Page 15 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes For example, although Tokyo Disneyland was proposed by a group of Japanese businessmen,
the success of that venture led Disney to actively seek out a European location or another
park.
2. External to Internal Handling of Operations – Path B: The use of intermediaries to handle
foreign operations is common during early stage of international expansion because this
method may minimize risk of committing one’s own resources to international endeavours
and also because of reliance on another company that already knows how to operate in
foreign environments.
But if the business grows successfully, the company will usually be more willing to
handle the operations with its own staff. This is because it has learned more about foreign
operations, sees them as being less risky than at the onset, and realizes the volume of
business justifies the development of internal capabilities by hiring additional trained
personnel, for purposes such as to maintain a department to carry out foreign sales or
purchases. This evolution is shown on axis B in Figure 1.1.
figure 1.1: the usual Patterns of internationalization

3. Deepening Mode of Commitment – Path C: Axis C in Figure 1.1 shows that importing or
exporting is usually the first type of foreign operation a company undertakes. At an early
stage of international involvement, importing or exporting requires the least commitment
and the least risk to the company’s resources such as capital, personnel, equipment, and
production facilities.
For example, a company could engage in exporting by using excess production capacity to
produce more goods which then would be exported. By doing this, it would limit its need
to invest more capital in additional production facilities such as plants and machinery.
Further, the engagement of only importing and exporting limits the functions with which
the company is responsible abroad.

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