Books Limited.