International strategy is highly complex and dynamic and therefore too risky. Essay focusing on corporate strategy in terms of internationalisation.

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International Strategy is highly complex and dynamic and
therefore too risky. Discuss
This essay will examine large organisations and how they implement international strategies and whether
these strategies are complex and too risky. Calof and Beamish (1995) defined internationalisation as “the
internal dynamics and learning of the firm as it expands internationally” whilst Covin and Slevin (1989)
describe it as an “innovative, proactive and risk-seeking behaviour”. Primarily the essay would look into the
reasons behind internationalisation. Following this, there would be a comparison of the existing
internationalisation frameworks and an evaluation of the complexity and dynamics of both successful and
unsuccessful case studies that would be used to evaluate the perks and risks of internationalisation. Through
this, the essay argues that while internationalisation can be effective, it is highly dependable on specific
circumstances.
Effectively, organisations look to internationalise once they have reached the saturation point within their
market. They seek to change and respond to a new market in order to increase their market share, become
more profitable and gain cultural awareness. If they do not internationalise, they could risk losing their existing
market position. Large organisations’ attempts to explore internationalisation have varied between different
case studies.
Procter & Gamble achieved their international dominance through brand building and product innovation
(Leavy 2013); their 65 brand portfolio spreads across 10 categories and brings them an annual revenue of
$65.1 billion in Net Sales internationally (Roderick 2017). P&G’s implemented a strategy to respond to a new
market by releasing products such as the Tide laundry detergent and the Prell shampoo abroad has been a
key factor for their success as an organisation. Both products were exported internationally and created
opportunities for the firm to become a household name within the commodity industry (Monti and Yip 2000).
Within the automotive industry, TATA Motors played a crucial role in overcoming institutional voids in
emerging markets opportunity (Becker-Ritterspach and Bruche 2012) when they introduced the Tata Nano in
India back in 2008 and took the sales figures down of their direct competitor, Suzuki’s Maruti 800 vehicle by
20% immediately after the launch (Virani 2011). Their gain of cultural awareness through analysing the
purchasing power and consumer values of the Indian market (Kumar and Thacker-Kumar 1996) led to the
creation of competition within the historically monopolistic market and thereby benefited consumers with
wider choice of affordable vehicles and further improvements of the transportation tools and of course sales
for the company. In fact, Nano has been named ‘the world’s cheapest car’ at just $2000 (Prahalad 2011)
starting price, aspiring for further innovations within the cost-effective vehicles.
Within internationalisation, there also comes a number of challenges organisations may face (Oviatt and
McDougall 2004). Such challenges often relate to the lack of knowledge: For example, in the furniture industry
back in 1998 IKEA failed to understand the cultural differences related to store size and purchasing power of
the emerging markets in China, as a result the organisaiton had to restock in order to prevent further financial
losses (Johansson and Thelander 2009). Amazon’s lack of expertise in China has prevented growth and has
allowed direct competitor Alibaba sustaining 47% market share compared to Amazon’s 1%. (Keyes 2017) and
equally amazon is trying to grow too quickly without grasping the field specialist information, not knowing the
market’s cultural values as described by Sloane (2014).
The more involved organisaitons are, the more they have to configure and coordinate in terms of their
resources. Theory states that firms tend to grow stage by stage: the Uppsala Model (Johanson and Vahlne
1997) in particular, looks at internationalisation as a logical path that works in an incremental way i.e. the non-
exporting producer organisation would gradually evolve and proceed to making a foreign direct investment.
Mindzberg (1994) also claims that firms grow incrementally. However, this is not always how large

