CHAPTER VII

INTERNATIONAL
EXPANSION AND
GLOBAL MARKET
OPPORTUNITY

© Mason Carpenter 2011, published by Flat World Knowledge

 INTRODUCTION

• This chapter pulls together all the information about choosing to expand
internationally and possible ways to make that choice.
• A wide variety of internationalization moves are available after
choosing to expand. Moreover, some flatteners make global moves
easier, while some make them more difficult.

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 Learning Objectives

1 2 3 4

Understand Recognize Identify Know the

the Global PESTEL, International CAGE
Strategic Globalization Expansion Analysis
Choices , and Entry Mode
Importing

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 “ Global Strategic Choices

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 R AT I O N A L E F O R
I N T E R N AT I O N A L E X PA N S I O N

• To improve the cost-effectiveness of their operations

• To expand into new markets for new customers
• To follow global customers

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 PLANNING FOR
I N T E R N AT I O N A L E X PA N S I O N

• It is important for firms to prioritize which countries to

enter first and to evaluate each country’s relative merits
because:
• Many markets look appealing due to their market size or
low-cost production

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 I N T E R N AT I O N A L M A R K E T
DUE DILIGENCE

• Involves analyzing foreign markets for their potential size,

accessibility, cost of operations, and buyer needs and practices to aid
the company in deciding whether to invest in entering that market
• Includes:
• Regional differences
• Understanding local consumers
• Industry dynamics

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 “ PESTEL, Globalization, and
Importing

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 KNOW THE COMPONENTS OF
P E S T E L A N A LY S I S

• PESTEL analysis
• An important and widely used tool that helps present the big picture
of a firm’s external environment in political, economic,
sociocultural, technological, environmental, and legal contexts,
particularly as related to foreign markets; analyzes for market growth
or decline and the position, potential, and direction for a business.

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 FA C TO R S FAV O R I N G
I N D U S T RY G L O B A L I Z AT I O N

• Markets
• Global customer needs
• Transferable marketing approaches
• Costs
• Learning and experience
• Governments
• Common technological standards
• Common manufacturing and marketing regulations

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 I M P O RT I N G A S A S T E A LT H F O R M
O F I N T E R N AT I O N A L I Z AT I O N

• Importing: The sale of products or services in one

country that are sourced in another country.
• Firms that engage in importing must learn about:
• Informed compliance with customs regulations
• Entry of goods
• Foreign trade zones

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 “ International Expansion Entry Mode

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 C O M M O N I N T E R N AT I O N A L -
E X PA N S I O N E N T RY M O D E S

• Strategic alliance: An international entry mode involving a

contractual agreement between two or more enterprises
stipulating that the involved parties will cooperate in a certain
way for a certain time to achieve a common purpose
• Greenfield venture: An international entry mode involving
the establishment of a new, wholly owned subsidiary.

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 C O M M O N I N T E R N AT I O N A L -
E X PA N S I O N E N T RY M O D E S

• Licensing: An international entry mode involving the granting of

permission by the licenser to the licensee to use intellectual
property rights, such as trademarks, patents, or technology, under
defined conditions
• Acquisition: An international entry mode in which a firm gains
control of another firm by purchasing its stock, exchanging stock,
or, in the case of a private firm, paying the owners a purchase price

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 “ CAGE Analysis

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 C A G E A N A LY S I S

• CAGE framework: The analytical framework used to understand

country and regional differences along the distance dimensions of
culture, administration, geography, and economics.
• Using the CAGE Analysis is helpful in order to create insights into the
key differences between a company’s home market and the international
market it intends to target. It is also helpful because it allows companies
to assess the desirability of that market in an organized manner.

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 Thank you!   

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