Seek opportunities for growth through market diversification; gain new ideas about products, services, and business methods; better serve key customers that have relocated abroad; be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products. | International Business Session 2 International vs. Domestic OPPORTUNITIES Seek opportunities for growth through market diversification Gain new ideas about products, services, and business methods Better serve key customers that have relocated abroad Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products International vs. Domestic OPPORTUNITIES Gain access to lower-cost or better-value factors of production Develop economies of scale in sourcing, production, marketing, and R&D Confront international competitors more effectively or thwart the growth of competition in the home market 3 Fundamental changes in the business landscape FDI Based Explanations: Dunning’s Eclectic Paradigm Three conditions determine whether or not a company will internalize via FDI: Ownership-specific advantages – knowledge, skills, capabilities, relationships, or physical assets that form the basis for the firm’s competitive advantage Location-specific advantages – advantages associated with the country in which the MNE is invested, including natural resources, skilled or low cost labor, and inexpensive capital Internalization advantages – control derived from internalizing foreign-based manufacturing, distribution, or other value chain activities 4 Factors Relevant to Choice of Foreign Market Entry Strategy The goals and objectives of the firm, such as desired profitability, market share, or competitive positioning; The particular financial, organizational, and technological resources and capabilities available to the firm; Unique conditions in the target country, such as legal, cultural, and economic circumstances, as well as distribution and transportation systems; Risks inherent in each proposed foreign venture in relation to the firm’s goals and objectives in pursuing internationalization; The nature and extent of competition from existing rivals, and from firms that may enter the market later; The characteristics of the | International Business Session 2 International vs. Domestic OPPORTUNITIES Seek opportunities for growth through market diversification Gain new ideas about products, services, and business methods Better serve key customers that have relocated abroad Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products International vs. Domestic OPPORTUNITIES Gain access to lower-cost or better-value factors of production Develop economies of scale in sourcing, production, marketing, and R&D Confront international competitors more effectively or thwart the growth of competition in the home market 3 Fundamental changes in the business landscape FDI Based Explanations: Dunning’s Eclectic Paradigm Three conditions determine whether or not a company will internalize via FDI: Ownership-specific advantages – knowledge, skills, capabilities, relationships, or physical assets that form the basis for the firm’s competitive advantage .
