International Business Limitations

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Questions and Answers

What might prevent managers of firms from internationalizing their enterprise?

Domestic competition from other firms

Fear of losing control over the enterprise (correct)

Unsolicited orders from foreign customers

Lack of experiential knowledge in international markets

What limitation does the Stages theory of internationalization have?

It doesn't recognize the importance of domestic competition

It doesn't consider the formality of business relationships

It doesn't explain how firms overcome internationalization problems (correct)

It doesn't account for experiential learning

What is a key aspect of the Network theory that sets it apart from the Stages theory?

It focuses on the role of business networks and relationships (correct)

It highlights the significance of domestic competition

It prioritizes the importance of unsolicited orders

It emphasizes the importance of experiential learning

What is a potential drawback of relying solely on experiential learning for internationalization?

It may overlook the importance of business networks and relationships Signup and view all the answers

Why might firms need to leverage both experiential knowledge and business networks/relationships?

To sustain their enterprise on the international market Signup and view all the answers

What external factor might affect a firm's internationalization efforts?

All of the above Signup and view all the answers

What is the primary way that firms acquire knowledge in internationalization?

Gradually through experimenting and experiential learning Signup and view all the answers

What is a limitation of the stages theory of internationalization?

Firms can leap-frog into later stages of internationalization Signup and view all the answers

What is a characteristic of the network theory of internationalization?

Internationalization is achieved through the development of business relationships with actors abroad Signup and view all the answers

What is an assumption of the network approach?

Firms are dependent on resources owned or controlled by actors Signup and view all the answers

What is a consequence of firms basing their international decisions largely on experiential learning?

Firms will internationalize slowly Signup and view all the answers

What is a limitation of the stages theory in terms of entry strategies?

The choice of entry strategies does not always correspond to the sequential step-by-step approach Signup and view all the answers

What is a characteristic of actors in the network theory?

An actor may be an individual, a department in a company, a whole company, or even a group of companies Signup and view all the answers

What do firms develop in the foreign market according to the network theory?

Further relationships or linkages with other actors Signup and view all the answers

What is the process of increasing the involvement of enterprises in international markets?

Internationalization Signup and view all the answers

What does the stages theory of internationalization propose?

Entry into the international market follows a step-by-step fashion Signup and view all the answers

What is the definition of internationalization process according to Albaum et al. (2005)?

The successive development in a firm’s export engagement in terms of geographical spread, products, and operation forms Signup and view all the answers

What is the focus of the network theory of internationalization?

Building networks to facilitate trade Signup and view all the answers

What is international trade backed by?

Several theories Signup and view all the answers

What is the primary focus of the stages theory of internationalization?

Slow and gradual process of entering foreign markets Signup and view all the answers

What is the definition of internationalization?

The process of increasing the involvement of enterprises in international markets Signup and view all the answers

Which of the following is a characteristic of the internationalization process?

No clear goals are defined at the beginning Signup and view all the answers

What is the characteristic of internationalization?

Dynamic process Signup and view all the answers

What is the typical progression of product types and variants in the internationalization process?

A gradual increase in product types and variants Signup and view all the answers

What do the stages theory and network theory of internationalization emphasize?

The building of networks to facilitate trade Signup and view all the answers

What is the initial response to unsolicited export orders in the internationalization process?

Responding to unsolicited and sporadic export orders Signup and view all the answers

What is the typical progression of organizational structure in the internationalization process?

From a single person in the firm to an international division Signup and view all the answers

What is the typical attitude of management towards internationalization at the beginning?

No marginal attention to internationalization Signup and view all the answers

What is the typical approach to market selection in the internationalization process?

Close markets are explored before more distant markets Signup and view all the answers

What is the role of experiential knowledge in the internationalization process?

It increases the commitment of resources to foreign markets Signup and view all the answers

What is the primary goal of an exporting firm in developing and maintaining long-lasting relationships?

To serve its economic objectives Signup and view all the answers

What is a characteristic of the network theory?

