Internationalization consists of standardized products or service through globally standardized marketing and production processes that target standardized customer needs. Internationalization can be described as the process of increasing involvement in international operations. Another definition denotes internationalization as the process of adapting firms’ operations (strategy, structure, resources, etc) to international environments. Both definitions emphasize the crucial fact that internationalization needs an overall support from the organisation as it is changing the environment to expand in various manners the process mostly consists of macro factors to evolve. The Process of Internationalization Internationalization fundamentally alters the price-setting strategies of domestic economic agents. This is true for agents operating in product markets, factor markets and financial markets. At a micro level, internationalization directly alters pricing behavior by deepening product and factor markets. More potential buyers and sellers imply greater competition and a reduction in excess returns. At a macro level, internationalization also has the Continue reading
International Business Management
Evaluation of Porter’s Diamond Model
In the globalization era, we observed an increment of multinational corporations as well as small businesses that aim to internationalize. Those, in order to be successful in their internationalization process, try to find abroad a location that fits them the most institutionally, culturally and opportunities wise. To make this happen, MNCs uses home and host location strategies which reflect to international business theories through different models. Those models assess external environment analysis of a specific country and explain the concepts used behind the chosen location. Out of the many useful models explaining location strategies used by international companies, this article will focalize on the Diamond Model and discuss whether is a useful concept for international firms to pursue the best entry mode and furthermore argue the advantages and disadvantages through the examination of a real case example such as the multinational IKEA. The Diamond Model was introduced in the book Continue reading
Conflicts Between Multinational Corporations and Host Countries
Although the Multinational Corporations (MNCs) has no power over the host government, if may have considerable power under that government. By being able to influence certain factors, the MNC has the opportunity to help or harm national economics; in this sense, it may be said to have power against host governments. Critics of the MNC perceive these powers as potential perils to host societies. The strategic aspects of a host country’s national policy that are subject to the influence of the MNC include: 1. Planning and Direction of Industrial Growth Host nations have viewed with concern the tendencies of many MNCs to centralize strategic decisions in their headquarters. For the host governments this signifies loss of control over industrial strategy to the foreign-based MNC. The MNCs allegiances are geocentric; their overall objectives are growth and profits globally rather than in the host economy. These objectives require efficiency in the functional Continue reading
Reasons for the Increased Foreign Direct Investments
The factors that propel sustained economic development have not changed with time. They include the generation and efficient allocation of capital and labor, application of technology and the creation of skills and institutions. These fact determine how well each economy uses its endowments and adds to them. They also affect how flexibly and dynamically each country responds to changing economic conditions. However, the global context for development has changed enormous the past decades. These changes affect not only the role of Foreign Direct Investment (FDI) in host countries, but also government policies on FDI. The following three are of particular significance. 1. The Nature and Pace of Knowledge (Technological Knowledge Change) The creation and diffusion of productive knowledge have become central to growth and development. “Knowledge” includes not only technical knowledge (research and development, design, process engineering), but also knowledge of organisation, management and inter-firm and international relationships. Much of Continue reading
The Effects of Globalization on Multinational Corporations
Globalization is the competition in an international market. The growth rate of developing nations and their acquisitions of previously first-world owned corporations indicates that the developed world no longer has the upper hand economic growth in the west has been miniscule in comparison. Success in this new global market requires the ability to accommodate the different needs of diverse consumer groups. Companies can achieve this through product and process innovations and maximize profits. Entrepreneurship is also increasingly recognized and as an alternative course to fortune as opposed to trading rare commodities. Companies from emergent economies are following the lead of their developed counterparts, issuing stocks and encouraging investment. This encouraged growth and share appreciation, surpassing past expectations. Some emerging companies’ growth has even outpaced well-known multi-national companies (MNCs) from the developed world-competing, acquiring and exploiting the endeavors and experiences of first-world MNCs. Similarly, developed nations are tapping into emerging economies, Continue reading
Staffing for Global Operations
Staffing for global operations is quite a complex affair. It involves activities on a global basis, including candidate selection, assignment terms and documentation, relocation processing and vendor management, immigration processing, cultural and language orientation and training, compensation administration and payroll processing, tax administration, career planning and development, and handling of spouse and dependent matters. In global staffing, companies need to choose from various types of global staff members and need to have specific approaches and strategies to global staffing. Global staff members are selected from among three different types: expatriates, host-country people and third-country nationals. Expatriate is a person who belongs to the country in which the organization is headquartered and not a citizen of the country in which the company operates. A host-country national is a citizen of the country in which the subsidiary company is located. A third-country national is a citizen of a country, but works in Continue reading