1 INTERNATIONALIZATION THEORIES/MODELS

GLOBALIZATION
= internationalization of business, communications and culture
 the term refers to the interdependence of the world economy and the fact that activities of events in the
country can have far-reaching effect across the globe
o smaller countries tend to be more globalized than larger ones
o they give them smaller masses of land and population allow smaller quantities of production
 POPULATION INCOMES
o countries with higher incomes have tend to be more globalized than those with lower
incomes
o their citizens can more easily afford foreign ones products, travel and communication with
people you meet abroad
 the variance between aspects of globalization
 although the country can be classified as highly globalized in one dimension, may have low globalization
in another dimension (e.g. USA – high technology globalization, low economic)
FACTORS STIMULATING GLOBALIZATION
 increasing the use of modern technologies
 liberalization of cross-border trade and movement resources
 development of services supporting international trade
 rising consumer pressure
 increasing global competition
 expansion of cross-border cooperation
INTERNATIONALIZATION
 INTER = between, NATIONALIZATION = nation
= summary of all activities of the company that cross the borders of the nation state SD
MOTIVES TO INTERNATIONALIZE THE COMPANY
o several motives
o to increase sales and market share of the company
o to weaken competitors
o to obtain new resources
o to expand production capacity
o to acquire intercultural competence

AREAS OF BUSINESS INTERNATIONALIZATION

o product, process, HR, finances, innovations (intellectual property = IP)

INTERNATIONALIZATION MODELS
 setup of business management strategy in international scale is crucial and decisive, AT WHAT STAGE
INTERNATIONALIZATION, the company is located
o reason for creating various models describing internationalization of the company in stages
 THE STARTING POINT FOR INTERNATIONALIZATION ACTIVITIES IS THEREFORE A SITUATION WHERE COMPANY:
o realizes all supplier-customer relations within the home state
o has only domestic instrumentation equipment
o has only a domestic workforce
 o finances its activities only with domestic ones funds
o has its revenues exclusively from the domestic state

SELECTED INTERNATIONALIZATION MODELS

1. UPPSALA MODEL (Johanson and Vahlne 1977)
 based on observation of Swedisch companies
 nordic independent model to explain the succesive steps to increased foreign expansion
 STEP 1: No regular export activities (sporadic export)
 STEP 2: Export via independent representative (export mode)
 STEP 3: Establishment of a foreign sales subsidiary
 STEP 4: Foreign production/manufacturing

UPPSALA MODEL – DYNAMIC APPROACH

 relationship between market knowledge and the market commitment

 market knowledge will lead the company to the increased market commitment and vice versa
2. STOPFORD MODEL
 Stopford and Wells 1972
 based on the survey within 190 companies and shows the organizational evolution as the company
expands abroad
 THE MODEL OPERATES WITH 2 VARIABLES
o foreign product diversity (foreign product diversification)
o foreign sales as percentage of total sales (area diversification)
 companies A and B are small / have closely related products. Company A sells its product to company
B for testing market demand.
 company B sees potential and buys a license from Company A for local production
 company A loses direct control over promising foreign market, pushes for a joint venture to manage
risks and gain more market control
 company A sets up its own companies in foreign countries
3. THEORY OF BUSINESS NETWORK (J. O. Sorensen 1997)
 the organizational network of the company is a major incentive for internationalization
 he companies produce their resources by interacting with other partners
 2 VARIABLES, WHICH INFLUENCE THE INTERNATIONALIZATION:
o degree of internationalization of the market (low x high)
o degree of internationalization of the company (low x high)
  THE EARLY STARTER – business relationships with foreign companies, start in foreign markets via an
agent, leading to sales subsidiary and then manufacturing subsidiary
 THE LONELY INTERNATIONAL – has experience of relationships with others in foreign countries, establish
new relationships or to deepen the existing ones
 THE LATER STARTER – focused on domestic markets while competitors already have foreign partnerships,
struggles to find partners and enter established markets
 INTERNATIONAL AMONG OTHERS - uses existing network positions to connect with other networks,
success depends on coordinating international activities across the value chain

4. MULTINATIONALIZATION
 MUTLTINATIONAL CORPORATION (MNC)
o a corporation having supplier and/or sales networks in more than one company
o creates space, where individuals business and accompanying operations of international trade
completely or partly take place between international branches (incl. HQ) of this company
 BORN GLOBALS
o some companies are created directly as international -> typical to internationalize during the first
year since their establishment
o companies vision: become global and globalize rapidly without any long term domestic or
internationalization period
o EXPORT/IMPORT START UP:
 globalizes rapidly without any preceding long term domestic or internationalization period
o GLOBAL START UP:
 since establishment many activities coordinated across many countries
o small companies, usually technology-oriented companies
o operates in international markets from the earliest days of their establishment