2. THE INTERNATIONALIZATION PROCESS Int’l business dynamics Portfolios Cross-border entry decisions Int’l business development Int’l financial management Measuring int’l business performance*

3. 2 Trade liberalization Int’l competition Increasing int’l trade and business links All size of firms may face competition from companies worldwide! TO SURVIVE: Recognize critical change factors React rapidly* Pressure:

4. 3 International business dynamics changing int’l environment and organizati- onal response strategies crossing national border increased int’l exposure requiring co-ordination Most firms will never grow to be world wide competitor!*

5. 4 To be an international player Critical mass Gain from taking an international stance Able to coordinate suppliers, distributors, functions, customers Lower costs and brand awereness

6. 5 To be a domestic player No critical mass Missing abilities Exploiting their unimpotance Serving parts of the markets where –worldwide presence is not neccessary –Too small to interest the largest firms

7. 6 few large worldwide (regional) competitors lot of small nat’l competitors medium size players Bi-polarization: in many industries GROW to critical mass merge, aquisition, alliance Being big is not essential Sell, close down IkarusGraphisoft OTP, MOL Malév (?)

8. 7 r No firm can persist in believing that international competition will not effect them! A local market may be regarded as part of the expanded home market of an international competition!*

9. 8 Cross-border market entry decisions Pull factors Push factors expanding market lower cost resources labor regulation higher profitability local market saturation increasing cost low profit internal context: vision, organisational dynamics*

10. 9 External triggers INTERNATIONALISATION Market penetration Geographical expansion Product development Organizational dynamics Vision mindset Meta trends Industry competition RETRENCHMENT* Internal triggers Product extension Restricted national market scope Figure 2.1. Developing an international business strategy Intern’l business development

11. 10 Left side: some companies may never attempt to enter cross-border markets restricted geographical scope misbelieve: not threatened by int’l competition Right side: decide to pursue int’l business development if initial int’l development successful: further entry of cross-border market - same steps as in the left if failure or conditions worsened: retrench (temporary, permanent)*

12. 11 External triggers Internal triggers Organisational crisis Corporate succession Financial/ business performance Internal dissent INTERN’LISATIONRETRENCHMENT* META-level Political Economic Ecological Social Technological INDUSTRY-level Industry/competi- tive forces Take-over, merger Shareholder pressure International business development Restricted national market scope

13. 12 Volvo-Renault proposed merger 1990: announced agreement to form strategic alliance 1991: exchange of cross-shareholdings Full merger proposed: by 1993 Failure –shareholder: terms are unacceptable –critics: chairman Gyllenhammer (1971-, style of manegement, preparations secretly, no info) –Gyllenhammer forced resign with 4 board members Volvo: uncertain future –small domestic market –little product range –difficulties in existing Volvo-Renault alliance Importance of internal factors!*

14. 13 FINANCIAL PRESSURE High adaptation High integration High adaptation Low integration Low adaptation High integration Low adaptation Low integration High Low STRUCTURALPRESSURESTRUCTURALPRESSURE Equelibrium portfolio

15. 14 FINANCIAL PRESSURE Low adaptation Low integration High Low STRUCTURALIPRESSURESTRUCTURALIPRESSURE Healthy portfolio

16. 15 FINANCIAL PRESSURE Low adaptation High integration High Low STRUCTURALIPRESSURESTRUCTURALIPRESSURE No financial equilibrium portfolio

17. 16 FINANCIAL PRESSURE High adaptation Low integration High Low STRUCTURALIPRESSURESTRUCTURALIPRESSURE No strategic equelibrium portfolio

18. 17 FINANCIAL PRESSURE High adaptation High integration High adaptation Low integration Low adaptation Low integration High Low STRUCTURALIPRESSURESTRUCTURALIPRESSURE No equelibrium portfolio

19. 18 Predictability Lowrisk Average risk Highrisk High Low REACTIVITYREACTIVITY Risk portfolio Average risk