Instructor: Doan Van Ha

Email: hadv@hvnh.edu.vn
Tel: 098 688 8371
§ Watch : The Social Network (2010)

§ Read: https://sociable.co/business/explaining-the-rise-of-born-global-firms-a-
new-generation-of-entrepreneur-set-on-global-development/
§ Understand the motives for internationalization

§ Understand the appropriate entry mode for organization

§ Explain the Psychic Distance and Born Global firm

§ Choose the appropriate strategic Alliance

§ Advise a firm on a choosing an appropriate mode for internationalization
§ You are a strategist (manager) working for a British firm operating in the
supermarket industry (Tesco) that recently decided to internationalise its
activities in Asian.

§ Critically evaluate the main reasons behind your firm’s decision to

internationalise its business activities in Asia.

§ Why Asia?
What is your role as a strategist manager in the new operations?
§ Why do firm internationalize?
§ Motives for internationalization
§ those internal and external factors that influence a firm’s decision to
initiate, develop, and sustain international business activities.
§ Motives for internationalization
§ Organizational factors
§ Decision-maker characteristic
§ Firm specific factors
§ Motives for internationalization
§ Organizational factors
§ Decision-maker characteristic
§ Foreign travel and experience abroad
§ Foreign language proficiency
§ Background
§ Risk taker vs. Risk averse
§ Motives for internationalization
§ Organizational factors
§ Firm specific factors
§ Firm size
§ International appealing
§ Motives for internationalization
§ Environmental factors
§ Not under the firm’s control
§ have major impact on the strategic direction of the firm
§ Unsolicited proposals
§ The bandwagon effects
§ Attractiveness of the host countries
§ Environmental factors
§ Unsolicited proposals :
§ The “bandwagon” effect
§ if one firm internationalize, it
competitors fear being left behind if
the internalizing firm gain competitive
advantages
§ how the country's host market is desirable
for business operation by foreign firms
§ Market size
§ GDP/ capita
§ labor
§ ….
§ Motives for foreign investment
§ Natural resource seeking:
§ Market seeking
§ Efficiency seeking
§ Strategic asset seeking
§ The Uppsala model and criticism
§ The Uppsala model
§ internationalization is a gradual
process
§ The firm proceeded along the
internationalization path in the form of
logical step
§ Gradual acquisition and use of
information determine successive
levels of international business
activities
§ The Uppsala model criticism and “Born global
firm”
§ Not all multinational firm following Uppsala
model
§ unable to explain the international
expansion of firms from emerging countries
§ Born-global firms which do not follow the
traditional internationalization process at all,
seek to derive significant competitive
advantage from the use of resources and
sales of output in foreign market
§ Reading the articles and Name some global born firm you know.
§ What are their characteristic?
§ Export
§ Licensing
§ Franchising
§ Wholly-Owned Venture
§ The Greenfield Strategy
§ The Mergers and Acquisitions (M&As)

§ Strategic alliance
§ Procurement, representative office
§ Exporting
§ is the action by the firm to send produced goods and services from the home country to
other countries.
§ SME often adopt this simples mode to enter foreign market
§ is a low-risk strategy

Mode of Advantages Disadvantages

Entry
Export • Does not require a high resource • Hard to control
commitment in the targeted country operations abroad

• Inexpensive way to gain experiential • Provides very small

knowledge in foreign markets experiential knowledge
in foreign markets
• Low cost strategy to expand sales in
order to achieve economies of scale
§ International licensing
§ the transfer of patented information and trademarks, information and
know-how, including specifications, written documents, computer
programs, and so forth, as well as information needed to sell a product or
service, with respect to regions
§ An arrangement whereby a foreign licensee buys the rights to produce a
company’s product in the licensee’s country for a negotiated fee
§ International licensing
§ several risk associated with licensing

Mode of Advantages Disadvantages

Entry
Licensing • Speedy entry to foreign market • Hard to monitor partners in foreign
markets
• Does not require a high resource
commitment in the targeted • High potential for opportunism
country
• Hard to enforce agreements
• Can be used as a step towards a
• Provides a small experiential
more committed mode of entry
knowledge in foreign market
• Low cost strategy to expand
sales in order to achieve
economies of scale.
§ International franchising
§ a contract-based organizational structure for entering new markets
§ Frachisor grants a franchisee the right to use the franchisor’s trademark and business
processes to offer goods and services that carry the franchisor’s brand name.

