Internationalisation process in developed and developing countries


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Internationalisation process in developed and developing countries

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Internationalisation process in developed and developing countries

  2. 2. INTRODUCTION 7/20/2010 The continuous relationship of individuals, companies and nations through globalisation has caused firms to move out of their domestic market on to the international stage to gain sustainable competitive advantage (Michael E. Porter, 1985). Internationalisation was historically perceived to be the strategy of large firms. Small firm’s internationalisation is more often combined with threat than with opportunities and for this reason they are however often considered to be home market oriented (Lindmark, 1998 in Laine & Kock, 2001).
  3. 3. CONTS. 7/20/2010 However, internationalisation today is a strategy of all firms irrespective of size. Firms are no longer interested to stay at home even where there are good prospects in the home market. With the development of internationalisation, many small firms are growing as a result of scale advantages they derive from the expansion. This has made the process of internationalisation a topical issue in many literatures. This study aims at discussion about internationalization and analyzes its effects in firms of developed and developing countries as well as examples[].
  4. 4. 7/20/2010 OVERVIEW
  5. 5. MEANING OF INTERNATIONALISATION 7/20/2010  With reference to the  Internationalization(so process models of metimes shortened to internationalisation, Wel “I18n”) is the process ch &Luostarinen (1988) of planning and define implementing products internationalisation “as and services so that the process of they can easily increasing involvement adapted to specific in international local languages and operations”. cultures, a process called localization. The internationalization process is sometimes called translation or localization
  7. 7. This MODEL OF INTERNATIONAL THESIS model has taken 7/20/2010 from lecture slide Globalisa tion versus Internati onalisatio n Dr. Anna Zueva
  8. 8. ADVANTAGES 7/20/2010  Internationalization can provide MNC’s with specific competencies that they were not available to the domestically operating firm  Arbitrage and leverage opportunities for MNC’s.  Increasing economies of scales for the MNC’s.  Economies of scope  More managerial perspectives  Rapid expansion of knowledge based services (i.e. professional and technological services banking , insurance etc.)  Reduction of the telecommunication’s cost.
  9. 9. CONTS. 7/20/2010  Higher economy growth with the participation of the developing countries  Helps balancing the recession in the US with the development in Asia  Increase of the consumption in the whole world  Decrease of the unemployment  Setup of institutions in developing countries  Protection of the environment (i.e. Kyoto’s agreement)  Monetary stability (i.e. euro currency)
  10. 10. INTERNATIONALISATION FOR FIRMS IN DEVELOPED COUNTRIES 7/20/2010 ‘‘Internationalization’’ has been widely used to describe the outward movement of the international operations of a firm (Welch and Luostarinen, 1988). Theories on the internationalisation of firms are largely based on Western multinational corporations. Starting from Vernon’s product life cycle theory (1966, 1971) through the Uppsala international expansion stage model (Johanson and Weidersheim-Paul, 1975; Johanson and Vahlne,1977) and the more recent works of Dunning on his eclectic paradigm theory (Dunning, 1993, 1995) and Investment Development Path (Dunning, 1981, 1986) - predominantly concerned multinational firms
  11. 11. CONTS. 7/20/2010 Research has found that firms from advanced economies derive ownership advantages from their technological and size superiority. They typically extend their sales and operations to foreign markets through a process of ‘‘evolutionary, sequential build up of foreign commitments over time’’ (Welch and Luostarinen, 1988). In support of this we are presenting example of HELLENIC TELECOMMUNICATIONS ORGANISATION (OTE S.A.)
  12. 12. OTE COMPANY PROFILE 7/20/2010  Founded in 1949  Telecommunication’s company  30000 employees in 6 countries  Owns the 54% of Romtelecom  Owns 20% stake in Telecom Serbia  Cosmote  AMC participation by 85% in the capital of the Albanian mobile operator (2000)  Cosmfon acquisition of the 100% of it’s shares (2003)  Cosmote Romania participation by 70%in the capital of the Romanian mobile operator (2005)  Global acquisition of 100% of it’s shares (2005)
