So South Africa should concentrate on the production of oranges as its comparative advantage is greatest here. Unfortunately the theory assumes that production costs remain relatively static. However, it is a well known fact that increased volumes result, usually, in lower costs. Indeed, the Boston Consulting Group observed this phenomenon, in the so called "experience curve" effect concept.
General risks include the following: A comparative market distance, competition from other firms in foreign markets, differences in product usage in foreign markets, language and cultural differences, difficulties in finding the right distributor and complexity of shipping services to overseas buyers.
Commercial risks include the following: Difficulties in obtaining export financing, failure of export customers to pay, delays or damage in the export shipment and distribution process and exchange rate fluctuations when contracts are made in a foreign currency.
Political risks include the following: Theories of internationalization In this chapter we will discuss the theories of internationalization. After a brief introduction we will cover the following theories: The Uppsala internationalization model, the transaction cost analysis TCAthe network model and Born globals.
The general market theories were a source of inspiration for the early literature of internationalization. In a later stage, internationalization dealt with the choice between exporting and foreign direct investment FDI.
During the last years there is more focus on networking in internationalization. A firm has different relationships with customers and other actors in the environment. The traditional marketing has its start with the Penrosian tradition in It reflects the traditional marketing focus on the firm's core competences combined with opportunities in the foreign environment.
Further development models of internationalization were introduced by Vernonwhere he describes the 'product cycle hypothesis', in which firms go through an exporting phase before switching first to market seeking foreign direct investments. The choice and decision for a location is a mix of technology and marketing factors.
The hypothesis of Vernon is that producers in advanced countries are closer to the markets than producers elsewhere.
The Uppsala internationalization model During the s a few Swedish researchers were interested in the process of internationalization. They were studying the internationalization of Swedish manufacturing firms. They developed a model of the firm's choice of market and form of entry when going abroad.
The researchers interpreted the patterns in the internationalization process they had observed in Swedish firms. They noted two things: In the first place they noticed that companies appeared to begin their operations abroad in markets that were fairly geographically and second, the companies entered new markets through exports.
Johanson and Wiedersheim-Paul distinguish between four different modes of entering an international market. The four different stages represent higher degrees of international involvement: The first one could be operationalized to the size of investment in the market like marketing, organization and personnel, while the degree of commitment refers to the difficulty of finding an alternative use for the resources and transferring them to the alternative use.
The activities that take place in the international business require both general knowledge and market-specific knowledge. The better the knowledge about the market, the more valuable are the resources and the stronger the commitment to the market.
The original stage model has been extended by Welch and Loustarinen They operate with six dimensions of internationalization: The underlying assumption in the Uppsala model is that internationalization is a slow, time-consuming and iterative process.
When the industry is highly complex and uncertainties involved are immense, internationalization decisions made too quickly and too boldly run a real risk of failure, with potentially large and negative consequences. The transaction cost analysis TCA model Coarse made the foundation of the transaction cost analysis model.knowledge and market – specific knowledge (Hollensen, ; Pignatti).
Market- and that of the foreign target- market. Mode of entry or M factor The selection of the mode of internationalization is subject of influence of many variables. Some of the main factors of influence are cost, profit, degree of commitment. Foreign Market Entry-Modes and Their Impact on Perceived ).
Furthermore, Hollensen () suggests that each entry-mode can be linked to a corresponding level of integration in the foreign market, where the entry- These relationships will be explained more in detail further on.
International Entrepreneurship - Entry Mode Strategies 1. Timing of entry 3. Market entry modes 4. Market selection 5. Key lessons 6. Key concepts 7. Questions 8. References [email protected] Slide 3 Licensed under a CC BY-SA license.
project marketing - Download as PDF File .pdf), Text File .txt) or read online. Sales, exports and international marketing (SE21) Chapter 7 Export entry modes 1 Introduction Choice between using direct and indirect exporting organizational forms involves: 1.
cost of performing functions 2. transaction costs of organizing activities or contracting with others. Market Entry Modes The worldwide known Swiss corporation Swatch has earned its reputation under the management of Nicolas G.
Hayek, in the early ‘80s. Created by merging the two Swiss watch leader firms (SSIH and ASUAG), Swatch was SMH’s (Societe Suisse de Microelectronique et d'Horlogerie) most important brand name, an outcome of the Swiss.