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Unit 1: International Business: An Overview

self assessment notes

Fill in the blanks:
6. ................ diagnosis consists of managerial decisions made by analyzing the significance of
the data (opportunities and threats) of the environmental analysis.
7. International business includes any type of business activity that crosses ................ borders.
8. The ................ of the international business should be large in order to have impact on the
foreign economies.
9. International business ................ need accurate information to make an appropriate
decision.
10. ................ markets present more potentials than the domestic markets.

1.4 stages of internationalization

Internationalization process for a company is a complex process. The experts have discussed
various strategies that are generally adopted in the process of internationalization. The optimal
strategic attractive available to firms depend upon different levels of internationalization.
Although there are variations in how international operations evolve, some overall patterns
have been noted. Most of these patterns relate to risk minimization behaviour. In other words,
most companies view foreign operations as riskier than domestic ones because they must operate
in environments which are less familiar to them. Thus, they initially undertake international
activities reluctantly and follow practices to minimize their risks. But as they learn more about
foreign operations and experience success with them, they move to deeper foreign commitments
that now seem less risky to them.

Patterns of expansion

The farther a company moves from the center on any axis, the deeper its international commitment
becomes. However, a company does not necessarily move at the same speed along each axis.
A slow movement along one axis may free up resources that allow faster expansion along
another.
For example, a company may lack initial capacity to own facilities wholly in multiple foreign
countries; thus it may choose either to limit its foreign capital commitment by moving slowly
along axis C in order to move rapidly along axis D (to multiple foreign countries), or vice versa.

1. Passive to Active Expansion – Path A: The impetus of strategic focus is shown on axis A in
Figure 1.1. Most new companies are established in response to observed domestic needs,
and they frequently think only of domestic opportunities until a foreign opportunity is
presented to them.
For example, companies commonly receive unsolicited export rejects because someone has
already seen or heard of their products. Often these companies have no idea of how their
products became known abroad.
But at this juncture, they must make a decision to export or not. Many decide not to because
they fear they will not be paid or they know too little about the mechanics of foreign
trade. Those that do fulfill the unsolicited export orders and then see that opportunities
are available to them abroad are apt later to seek out other markets to sell their goods.
Even large companies may move from passive to active involvement with aspects of their
business.

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