Question:

A firm which is entirely domestic in its activities normally passes through different stages of

internationalization before it becomes a truly global one. Briefly discuss the important stages in

the evolutionary process of internationalization.

Answer:

Doing business internationally typically involves much more than importing and/or exporting

goods. The six stages of the internationalization process are the following:

o Licensing: An international licensing agreement allows a foreign company (the licensee) to sell the

products of a producer (the licensor) or to use its intellectual property (such as patents, trademarks,

copyrights) in exchange for royalty fees.

o Exporting: Exporting is the marketing and direct sale of domestically produced goods in another

country. Exporting is a typically the easiest way to enter an international market, and therefore

most firms begin their international expansion using this model of entry.

o Local warehousing and selling: Goods produced in one country are shipped to the parent

company’s storage and marketing facilities located in one or more foreign countries.

o Local assembly and packaging: Components, rather than finished products, are shipped to

company-owned assembly facilities in one or more foreign countries for final assembly and

sales.

o Joint ventures: A company in one country pools resources with one or more companies in a

foreign country to design, produce store, transport, and market products, with resulting

profits/losses shared appropriately.