International Business – Meaning, Process, Types & Factors

International business refers to the trade of goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale. It involves cross-border transactions of goods and services between two or more countries. Transactions of economic resources include capital, skills, and people for the purpose of the international production of physical goods and services such as finance,

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The International Product Life-Cycle Theory

1. Market Entry According to the Product Life-Cycle Phase The international product life-cycle theory developed by Vernon was introduced in 1966 (Vernon 1966). Based on panel research of enterprises from the United States of America, Vernon’s product life-cycle explanations further developed the existing trade theories introduced by Heckscher-Ohlin and Leontief (Vernon 1972). Ver­non assumed

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Location Theories of Internationalization

1. Historical Foundations The location discussion in connection with international trade theories has a long history. The mercantile doctrine, the major economic theory from the 16th to the 18th century, claims that the prosperity of a coun­try (accumulated in gold or other precious metals) should be increased by high number of exports and a

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Internalization Theory

1. The Issue of Transaction Costs The internalization theory of Buckley and Casson (1998) is based on the transaction cost approach of Coase published in The Nature of the Firm (1937) and the market-hierarchy paradigm of Williamson (1975). Firms have two fundamental possibilities when dealing with transactions: externally in the market (e.g., contracts) or

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The EPRG Model of Internationalization by Perlmutter

In 1969 Perlmutter was ahead of his time claiming that the multinational corporation is a new kind of institu­tion which, from his point of view, could make a valuable contribution to world order and conceivably exercise a constructive impact on the national states. As a pioneer in MNE research, he categorized MNE character­istics in

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The Eclectic Paradigm

1. Advantage Categories 1.1. Ownership-Specific Advantages The more ownership-specific advantages are possessed by an enterprise, the greater the inducement to in­ternationalize them; and the wider the attractions of a foreign rather than a home country production base, the greater the likelihood that an enterprise will engage in international production. Such ownership-specific advantages may take

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The Uppsala Model of Internationalization

1. Incremental Market Entry Through Accumulated Knowledge During the mid-1960s, Carlson, one of the pioneers of internationalization process theories, argued that firms pass cultural barriers when entering foreign markets. With increasing experience in foreign operations, the enterprise is willing to enter one market after another (Carlson 1966). Firms handle the risk problem through an

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Network Theory of Internationalization

1. Inter-Organizational Relationships In general, a network is a model or metaphor that describes a number of entities that are connected (Axels- son & Easton 1992). In the case of international industrial networks, the entities are actors involved in the economic process that converts resources into finished goods and services. The network model is

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About Strategy and Internationalization

The term ‘strategy’ goes back to Chandler, who defined strategy ‘as the determination of the basic long­term goals and objectives of an enterprise and the adoption of courses of action and allocation of resources necessary for carrying out these goals’ (Chandler 1962: 23). Consequently, strategic management is a set of managerial decisions and actions

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Contractual Modes of Market Entry

1. Indirect and Direct Export Export describes business activities where goods and/or services are sold outside the country in which the major value-added activities took place. Export allows a fast and relatively less risky foreign market entry. The exporter’s major risk is a financial risk (importer does not pay for the cargo) that can

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Cooperative Modes of Market Entry

1. Strategic Alliances Strategic alliances, which belong to the category of cooperative market entry strategies, are formal mecha­nisms that are established to strengthen the participating firms’ competitive positions in the markets. Interna­tional strategic alliances are working partnerships between firms across national boundaries in the same or different industries. Strategic alliances are agreements between two

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Hierarchical Modes of Market Entry (Foreign Direct Investment)

As the foreign business develops successfully, the firm may consider enlarging its engagement in its target markets abroad through foreign direct investments (FDI), which has several forms (Rugman & Hodgetts 2003: 41). The establishment of a sales branch represents the lowest form of financial involvement in the category of foreign direct investment. The institutional

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Decision Determinants of an International Market Entry

1. Entry Rapidity and Proximity to the Market The strategic concept of international market entry requires a clear formulation of the firm’s objectives in the target foreign market. Objectives are a statement as to what the company will achieve within a certain period of time in terms of market position, return on investment, and

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The Internationalization Case Study of Sony

1. Company Origins (The Period from 1945 until the 1980s) In September 1945, a thirty-eight-year-old engineer named Masaru Ibuka, with about twenty employees and USD 1,600 of his personal savings, established a telecommunication-engineering firm, Tokyo Tsushin Kogyo K. K. Another engineer by the name of Akio Morita soon joined the team. At the beginning,

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What Exactly is Meant by Panasonic’s ‘Core Business’?

1. Company Background In 1918, Konosuke Matsushita established the company known as Matsushita Electric Housewares Manufac­turing Works, which was changed to Matsushita Electric Manufacturing Works in 1929. The company has been using the name Matsushita Electric Industrial Co., Ltd., ever since its incorporation as a joint stock corpora­tion in 1935. Panasonic now has 591

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Environmental Analysis in Business Practice: Strong in Technological Forecasting but Poor in Marketing Implementation

A milestone in the history of Sharp was its ambiguous strategic decision to start developing alternative display concepts for television set production that might replace the conventional cathode ray tube (CRT) technology. In 1986, the Japanese firm established liquid crystal display (LCD) laboratories within the corporate research and development group of the firm. Two

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The Phenomenon of Disruptive Technologies Applied in the Automotive Industry: The Case of Tesla Inc

1. Disruptive Technologies Disruptive technologies introduce a very different package of product and service attributes compared to the product characteristics of the industry mainstream. Therefore, disruptive technologies tend to be valued and used first by innovative and open-minded customers. As a consequence, ‘disruptors’ develop entirely new markets with new product and service applications, thus

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Delivery Hero: Instant Internationalization Through Digitalization

1. Launching a New Business Concept and the Role of the Founding Entrepreneur The foundation of Delivery Hero goes back to initial brainstorming ideas developed during a student summer project in 2005 in Sweden. Just a couple of years later, in 2008, one of the students who had participated in the project, named Niklas

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The Internationalization Case Study of Samsung

1. Samsung Management Philosophy – History and Today The Korean economy is characterized by local-market-dominating Chaebols with highly centralized decision structures that consist of many affiliated companies. Compared to large Japanese conglomerates (Keiretsu), Chaebols are generally much younger. The oldest, Samsung, was established in Taegu in 1938 (Chen 2004) by Byung-Chull Lee (Samsung 2007).

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Contract Manufacturing: The Case Study of Foxconn

In 1974, the Taiwan-based firm Hon Hai Precision Industry Company Limited, better known in Western mar­kets by the name Foxconn Technology, was founded by Terry Gou (Hon Hai Precision Co. 2013). During the first years of its existence, the company produced channel-changing knobs for television sets. In 1988, it be­gan to invest in mainland

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