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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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