The author of the thesis below quotes Strandskov´s framework (created in 1995) which “defends that the internationalization theories are divided into two scopes: drivers and nature of decision. Drivers are features that began and started off the internationalization process at a firm, and the reason behind entering international markets. Drivers can either be internal (example: economies of scale) or external (example: market opportunities). The nature of decision normally indicates whether making the decision for internationalization was planned or emergent.”
Please review the thesis and then answer the following question:
Which of the two scopes in Strandskov’s framework, the drivers or the nature of decision scope best describe the internationalization processes of most companies in practice? In providing a response, consider factors such as the size, industry and national origin of companies.
Solution
As per the Strandkov framework, the drivers and the nature of the decision scope best describe the process of internationalization for companies. The drivers are the reasons for entrance into the international market while the nature of decisions indicates the planning or emergent behavior of the decisions of internationalization. Drivers are the reasons or things which trigger the internationalization process; it can be an opportunity sourced from internal or external drivers (Mayla, 2017). The nature of the decision is the decision of the international process being emergent or planned. These differences in the decision nature, with the industry, size and the origin of the companies provide the varying basis of success in international processes of the different companies. Apple and Samsung, having a different culture, size and similar industry have different offerings. However, the same market demographics make them compete for it (Denig, Witteman, & Schouten, 2002).
For looking at which of these scopes, drivers or decision nature has more impact on the internationalization process, we need to look at each of the scopes individually.
It has been found that firms gradually intensify their activities in the international markets. It is often triggered by the opportunities for breaking through the technology process. The reason can also be in the form of the need for customized or specialized products. In some cases, partners turn to become the trigger by initiating the expansion process by highlighting the opportunity. Social networks and other external players provide the reasons for international expansion. Economies of scale can also be one of the reasons. Companies start gradually developing their evolutionary path by firstly establishing business through indirect exports, joint ventures, and partnership and steadily converting it into wholly owned divisions. Companies tend to enter the markets with lower psychic distance and move to higher distant ones by cautiously mitigating risk (Deuer, 2013). Apple Inc market strategy includes and focuses on commitment and market knowledge as they believe it has an impact on the commitment decisions and operating activities.
Samsung, on the other hand, started investing for expansion through its venture in Brazil, which is a high psychic distance market. The company focuses on making products which are suitable and more customized for the local market but have a shorter life cycle. The company was once the supplier for Apple Inc and became its leading competitor by using its network and intelligence mainly used by Apple for itself (Kluyver, 2010).
Looking at the nature of decisions, it can be said that regarding the strategy for internationalization, the decision concentrates on the economic measures and mainly on transaction costs which are cautiously planned. It is more derived from internal drivers with planned decision making involved. It is known as the institutional-economic approach. The combination of planned decision making with external drivers aims for competitive advantages and the comparison of the advantages of each company (Antell & Wallgren, 2012).
It is known as the strategic competition approach. The emergent decision making and use of internal drivers focus on the market selection and entry mode choice of the process of internationalization (Azuayi, 2016). It is known as the Learning perspectives approach. The last stage is to use external drivers and emergent decisions. It is done by building network building and risk management. It is known as the Inter-organizational approach. Apple Inc was considered as using the combination of planned decisions and emergent decisions with external drivers, and Samsung is considered to be using planned decisions and emergent decisions with internal drivers. It shows that even though both companies are using different drivers, both companies are using planned as well as emergent decision making for its success (Pauwels, 2000).
It shows that more important and better scope which enables us to understand the process of internationalization is the nature of decisions. It is true as even with all the drivers, opportunities present, and resources available, without having the effective decision-making process for using and going for these opportunities, a company cannot successfully expand and follow internationalization (Long, 2012).
References
Antell, F., & Wallgren, C. (2012). Foreign market entry. Retrieved May 31, 2018, from https://www.diva-portal.org/smash/get/diva2:530210/FULLTEXT01.pdf
Azuayi, R. (2016). Internationalization Strategies for Global Companies: A Case Study of Arla Foods, Denmark. Journal of Accounting & Marketing, 5(4), 1-9.
Denig, P., Witteman, C., & Schouten, H. (2002). Scope and nature of prescribing decisions made by general practitioners. Quality and Safety Health Care, 11(1), 137-143.
Deuer, G. B. (2013). Factors that influence the Internationalization decision in firms from developing market context: Case of Bolivian Firms. Retrieved May 31, 2018, from https://brage.bibsys.no/xmlui/bitstream/handle/11250/135877/Deuer,%20Gustavo%20Barja%20Oppgave.pdf?sequence=1
Kluyver, C. d. (2010). Fundamentals of Global Strategy A Business Model Approach. Business Expert Press.
Long, L. K. (2012). The Model Of Internationalization Process: An Exploratory Research Of Malaysian Foodservice Firms. Retrieved May 31, 2018, from http://studentsrepo.um.edu.my/5712/1/Lim_Kuang_Long_PhD_CHA060022.pdf
Mayla, L. (2017). Consolidating resources in the global multinational enterprise: An internationalization perspective on value creation. Retrieved May 31, 2018, from https://projekter.aau.dk/projekter/files/261766808/AAU_IBE_Masters_Thesis_Levente_Mayla_2017.pdf
Pauwels, P. (2000). International Market Withdrawal: A Strategy Process Study. Retrieved May 31, 2018, from https://doclib.uhasselt.be/dspace/bitstream/1942/8751/1/Piet%20Pauwels.pdf
+447462439809