Can a game be
franchised?
§ International franchising

Mode of Entry Advantages Disadvantages

International • Speedy entry to foreign •High monitoring costs

Franchising market
• High potential for opportunism
• Requires a moderate
• Could damage the firm’s
resource commitment in
reputations and image (KFC
the targeted country
china)
• Moderate cost strategy
• Does not provide first hand
to expand sales in order to
experiential knowledge in
achieve economies of
foreign markets
scale.
§ Wholly-own ventures

Wholly-own
venture

Merge and
Green field Acquisition
(M&A)
§ Wholly-own ventures
§ A Greenfield strategy entails building an entirely new subsidiary in a
foreign country from scratch to enable foreign sale and or production
§ Is a high-risk strategy
§ building relationships with customers, suppliers and government
officials in the new country
§ The risk of recruiting managers and employees familiar with local
market conditions:
§ The risk of being seen as a foreign firm by local stakeholders
§ Merge and Acquisition (M&A)
§ An international merger or acquisition is a transaction that combines two
companies from different countries to establish a new legal entity
§ Merge and Acquisition (M&A)
§ Horizontal M&As
§ Involve 2 competing firms in the Buyer A Buyer B
industry
§ Industry consolidation is required.
§ Vertical M&As
§ A merge between firms in the
supply chain
§ Conglomerate M&A
Supplier Buyer C
§ Merge of two companies from two
unrelated industry
§ International joint venture

§ A separate corporate entity in which two or more companies have an ownership

stake

JVC
§ Strategic alliance
§ Strategic alliance
§ A strategic cooperative agreement, or agreements, between two or more
firms to pursue a set of agreed upon strategic goals while remaining
independent organizations
https://stories.starbucks.com/stories/2015/
starbucks-and-pepsico-agreement-for-rtd-
beverages-in-latin-america/.
§ Strategic alliances
§ Motivation for strategic alliance

Motivation

External motive Internal motive

§ Strategic alliances
§ Motivation for strategic alliance
§ External drivers
§ Facilitate access to global market
§ help grow a business faster than ‘go it alone’ strategy
§ Reduce speed to market-innovation and new product development
§ Acquire all the necessary resources
§ Defray rising R&D cost, production cost, distribution cost
§ Strategic alliances
§ Motivation for strategic alliance
§ Internal drivers
§ Resource need
§ Learning: seeking not simply to gain a resource but to become part of a
partnership to create new knowledge
§ Risk limitation: seeking to spread financial risk
§ Speed to market: seeking to achieve market presence at a faster speed than
going it alone
§ Cost minimization: seeking to reduce costs
§ Current poor performance: seeking an alliance to improve the current poor
performance
§ Types of strategic alliance

Partnerships between non-competing firms:

1. International expansion alliance
2. Vertical integration alliance
3. Diversification alliance
Alliances between competitors:
1. Complementary alliance
2. Shared supply alliance
3. Quasi-concentration alliance
§ Non-competing firms
Vertical
alliance

Diversification International
alliance Firm expansion

Vertical
alliance
§ Vertical Alliance
§ formed between a supplier and a buyer that agree to use and share
their skills and capabilities in the supply chain.
§ Suppliers invest in a long-term collaborative relationship with the
customer and become partners rather than mere subcontractors
§ International expansion
§ An international expansion alliance is a partnership for expanding into a
new geographical area.
§ Partners originate in different countries
§ One of the partners seeks to enter a market - the other partner has
privileged market access
§ Diversification
§ a partnership between companies in different lines of business
§ to facilitate diversification into an unfamiliar product or service
§ Shared supply alliance
§ partnership between competing firms, which collaborate to achieve
economies of scale or to share research and development (R&D) with
regard to a specific input within the production process.
§ limited to upstream activities
§ direct competitors in end products
§ Complementary alliance
§ a partnership between competing firms, which contribute different and complementary
assets and capabilities to their joint endeavour.
§ One partner typically contributes a product design or set of critical technologies, while
the other provides in-depth knowledge of and access to international markets.
§ Example: Pharma-biotech company
§ A quasi-concentration alliance
§ a partnership between competing firms, which contribute similar capabilities and assets
to the alliance in order to develop, manufacture and market a joint product
§ The aim of such an alliance is to benefit from advantages enjoyed by larger rivals without
having to merge
§ END OF CHAPTER 4