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organisations operate. For example, Igor Ansoff (1994) points out that Mindzberg bases his analysis only on
firms which were successful, ignoring the failed ventures.
Another theory addresses internationalisation through Yip’s (2003) model where firms see potential in going
international that derives from local drivers, market drivers, government and competitive drivers. At the same
time, Porter’s Diamond (1990) suggests there are four key determinants of locational advantage “Local
demand conditions; Local related and supporting industries; Local firm strategy; Industry structure and rivalry”
(Johnson et al. 2017) which influence competitive advantage. When developing the model, Porter primarily
based his study on ten predominantly mature, manufacturing-based economies (Yetton et al. 1992). Thus, the
model could only be applied within developed countries for example, the Dutch Automotive industry where
Audi and others operate. There is a clear rivalry between Audi and BMW who are both local, hence they
continue to innovate. Moreover, the iron and steel industries are both very strong in Germany, providing
materials for the car manufacturers therefore establishing enhanced innovation and rivalry. The labour force
is educated, solvent and IT literate. All those factors satisfy the Porter’s framework and justify Germany’s
regional advantage.
The three key internationalisation frameworks differ from each other: The Uppsala Model is considered “old
fashioned” (Woolnough 2012) because in practice, individual organisations’ involvement on foreign grounds
could be as minimal as irregular exporter. They could be passively involved and not seeking a committed
involvement abroad. Yip (2003) focuses on the impacting factors and utilisation. Whereas Porter’s Diamond
aims to identify the sources of competitive advantage and how to utilise them. Both YIP and Porter
frameworks are more applicable than Uppsala because they perceive organisations as dynamic evolving
bodies that do not always move in an incremental way.
Michael Posner (1961) looked at understanding international strategy through the Technology Gap that is
seen by investors and taken advantage of. His theory looks into the setting up process of monopolies in less
developed markets (Futrell 1997). This then is closely related to Olivatt and McDougall’s regime of
appropriability and knowledge-intencity (1995) that has been described as 'positive new ventrure
internationalisation in less mature industries’ (Fernhaber et al. 2007). An example of Michael Posner’s theory
in practice would be the popular streaming services Spotify and Netflix (Thomes 2013); prior to their existence
the entertainment industry only distributed physical copies in the form of CDs and DVDs (Yannakakis and
Hallam 2008). This limited their exposure to often only domestic markets. As streaming platforms are easily
accessible and only require internet connection, consumers were able to gain on demand access to music and
videos. As both organisations were pioneers in their industries, they were able to hold on a monopoly for a
short period of time. “The ownership of such assets gives rise to additional profits representing a return on
past investment and R & D” (Jenkins 1987), making it difficult for competitors to enter to this date. Both
services had the advantage of internationalising despite their small size as World Wide Web (Greco et al. 2004)
offers wider accessibility.
Porter (1986) proposes Co-Ordination and Configuration Grid that examines how organisaitons retain
activities when they are operating internationally. The theory argues that firms would maintain and configure
resources by understanding both pressures and opportunities that could arise from upstream and
downstream activities. Large organisations that were able to succeed in the United Kingdom have suffered
losses when expanding outside their core market (Gammeltoft et al. 2012). Issues arise from the fact that
there are cultural, economic and religious differences between domestic and international consumers.
Despite the fact that UK is a hub for different nations, both M&S and Tesco attempted entering the Chinese
market, but were unable to hold onto multiple fronts. Both retailers failed to understand the needs of Asian
consumers (Branigan 2017). Their failure to follow Porter’s Co-Ordination and Configuration Grid 1986 and
examine the situation into a market they attempt to enter has led to financial losses and damage of reputation
- Tesco closing 130 stores (Boulden 2017).

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There is evidence of success stories about brands not only entering an international market, but becoming a
monopoly (Summers 1996). Similar to the streaming giant, Netflix, Coca-Cola took advantage of holding a
monopoly in the soft drinks industry (Frykman and Tolleryd 2009) before Pepsi became direct competitor in
1985 (Hamilton and Flecher 2004). Coca-Cola were able to gain competitive advantage in setting up plants,
establishing a brand and becoming a leader world wide in a later to be oligopolistic market. Global reach
offered Coca-Cola the opportunity to: set up supply chain and to be able to quickly and efficiently release new
products into market. To date, the Coca-Cola Company has “3,500 portfolio of beverages falling under 500
different brands” (Bhasin 2017). Standardisation was achieved through economies of scale (Levitt, 1983):
Successfully serving 1.9 billion drinks per day (Snowdon 2017); The effective implementation of Porter’s (1986)
Co-Ordination and Configuration grid meant Cross subsidisation developed into competitive success (Prahalad
and Doz, 1987). In addition, Coca-Cola’s decentralisation strategy achieved them faster learning through
guarding quality at a lower scale (Dunning, 1993): Spreading production over 900 plants. (Technology 2017)
Overall, complexity is highly dependent on the type of internationalisation. As the essay examined, the more
that organisations do, the more they have to configure, to co-ordinate and provide resources for
internationally. Initiatives include knowledge gain, innovation, logistics and cultural awareness. It is
imperative for organisations to internationalise in today’s global climate and the more they engage in these
activities, the more they would need to manage the risk and complexities.

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