International Marketing Motivations

International Marketing - Motivations

• Firms internationalize for risk reduction (stabilizing sales across different business cycles and diversifying market risks) and for realizing opportunities (developing new sales opportunities, extending sales of seasonal products, and capitalizing on cost advantages).

Risk Reduction Motivations

• Stabilizing sales by supplying various markets with various business cycles
• Compensation for lost market share to competitors in the home country
• Counteracting loss danger in the home country
• Preserving current market positions by stronger engagement (e.g., foreign branch)
• Following competitors overseas to counterbalance their competitive advantage

Realization of Opportunities Motivations

• Development of new sales sources
• Extension of seasonal product sales
• Utilization of overproduction/excess capacity
• Following important customers abroad
• Participation in foreign market growth
• Meeting growth targets unattainable in the home market due to saturated markets or antitrust limitations

Cost Advantages

• Reduction of market development costs through economies of scale
• Capitalization on lower costs of market development in foreign markets

Internationalization Theories

Uppsala Model

• A gradual, successive stages internationalization process (starting with nearby markets and expanding to distant ones).
• Stages include sporadic exporting, using independent representatives, establishing foreign sales subsidiaries and eventually foreign production.
• Market commitment increases as the firm expands
• Factors like perceived differences between markets (psychic distance) affect decisions
• Incremental/sequential approach
• Criticism: too deterministic; doesn't account for country market interdependencies or leapfrogging tendency (entering distant markets using other entry modes).

Traditional Cost Model

• Focuses on existing transactions or sets of transactions to minimize production/service costs for competitive advantage.

Born Globals

• Businesses that immediately enter international markets with high potential.
• Often leverage technology and entrepreneurial vision to minimize perceived differences between markets.
• Influencing factors include: growing importance of niche markets, advances in process/technology production, flexibility of SMEs, and global networks, advances in information technology.