OHT 2.

Internationalisation
Process

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004
OHT 2.2

Methods of internationalisation
• Export based
– Direct exporting
– Indirect exporting
• Non-equity based
– Licensing
– Franchising
• Equity based
– Joint ventures
– Foreign direct investment (fdi)
– Consortia, Keiretsus and Chaebols

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004
OHT 2.3

Why invest abroad?

• Supply factors
– Production costs
– Distribution costs
– Availability of natural resources
– Access to key technology
– Incentive schemes to reduce costs

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004
OHT 2.4

Why invest abroad?

• Demand factors
– Saturation of home market
– Avoidance of trade barriers
– International product life cycle
– Demand from business customers now abroad
– Demand from overseas governments for
inward fdi (incentive schemes)
– Strategic issues: e.g. matching rivals; seeking
more ‘local’ responsiveness.

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004
OHT 2.5

Theories of internationalisation
• Ownership – specific advantages
• Location – specific advantages
• Eclectic theory
• Sequential theory
• Simultaneous theory
• Network theory
• International product life cycle (IPLC)

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004