It is based on mutual trust and confidence among partners Signup and view all the answers

What is a benefit of gaining access to a network's resources?

Gaining access to market-specific knowledge Signup and view all the answers

What is a limitation of the network theory?

It does not consider the importance of the decision maker and firm specific attributes Signup and view all the answers

What is a result of firms adapting to each other's needs in a network?

Interdependence and possession of high degree of mutually beneficial assets Signup and view all the answers

What is a characteristic of the relationships between partners in a network?

Long-term and built on mutual trust and confidence Signup and view all the answers

What is a benefit of gaining access to experiential knowledge through a network?

Gaining access to experiential knowledge without going through the same experiences Signup and view all the answers

What is the role of interpersonal and inter-organizational relationships in the network theory?

They are a means to gain access to a variety of resources Signup and view all the answers

Study Notes

Theories of Internationalization

Internationalization is the process of increasing the involvement of enterprises in international markets.
It involves entry into new markets, variation and standardization of products, and changes in mode of operations.

Stages Theory of Internationalization

The theory argues that for a firm to gain successive entry into foreign markets, it ought to proceed in a consistent step-wise fashion.
Internationalization is seen as a slow and gradual process, with close markets explored before more distant countries/markets are considered.
Through accumulated experiential knowledge, more resources are committed to the foreign market.

Typical Internationalization Process

Begins from the domestic market, entering first neighboring and environmentally similar markets.
Goals are not clearly defined at the beginning, but profit goals assume importance with experimental success.
Products gradually increase in types and variants, reflecting adaptation to requirements of specific markets.
Entry modes progress from responding to unsolicited and sporadic export orders to establishment of sales subsidiaries and/or production units in selected markets.
Organization evolves from occasional tasks of a single person to a full-time job of a marketing officer, and eventually, an international division.
Management commitment grows gradually with experience and success.

Limitations of the Stages Theory

The impression that internationalization is inevitably progressive, consistently cumulative, and irreversible is not always true.
Firms may leap-frog into later stages by strategic moves conditioned by internal and external changes.
Internationalization process may be slow if firms base their international decisions largely on experiential learning.
The choice of entry strategies/modes does not always correspond to the sequential step-by-step approach.
Firms may take similarities between neighboring countries for granted.
The idea of having a strong domestic market base before venturing into international markets may not be applicable in most developing countries.

Network Theory

A given market is seen as a network of relationships, and internationalization is achieved by firms through the development of business relationships with actors abroad.
Actors may be individuals, departments in a company, whole companies, or groups of companies.
The roles and strengths of the actors are identified to understand possible constraints and opportunities for operations.
Positioned within the foreign network, the internationalized firms develop further relationships or linkages with other actors.

Attributes of Network Theory

Parties build mutual trust and confidence in each other's ability and willingness to fulfill their respective commitments.
Mutual learning and knowledge concerning areas of resources, marketing, organization, and developing possibilities accrue.
Reliance on complementary resources of partners is essential.
Information flow is more comprehensive and reliable.
Parties adapt to each other's needs and gradually become interdependent because of the possession of high degree of mutually beneficial assets.

Merits of Network Theory

Useful in gaining market-specific knowledge and valuable as a source for market entry.
Firms that pursue opportunities in foreign markets enabled by network resources experience greater international growth.
Firms can gain access to other firms' experiential knowledge without necessarily going through the same experiences.
Interpersonal and inter-organizational relationships are viewed as the media through which firms can gain access to a variety of resources to gain competitive advantage.

Demerits of the Network Theory

The theory does not consider the importance of the decision maker and firm-specific attributes in the network development.
The neglect of inter-personal linkages, the decision maker, and the firm characteristics that emerge when firms take opportunities to penetrate, extend, and integrate in the international market through their networks.

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Description

This quiz explores the limitations of international business models, including the fear of losing control, inability to overcome internationalization problems, and neglect of external factors such as relationships with competitors.