International Business Theory And Strategy (5T6Z0038_2021_9Z5F)
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International Business - Discussing FDI and Internalisation
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Course
International Business Theory And Strategy (5T6Z0038_2021_9Z5F)
Institution
Manchester Metropolitan University (MMU)
Book
International Business
This document includes notes developed directly from the work of Cavusgil in his textbook 'International Business' and covers the following topics:
Chapter 11:
Building competitive advantage
How to become globally competitive
Foreign market entry strategies
Chapter 14:
Key characterist...
International Business Theory And Strategy (5T6Z0038_2021_9Z5F)
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Week 3 Reading:
Cavusgil (2013) Chapter 11 332-336:
The most widely accepted approach for building sustainable, competitive advantage in international
business is that of Bartlett and Goshal. They argued the firm should simultaneously strive to develop:
Global-scale efficiency in its value-chain activities
Multinational flexibility to manage diverse country-level risks and opportunities
Learn from operating internationally and exploit that learning on a worldwide basis (D:335)
The three strategic objectives a firm must seek in order to become globally competitive are:
Efficiency – refers to lowering the cost of the firm’s operations on a global scale (Value-
chains)
Flexibility – develop worldwide flexibility to accommodate diverse country-specific risks and
opportunities
Learning – firms must create the opportunity to learn from operating in international
environments and exploit this learning, through knowledge transfer, on a worldwide basis
D:336)
IKEA case study
Cavusgil (2013) Chapter 11 354-358:
Foreign market entry strategies:
Trade of product and services:
Importing or Globally sourcing/global procurement/ global sourcing: Buying products or
services from a foreign country and bringing them back to the home country (or a third
country) (ID)
On the other hand, exporting consists of making a product in one country (standardly the
home country) and selling and distributing that product in other countries (ID)
In both global sourcing and exporting, the firm manages its international operations largely
from the home country (D:354)
Require high commitment and resources
Equity or ownership based:
Typically, FDI or equity-based collaborative/joint adventures – establishing a presence in
the foreign market as opposed to operating from the home market as the above
Require high commitment and resources
Contractual relationships: Franchising or licensing
Firm allows a foreign partner to use its intellectual property in return for royalties or other
compensation (D:354)
Requires a low level of managerial commitment and dedicated resources (D:354)
, Week 3 Reading:
Aspects to consider with international expansion: (in relation to exam question)
The degree of control the firm desires over decisions, operations and strategic assets
involved in the venture.
The specific financial, organisational, and technological resources and capabilities available
to the firm (D:355)
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