  13. 13. COMPANY AT GALANCE 7/20/2010
  14. 14. INTERNATIONALISATION FOR FIRMS IN DEVELOPING COUNTRIES 7/20/2010 Most of the studies have been confined to firms operating in well – established developed countries. The pattern of internationalization in less developed and newly industrializing economies is different. Since the late 1960s, an increasing number of firms from these economies have emerged as active players in foreign direct investment (FDI) (Wells, 1978; Lau, 1992; Erramilli et al., 1997). Developing-country MNCs first appeared as a focus of interest about 25 years ago, with the advent of some overseas expansion by companies from a few countries (Lecraw, 1977; Lall, 1983; Wells, 1983).
  15. 15. CONTS. 7/20/2010 The earliest major developing-world sources of FDI in this period were a small group of economies, including Argentina, Brazil, Hong Kong (China), India, Republic of Korea, Singapore, and Taiwan (Province of China).since, 2003, the growth rate of outward FDI (OFDI) from emerging markets has outpaced the growth from industrialized countries (UNCTAD, 2005). While OFDI from the BRIC countries – Brazil, Russian Federation, India and China – has received more attention (Sauvant,2005). In context to this we are presenting example of TATA GROUP.
  16. 16. WHY TATA  Turnover > US$28 bn, equivalent to over 2.5% of India's GDP 7/20/2010  Traditionally the biggest market capitalization(now reliance)  India’s largest employer in the private sector(222,000+85)  Many firsts/largest for India: first private sector steel mill (TISCO 1970) first private sector power utility first luxury hotel (Taj) first airline (now Air- India) India's largest software company (TCS) India’s largest watch & jewellery firm (Titan) India’s largest cross-border M&As (Tetley, Corus) Some unique characteristics Family
  17. 17. GROUP HOLDING STRUCTURE Sir Darobji Tata Trust Sir Ratan Tata Trust Other Tata Trust 7/20/2010 Tata sons[65.89% share holding] TCS Trent Rallis Tata steel Tata investment corporation Tata Motors Tata Teleservices Tata industries Tata Power Tata international Tata advanced materials VSNL Idea cellular Tata Chemicals Tata Teleservices Tata tea Information tech. park Indian Hotels Tata autocomp
  18. 18. INTERNATIONALISATION STRATEGY  Driven by operating companies  Geographically selective 7/20/2010  Greenfield, JVs, acquisitions  Partner development of select countries Tata’s internationalisation: Most Tata companies have internationalised Revenue from overseas geographies Country prioritization: Priority countries (mostly OECD, mostly inorganic growth) – USA, UK, Germany, China Emerging economies(mostly Organic Growth) – South Africa, GCC, Thailand, Indonesia, Vietnam, Brazil, Chil e, Mexico, Uruguay Neighboring countries – Sri Lanka, Bangladesh M&A’s, mostly in higher-income country, ex- Tetly, Daewoo, Natsteel, Corus, INCAT, Tyco Teleglobe, Jaguar, etc
  19. 19. CONCLUSION  The pattern of internalisation for less developed and newly industrialized countries are different. 7/20/2010  Developed economies typically extend their sales and operations to foreign markets through a process of ‘‘evolutionary, sequential build up of foreign commitments over time’’ (Welch and Luostarinen, 1988).  Developed economies have ownership advantages from their technological and size superiority.  Different types of networks are evolving that is beyond mere export, investment and FDI from developing economies.  The government has supported emerging MNEs by providing appropriate policy framework and infrastructure so that they can boost overseas expansion.  In the coming years, the trend of OFDI and internationalization of enterprises from emerging
  20. 20. REFERENCES  Industry evolution and internationalization processes of firms from a newly industrialized economy - Ho-Fuk Lau[Department of Marketing, 7/20/2010 The Chinese University of Hong Kong, Shatin, NT, Hong Kong, China]  Internationalisation of Firms in Developing Countries: Towards an Integrated Conceptual Framework - John Kuada[Aalborg University]  The internationalisation of indian companies: The Case of TATA – Andrea Goldstien[OECD – organisation for economic co-operation and development]  Tata website  Internationalization and economic performance of enterprises, Jan Hagemejer Marcin Kolasa, May 2008  , ,      www.telecom.yu  
  21. 21. QUESTIONS 7/20/2010