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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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