Everybody agrees that the organization’s focus on internationalization offers huge business opportunities. Looking at most examples and studies, a positive relationship between international strategy and financial growth is identified. However, the global strategy brings along complex management and negotiation decisions. It is important to analyze the boundary conditions. This post will look at the things that should be considered that might change the opportunities for the firm.
What are the consequences of internationalization?
In terms of the position of the industry there are 3 main implications:
- The threat of new entrants increases. When an organization enters a market in the new country, it crashes the barriers for new firms to enter this same market. This means lower tariffs, transport costs, etc., and more competition.
- Buyers gain more influence on an organization’s decision-making. Because of the ability to buy around the world, buyers have access to more offers that they are aware of. This fosters an arbitrage.
- The rivalry within the central industry increases. When the concentration of firms decreases, the level of competition increases not only in numbers of new firms but also the diversified services they provide.
How to get a competitive advantage?
When talking about internationalization, it is mostly about a shift to reach a competitive advantage. Usually, we associate competitive advantage with the fit between key success factors of an organization and its resources and capabilities. This is easy to achieve in a domestic market.
In the international industry, the competitive advantage depends not only on the internal allocation of resources and capabilities but also on the conditions of the national environment.
So what are the most popular ways of bringing the company to the international market?
- Outsourcing (of talent, service, business solution, etc.) is commonly used by IT, operations, manufacturing, and other companies.
- Technology partnerships. Look at the giants like IBM and Apple having a partnership deal, as well as Canon and HP.
- Supplier partnerships are commonly used for internationalization, especially in automobile manufacturing. These include competitive contracting.
- Franchising. Look at McDonald’s — 80% of their net revenue comes from franchising in countries all over the world!
In the end, there is no better time for international strategy as now. Boundaries between firms and markets are blurred, and we don’t associate brands with the location of their headquarters anymore.
