Introduction to Internationalization

Introduction to Internationalization

• Internationalization involves strategically extending a company's products or markets to other countries
• Globalization means an increase in the flow of goods, services, capital, people, and ideas across international boundaries
• Drivers, timing, location, and competitive strategies are all considerations for the internationalization of firms

Drivers for Internationalization

• Structural factors promote deregulation, which avoids political/regulatory hurdles
• Access to new customers, addressing market saturation, and tapping into emerging markets are demand factors
• Supply factors involve economies of scale, diversification of suppliers, and global value chains (GVCs)
• Competition factors include reacting to global competitors, imitating successful strategies, "First-Mover Advantages," and gaining economic benefits
• Increased dependency on other countries is problematic during wars, conflicts, and natural disasters

Concerns Related to Internationalization

• Increased competition can lead to protectionist policies that aim to shield domestic firms and workers, which can be difficult to justify
• Disproportionate growth creates inequalities within/between nations, potentially leading to migration and increased globalization
• Environmental challenges, like deforestation and greenhouse gas emissions, are often outsourced, failing to address the global ecological crisis

Roque et al (2019): Internationalization Strategies Revisited: Main Models and Approaches

• Key internationalization strategies are reviewed that companies use to expand into global markets
• Theoretical models and frameworks guide firms' international growth

Definition of Internationalization

• It is the expansion of a company's operations into foreign markets
• It involves adapting structure, strategy, and resources to fit different international environments
• It is not always a linear process, and companies might scale back or change their strategies

Theoretical Approaches to Internationalization

• Contingency Theory: Internationalization is affected by organizational and environmental factors
• Institutional Theory: Strategies are adapted based on external pressures from institutions and regulations
• Network Theory: Expansion occurs through relationships and networks, leveraging connections for market entry
• Internalization Theory: Internationalization aims to control operations and reduce transaction costs

Internationalization Models (IMs)

• U-Model: Gradual expansion, targeting nearby, culturally similar countries first
• I-Model: Innovation-driven, starting with small export activities and incrementally increasing commitment
• Born Globals: Rapid internationalization from the start, leveraging technology and global networks
• Product Lifecycle Model: Expansion based on product maturity in different markets
• Non-Sequential Model: Skipping traditional steps, entering markets directly through investments
• Pre-Export Activities Model: Analysis of factors influencing the initial decision to export
• Integrated Model: Flexible approach that considers internal and external factors

Strategic Implications of Internationalization

• Strategy variations are based on company goals, industry specifics, and market conditions
• Knowledge and experience in foreign markets lowers risks and increases commitment
• Internationalization model choice affects operational control, resource allocation, and risk exposure
• There isn't one "best" model and companies should use an approach aligned to their unique capabilities, market conditions, and strategic goals
• Future studies should explore the impact of these models on companies' internal structures and long-term success

Worn Again Technologies Case Study

• The business aims to scale its fiber-to-fiber textile recycling technology, while navigating industry challenges and expansion opportunities

Circular Economy & Textile Industry

• Worn Again is an operator within the circular economy, recycling textiles instead of landfilling them
• The fashion industry generates significant waste, with fast fashion exacerbating overproduction and rapid disposal
• Worn Again separates and recycles PET (polyethylene terephthalate) and cotton from blended textiles

Business Model & Expansion

• They established an R&D lab in Nottingham in 2012, and a pilot plant in England
• A 1,000-ton demonstration plant in Switzerland proved the technology at scale
• There are plans to expand globally by licensing the company tech, for large plants in Europe and North America

Market Expansion Considerations

• Strong regulatory support, high textile consumption, and a well-developed recycling ecosystem are in Europe. Mandatory textile collection is required by 2025 via the EU Waste Framework Directive
• Europe's rising energy costs and economic challenges could increase operational expenses
• The United States has a large textile waste output (17 million tons in 2018), creating potential for recycling
• The United States lacks uniform national recycling regulations, making policy weaker than in Europe
• The United States has lower energy costs than Europe

Challenges & Key Strategic Questions

• How can Worn Again replicate the Swiss model in new markets?
• What regional template should the company adopt?
• How do differences in regulations, infrastructure, and market readiness get navigated between Europe and North America?
• Worn Again requires effective policy navigation, partnership scaling, and economics to scale from pilot success

Market Entry Strategies

• Exporting: Selling products/services to foreign customers, shipping goods or delivering services internationally, using intermediaries or distributors
• Licensing: Granting foreign entities rights to use intellectual property, quick entry, relatively low-risk but requires management
• Franchising: Replicating successful business models, quick entry, relatively low-risk, requires management

Local Manufacturing Strategies

• Contract Manufacturing: Arranging for an independent local manufacturer to make products, international companies marketing the finished product. Marketing is critical
• Assembly: Locating part of the manufacturing process in the host country, taking advantage of lower wages, dependable access to imported parts is needed

Ownership Strategies

• Joint Venture: Two businesses in different countries working together, risks and costs are shared
• Mergers & Acquisitions: Consolidates businesses, gives quick access to customer bases/distribution networks, high-risk, high-reward
• Subsidiary: Setting up a new, fully-owned entity, tight control, significant financial investment/risk
• Greenfield development: Investing in land and building new facilities, slow, high investment/risk, but allows building a customized subsidiary

