Internationalization Strategies Questions Essay

Internationalization Strategies Questions - Essay Example The reasons why a business may seek to pursue an internationalization strategy as part of its growth and expansion plans are strongly contextual. In particular, they will reflect the economic and political features of the country or region of the investing firm, and of the country or region in which the company seeks to invest. Other factors at that will determine this decision include: the industry and the nature of the value added activity in which the firm is engaged and the characteristics of the individual investing firm, including its objectives and strategies in pursuing these objectives. Dunning (2000) identified four major types of internationalization activities: (1) market seeking or demand oriented activities that are geared towards satisfying a particular foreign market, or set of foreign markets; (2) resource seeking or supply oriented activity that targets gaining access to natural resources; (3) efficiency seeking activity which is designed to promote a more efficient division of labour; and (4) strategic asset seeking, which aims to protect or augment the existing specific advantages of the internationalising firm and/or to reduce the advantages of its competitors. These activities also mirror the advantages that organisations gain by pursuing internationalisation strategy such as greater market share, brand awareness and revenue, accessing more resources or technology for competitive advantage, efficiency and economies of scale which lowers cost of production, spreading of business risk and creation of entry barriers to one’s industry. Factor conditions refer to the inputs that are necessary for a firm to compete such as capital, infrastructure, land and labour. According to Porter (1990) the stock of factors in a country at any given time is less important than the extent to which they are upgraded and deployed. In reference to Dunning's resource seeking internationalisation objective, a company may therefore be attracted to a part icular country where its key resources are generally rapidly upgraded for example the strong government support experienced in China’s manufacturing industry. Home demand conditions refer to the level of demand of a particular product locally in comparison to its level of demand abroad. It is largely influenced by size, number of independent buyers, sophistication of local buyers, rate of demand growth, early demand and early saturation. A more demanding local market leads to national advantage and a strong, trend-setting local market helps local firms anticipate global trends. Early saturation of the local market also motivates firms to continue innovation and to reduce cost and/or pricing of products for example Japan’s TV industry saturated early and forced home players to seek new markets in Europe and North America. Finally, the home firms will be forced to enter foreign markets, Dunning’s market seeking international activity, in the search for more busine ss and sustainable growth. Porter’s third determinant, related and supporting industries reflects the importance of the link between businesses within a value chain. Related industries refers to those industries that share certain elements of their business for example the US has a vibrant information systems industry that