Introduction
The recent past has
witnessed significant development in the establishment of the organizations.
The consideration of organizational development can be best illustrated by the
concepts of internalization that has been witnessed with the emergence of
globalization. Globalization is an extremely beneficial aspect that has the
attributes of enhancing development of the regional organizations and
establishing them to the prospects of global market. The consideration of
internalization considers the attributes of developments where regional
boundaries are overlooked and development between nations is enhanced (Andersen & Kheam, 1998). Normally, the aspect to
internalization is an aspect for enhancing trade where different theories contribute
towards the development of trade in the organization. The stakeholders of the
business incentives immensely benefit from the aspects of increased market
scope and this is the role of internalization of business (Andersen, 1993). Over the period, various business
ventures have adopted the consideration of engaging in the expansion to
encompass the external markets because this promises higher revenue for the
business ventures. The usages of internalization theories have been critical in
establishing the benefits of external trade between various nations.
Internalization theories are critical for the organization because they aim to
enhance the aspect of trade which in the motive of the organization. In this
regard, internalization has been viewed as the process of increasing
development of enterprises in the international markets. In the analysis of the
internalization theories, significant numbers of theories have been ascertained
to contribute to the aspect of enhancement of internalization of organizational
venture (Andersen, 1993, Penrose, 1959). The
leading theories that are significantly related to the process of
internalization are behavioral theories, foreign direct investment theories and
the theories of growth of the firm. In view of the above findings, the
consideration of external expansion is a process that is gradual and extremely
dependent on the aspects of growth theory and behavioral theories. The aspects
of behavioral theories will stir the firm to continue with the attributes of
growth and development and this will pave way for the need to expand the
venture. The necessity to enhance organizational growth is also a critical
aspect that will significantly enhance the growth and development of the firm
to capacitate the international markets.
Internationalization
theory
The attributes of
internationalization theory are depicted from the consideration of the theories
of growth and the theories of organizational behavior. According to Johanson and Vahlne (2003) the expansion and
internationalization of firms is normally caused by lack of a proper incentive
to enable firms to develop gradual. The theory of growth asserts that firms
grow and develop over period and this leads to the establishment of the
branches in the international markets. The aspects o establishing branches in
the international markets is a gradual process and it is initiated by the
organizational behavior that highlights the consideration of growing and expanding.
The aspect of internationalization of any firm is depicted as an incremental
process that involves the formulation of commitment decisions based on the
perceived problems and opportunities in the targeted market (Blomstermo & Sharma, 2003). Normally, the
expansion and development of the firm into the international markets are best
illustrated through the usage of process models and the models are based on the
assumption that firms have imperfect information about the foreign markets and
this aspect is responsible for their gradual entry in to the foreign markets.
Analysis conduced about
the internalization theory provided by Johanson and Vahlne has shown that forms
build their presence in the foreign markets through a series of movements and
the depiction of thee movements occurs in an incremental model. The expansion
into the foreign markets is a process that is gradual and it results in the
transformation form small investments to the increased investments that form integral
organizations (Cyert & March, 1963).
Analysis has also shown that only limited numbers of firms are engaged in the
conduction of initial investment in large proportion of the international
market. In reality, the decision to invest and engage in foreign investment is
based on two considerations that include the aspect of commitment and the
availability of market knowledge to the organization.
Market commitment
Over the period,
various organizations have developed ideal strategies to help them participate in
the aspect of international markets. The commitment to engage in the production
of commodities is the ideal factor that enhances participation and growth of
the organization. During the establishment of the organization, values,
visions, missions and objectives are stipulated to form the basis of operation
of the organization (Eriksson et al, 2000, Johanson
&Vahlne, 1977). The critical attribute the necessities commitment of
the organization in the international market is the perspective of the
organization to engage in the aspect so realization of the goals and
objectives. The commitment of the organization leads to the realization of the
goals and objectives of the organization which translates to the satisfaction of
the consumers’ needs and wants. The aspect of commitment is enhanced by the
consideration of behavioral theory and the growth theory. The commitment of the
organization normally translates establishment of commitment. The consideration
of organizational commitment is enhanced thought the consideration irregular
export activities, export via independent representatives, the establishment of
overseas sales subsidiary and finally, the establishment of foreign
manufacturing subsidiaries (Forsgren, 2002).
Finally, a committed firm in the market employs the usage of significant
resources that leads to the enhancement of the market scope.
Market knowledge
Over the period,
analysis conducted on the performance and establishment of the organization has
shown that organizations are engaged in the operations of the markets in which
they understand its provision because this will enhance reduction of losses and
an increase in the profit margins of the organizations. The attribute of market
knowledge is based on the provision of internalization theories that highlights
the necessity for the organizations to enhance their performance (Hadjikhani, 1997). The behavioral theories of the
organization states that organizations will be engaged in the establishment of
the market in which there is adequate activities and knowledge. The aspect of
market information is an extremely vital component of internationalization
because it forms an integral apart of internationalization decision making. The
consideration of engaging in the venture is extremely crucial because it leads
to the enhancement of the performance of the organization. Therefore, the
manager of the organization must ensure that ideal information about the market
is considered before engaging in foreign markets. Analysis has shown that
significant number of organization normally conduct their transacting in the
regional markets to enable them gain significant information about the market. The
next step for organization will be to expand to the international markets
because they will apply the knowledge gained from the regional organization to
impact performance on the international market. In this regard, the firms with
access to large pool of resources are less susceptible to the consequences of
bad decisions and they can step up the aspect of internationalization at a
higher rate.