Process of Internationalization

• Incremental: The Uppsala model shows an incremental internationalization process
• The Uppsala model aims to explain firms' internationalization behavior (why, when, where, how), predict entry strategies over time, and formulate business implications

Explanation Areas

• Psychic distance refers to lack of knowledge about foreign markets, affecting decisions
• Businesses internationalize first into "close" markets/countries and gradually learn

Establishment Chain

• Businesses starts with low-risk enty strategies at first
• Once there is morre market knowledge, there is a willingness to increase investment

Static Aspects

• Market commitment and knowledge

Dynamic aspects

• Current activities and commitment decisions

Born Global Firms Characteristics

• Businesses seek to derive market advantages by using resources and selling outputs in multiple countries
• Usually possess advanced technology, internationally oriented entrepreneurs, cheaper internationalization strategies (internet/networks), niche business models

Timing Strategies

• Business know which market to enter
• The product service it specific
• One test market is needed

Sprinkler Timing

• Product service is generic
• There are substantive resources

Timed-Mover Advantages

• First mover advantages are brand recognition, economics of scale, control of resources, higher buyer switching costs
• Follower/Late mover advantages are marker viability, improvements to existing products, reduced risks, easier momentum

Allocation Strategies

• Local responsiveness is the ability to align with national markets in a timely manner
• Global synergy is the ability to create value through integration and alignment across countries

Global-Local Tensions

• Result in paradoxical tensions: contradictory elements
• Interrelated elements
• Persistent over time

Paradox Mindset

• It assists in drawing energy from complex goals
• There is a link between Paradox mindset and performance, creativity and innovation

International Business Conflicting Goals

International businesses progressively face conflicting goals

• Examples of conflicting goals are global synergies, local adoption, and exploration
• Social/ecological vs economic sustainability is another example

Global Supply Chains Paradox

A paradox in the global supply is:

• Higher wages for factory workers lead to higher prices, increasing production costs
• Success depends on factory standards and cost of product

Internationalization in the 21st Century

• This has driven growth however has caused job losses and inequality
• These trade routes date back to the silk road

Globalization Considerations

• Debates on restructuring for equality and preventing fragmentation
• The rise of china created global tensions

IMF Warning

• IMF stated tensions may lead to economic blocs and instability
• Critics advocate for inclusivity

Positive Globalization Consequences

• Trade and investment drive economic expansion
• Millions lifted from poverty
• Accelerated spread of innovation
• Increased interconnectivity fuels tolerance

Negative Globalization Consequences

• Technological advances lead to unemployment and wage gaps
• Some workers face harsh conditions
• Industry and trade contribute to climate change
• Economies fuelling interational conflicts

"Globalization as an End" vs. "Globalization as a Means"

• An ultimate goal which prioritizes trade over the environment is "globalization as an end"
• When you use globalization to establish stable development that benefits everyone it is "globalization as a means"

Protectionism

• What it is, and the economical restrictions it brings
• Trade is limited
• Increase costs for consumers
• War and retaliation
• Challenges global integration

IMF Role

• Promoting financial stability throughout the economies
• Provide finacial support

Future of Globalization

• It needs cheap capital, energy, and cheap labor
• Shifts from liberalization to regionalization

Need For Global Governance

• International competition evades regulations through tax havens
• There is a relevance to enviornmental and social change

International Human Resource Management

Key HRM Leadership

• Balance global standardization
• Match HR practices with industry and country

Divergence or Convergence

The article compares selection practices through out various different countries

• Hiring differs due to social construct
• Trend in convergence of HR practices
• Technical ability and personal interviews

Regional Aspects

• North America emphasizes technical skills
• East Asia emphasizes interpersonal skills
• Developing countries emphasize personal connections

Expatriate and HCN

• How host-country nationals interacts with expatriates
• Emotional and instructive support

Consequenses Of HC Attitudes

• Negativity may result in harm
• A number of investigations need to take place

IHRM Orientations

• Adaptive to the local markets
• Exportive to impose HO approach
• Integrative to transfer best practices

International Employment Law

• Common law is subject to the constitution
• Civil law of written law
• Religious code of traditional "ways"

ILO Declaration

• Recognizes collective bargain rights
• Prohibits child labor
• Prohibits forced labor

International Staffing (Approaches)

• Tend to hire from home headquarters
• Preference to use locals from the subsidiary
• Favour people using from the region

Causes for Expatriate Failure

There is a failure with adaptation when an expatriate

• Has personality issues and immaturity
• Has an inability to fulfil
• Has lower motivation

Expatriation Best Practices

• Use natives to staff
• International managers need to manage issues well

International Rewards Comparibility

• Accountablitity of compensations
• Labour costs
• Transparency

Base Pay

• This will supplement low-pay countries
• Home pay is foudation for the approach

Global Leadership

"Virtual Teams Research"

The paper shows the developments and directions of virtual teams

• Research has shifted from lab studies to real world settings
• Focus on team composition
• High rate of technology relies on dispersion

"Global Business Speaks English"

The trend toward companies in adopting English

• It is the fastest spreading language
• Companies mandate a corporate language

Key Drivers

• There are key drives to be competitive
• Globalization is a driver
• Mergers across the borders

Employee Resistance

• Causes resistence
• Causes self confidence issues
• Results of a negative impact

Global Leaders

• Interract with other parts of the world
• Essential asset

Team Diversity

• There is diverse team members to share ideas
• There members will have to have diverse perspectives and competencies