Business Strategy and the

Internationalization of
Author(s):
Business: Recent Stephen Young
Approaches

Presented by: Jihane

Wissal
Malika GOUROU
Montored by : Mr. KOUBAA Salah
 Introduction

• From the viewpoint of business strategy, this

paper, by Stephen Young, provides a review of
recent researches and writings on the topic of the
internationalization of business.
• The discussion orbits around various companies
strategies perspectives on internationalization,
distinguishing between the newly international
firm, the large multinational (MNE) and so called
'in- between' MNEs
 Plan
Introduction

I- Explanation for international business activity

II- Internationalization and firm strategy

III- New Focus of foreign participation and

international strategy

Conclusion
I-Explanation for international business activity
INTERNATIONAL BUSINESS ACTIVITIES
Entry strategies for international
markets (Dunning,1986)

 Ownership advantages
over foreign rivals Remain
( technological NO
capabilities, huge
domestic
economies of scale…..)
YES
 Location advantage in
foreign country (cheap NO
Export
raw materials, low
wages, special taxes..)
YES
Advantage from
NO
internalizing Licensing
production

YES
FDI
 II- Internationalization and firm strategy.

Internationalization process

1.Experimental involvement stage:

• Exporting in usually marginal and irregular.
• Only one or two foreign markets are involved,
• Exporting is indirect.

2. Active involvement stage

• The company begins to systematically explore export possibilities in a number of
foreign markets.
• Export activities are no longer considered to be marginal business.
• An export marketing department may be formed.

3. Committed involvement stage

 Process of internationalization

Johanson and Valhne (1977)

Establishment Establishment
Exporting via
of a sales of a production
an agent
subsidiary subsidiary
 Global strategy

• Is defined 'as one in which a firm seeks to gain

competi- tive advantage from its international
presence through either concentrating
configuration, co-ordination among dispersed
activities, or both' (Porter, 1986)
International strategies:
 Other factors that influences
international strategies

The economic imperative: economies of scale, economies

of scope, economies of location, technology, competitive
forces…

The political imperative relating to the demands of the

host countries in which the MNE operates.

The MNEs' strategic predispositions or value systems: four

of these have been suggested, namely, ethnocentric,
 In-between MNEs

• In-Between MNEs, also called non-dominant companies, are small

firms that operate in mature or declining sector in order to avoid
competetors.
• Those small firms have potential strengths in terms of being able:

o To handle smaller orders that larger firms might forego

o They may have greater potential to adapt to customer

demands;

o They may be less visible and, therefore, less susceptible to

political risk.
International strategies of non-dominant
firms

Strategy Description
Rapid extension of products/services to
Extension to less competitive less competitive markets in other major
primary market similar developed countries where buyer
expectations not as high

Market segmentation strategies through

localization (local production or local
Segmentation of primary market adaptation) and/or focusing on a
spesialized market segment (small
customers, speciality product)

Flexibility in exploiting opportunities in

segmented secondary markets, monopoly
Focus on a secondary market licenses, government procurement
contracts
III-New forms of foreign participations and
International strategy
1-Licensing

Strategic reasons for using licensing :

• The foreign country's regulations or political risk which
inhibited the formation of majority-owned subsidiaries .
• Transport or tariff barriers makes exports difficult.
• Licensing is considered as a means of rapid entry into a
foreign market .
• The expectation of receiving technology or
improvements back from the licence
• Licensing as a strategy when products or processes are
older or standardized.
2. Management Contracts (Brooke, 1985a)
 Major uses of management contracts include the
following:
• A joint venture or minority equity as a unidirectional
package providing an enhanced control and revenue-
generating function
• Other contractual forms such as licensing although they
include transfers of managerial know how but they lack
the depth of managerial control
• Long term importing arrangements as a way of ensuring
security , reliability and quality of key supplies
• Project operations to ensure that the constructed
facility functions successfully after completion and that
the essential know how is transferred to local staff
Conclusion
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