The
internationalization model
The development of internationalization
models considers the contributions of the significant attributes of
international expansions. These two attributes of the theory are establishment
chain and psychic distance. The consideration of chain dimension predicts the prospects
of the firm and it asserts that the initial investment of the firm in the local
economy involves the consideration of a given level of commitments (Huber, 1991). The depiction of this model has also
helped the understanding that firms prefer foreign/international markets that
have similar attributes to their own local markets. The model continue to add
that as the firms experientially gain knowledge about the market, the firms
will enhance conduction of activities and entry into other markets that are
characterized by uncertainties. In this regard, it is evident that forms expand
internationally after accumulating significant amount of knowledge about the
activities of the markets. This incentive is crucial because it confirms the
depiction of internationalization theory that states that firms will first
expand to the external markets that are physically close to them into gain
adequate knowledge about the markets (Gundlach et al,
1995). This aspect of prediction provided by the theory is beneficial
because it helps in the conduction of the analysis of the emergence of
significant multinational corporations like Ericson that has entered the global
market after acquiring critical information abut the operations of the market. Additionally,
the representation of the organizations has also been represented as the bid
step that involves adopting the technologies and terminologies that
characterizes the international market (Pedersen
& Petersen, 1998). In this regard, the usage of the big step
hypothesis is crucial in explaining the aspects of the international market and
organizational development.
The big step hypothesis
The development of this
hypothesis is based on the theory of foreign investment that states that
internationalization process results from growth and development of the
organization. It further provides that internationalization is a discontinuous process.
The big step hypothesis is critical
because it highlights significant challenges that are associated with
internationalization and these are provided as the disparities because of the
differences in political standards, languages differences and the business
environment (Gundlach et al, 1995). Another
source of disparities is the discrimination by the government, suppliers and
the consumers. Finally, the third source of disparity in internationalization
is the attribute of exchange risks. The above mentioned aspects depict critical
disparities in the organization that restricts operating of the firms in the
international markets and the firms must employ ideal measures to overcome the
challenges and difficulties in the international markets.
The aspect of
initiating activities in the international market represents a bid step because
the attributes of development goals and objectives of the organization must be
realized. Normally, the entry into the international market represents a big
step that firms must undertake despite the significant amount of costs that are
involved. Furthermore, the aspect of huge costs of money involved in the
internationalization process may project significant number of firms to
generate the money before considering the entry into the global market. This
calls for the aspect of dedication substantial amount of time before the
engagement in the internationalization process. The depiction of the hypothesis
below has been confirmed in the organizational growth and development (Huber, 1991). The considering internationalization
is that the time between successive entries is longer for the initial
investment than subsequent investment overseas.
Over the period,
analysis of economic reports has stated that the consideration of the big step
hypothesis and the discontinuous nature of internalization are extremely
crucial for the managers of the organizations. The discontinuous view of the
internationalization is important for the managers because it helps the
managers to prepare for the expansion into the international territories (Johanson & Vahlne, 1990). The theory of internationalization
is crucial because it considers the aspect of trade and development of the
organization. The development of the theories of foreign trade are aimed a
enhancing he performance of the organization through the expansion into the international
markets. The expansion into the international markers is faced with significant
disparities and the managers of the organizations must consider the provision
of internationalization theories before engaging in internationalization of
business incentives. The provisions of international investments assert that
the managers must be committed to the job and engaged in the aspects that are
ideal and ethical for the economy. Another provision of the theories is to
acquire all the necessary information about the targeted market because this
will be extremely critical for the organization (Hedlund
& Kverneland, 1985, Pettigrew, 1997). The aspect of full information
about the market is beneficial because the business managers can develop
hypothesis and market plans for overcoming the disparities and the complexities
of the market. The theory of internationalization acknowledges that managers
are the propellants of organizational growth and the behavioral trade theory
highlights the necessity for engaging in the international growth. Therefore,
managers should consider the aspects of organizations profitability before
engaging in internationalization. Furthermore, the managers of the organization
should consider that aspect of adopting the attributes of markets with identical
culture and heritage (Johanson & Vahlne, 1990).
The aspect of business environmental in the host country and the provisions of
the political stability should be considered because they have immense
contributions in the enhancement of international business performance.
Internationalization is
an incentive that represents the attributes of development where various
business organizations and other corporations establish their branches r
outlets in the international lands. Before the engagement into the exercise of
internalization, the proponents of the organization must demonstrate the
commitment towards enhancing growth and the also the necessity to understand
the complexity of the market (Hedlund &
Kverneland, 1985). This later provision calls for gathering sufficient
pieces of information about the market and trading partners. In addition, the provisions of
internationalization theirs also highlights that advantage of engaging in the
international markets where there are significant number of buyers and sellers
thereby leading to an increase in the performance of the organization. The
provision of the these trade theories states that the firms should consider the
proximity markets before adopting larger markets that are distantly apart. An
important idea from the trade theories is that the firms and their managers
should not be misguided that international expansion to the proximal markets is
an incremental process. However, the firms and their managers should consider
the firms ad discontinuous process because this notion will enable firms to
expand and participate in the international markets (Hedlund
& Kverneland, 1985). This attribute will ensure that firms are
prepared to face the challenges in the international markets that are
attributed to direct investment. When considering expansion as a discontinuous process,
the firms will be more likely to overcome the difficulties that are experienced
upon entry into the proximity market. In this regard, internationalization is
extremely crucial because it enhances development of the global economy and it
also encourages the aspect of regional integration.
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