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Questions and Answers
According to the Uppsala Model, what is the initial stage of internationalization for a firm?
According to the Uppsala Model, what is the initial stage of internationalization for a firm?
What is a major criticism of the Uppsala Model of internationalization?
What is a major criticism of the Uppsala Model of internationalization?
Which of the following is NOT a motivation for firms to internationalize?
Which of the following is NOT a motivation for firms to internationalize?
Which internationalization theory focuses on leveraging existing transactions to reduce costs and gain a competitive advantage?
Which internationalization theory focuses on leveraging existing transactions to reduce costs and gain a competitive advantage?
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Which characteristic is associated with 'Born Global' firms?
Which characteristic is associated with 'Born Global' firms?
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Flashcards
Internationalization Motivation
Internationalization Motivation
Reasons for firms to expand internationally include risk reduction and seeking new opportunities.
Uppsala Model
Uppsala Model
A model explaining gradual internationalization through stages of market commitment and distance.
Psychic Distance
Psychic Distance
Perception of differences between markets that influences international expansion decisions.
Traditional Cost Model
Traditional Cost Model
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Born Globals
Born Globals
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Study Notes
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.
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Description
Explore the key motivations behind firms' decisions to internationalize their operations. This quiz covers both risk reduction strategies and the realization of new sales opportunities. Test your understanding of how businesses adapt to different market dynamics and competitive pressures.
