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Internationalization of the Business Report


Introduction

In the highly dynamic arena of business, strategic management through internationalization has been an increasingly discussed subject. With regards to internalization of business, strategic management can be generally described as the process of designing a long-term business plan that is aims at realizing organizational goals, sustaining organizational efficacy and producing a work plan that streamlines the operations of the business over a particular (Meldrum, 2000; & Hedstrom et al., 1998).

In internationalization, the major focus is normally on expanding the tentacles of a business beyond national borders. This is mostly done for a number of reasons including (but not limited to): help increase markets for our goods and services, take advantage of technological advantages brought by venturing into other countries, help in reduction of expenditure costs while augmenting the making of profits and encourage business diversifications, among many others (Hurn, 2009 & Mintzberg, 1994).

In this paper, academic spotlight is going to be on the internationalization of Elecdyne; a Japanese company located in Tokyo. Essentially, Elecdyne has been in operation since 1990 and it mainly deals with electronic consumer goods like VCR players, DVD players, hi-fi equipment, and Stereo equipment, among many others.

Initially, the company began with as few as 5 employees. An increase in the demand for its goods and services, however, led to an increase in staff to over 100 workers so as to serve its many clients. Unfortunately, due to a number of challenges that this multinational company has been facing over the recent times, the managers are seeking to internationalize the operations of the company.

In doing so, three potential countries—Brazil, China and Sweden—have been chosen for the purpose of this internationalization. A rigorous assessment of the country that is most suitable for this internationalization is going to be done below—majorly based on the relevant data that was gathered in assignment one.

Even more importantly, appropriate analytical frameworks—the SWOT and PESTEL analysis—will be used to undertake a weighted internal and external analysis of these three countries while intermittently comparing them with Japan so as clearly show the country that will be best suited for the internationalization.

All these explicative analyses of Brazil, China and Sweden, in relations to Elecdyne’s internationalization agendas, are succinctly done in the section below.

Weighted analysis of the three countries (External Factors)

In conducting a weighted analysis of the suitability of Brazil, China and Sweden for Elecdyne’s internationalization, several multidimensional factors come into play. It is for this reason that this section uses the PESTEL (Political, Economic, Social, Environmental and Legal) analysis so as to do a circumspect analysis of these countries.

Notably, the weightings of these countries will be based on the suitability and relevance of these countries to Elecdyne’s planned internationalization structure. The numbers 0, 1, 2 and 3 will be used to show the risk involved whereby 1 signifies less risky (suitable), 2 signifies moderately risky (moderately suitable), and 3 signifies highly risky (less suitable). The more risky a country is, based on the factors stipulated below, the less suitable it is in terms of satisfying Elecdyne’s internationalization plans and vice versa.

Political and Legal

Political/Legal risk Japan Brazil China Sweden
Government Type Parliamentary government Federal republic Federal Republic Constitutional monarchy
Political Instability 1 2 3 1
War Risks 2 3 3 1
Labor Freedom 1 2 1 2
Stringency of Legal Rules 2 2 2 1
Average 1.5 2.25 2.25 1.25

Economic

Economic risks Japan Brazil China Sweden
GDP Growth (Purchasing power) Moderately growing
2
Very Slow growth
3
Highly growing
1
Slowly growing
2
Globalization/ Urbanization (more industrialization, equals less risk) Moderately industrialized
2
Least industrialized
3
Highly industrialized
1
Moderately industrialized
2
Inflation (High equals less stability) Moderate Inflation
2
High Inflation
3
Low inflation
1
Moderate inflation
2
Dependency on other countries Moderately dependent
2
Highly dependent
3
Least dependent
1
Moderately dependent
2
Public Debt (low debt equals less risk) Moderate
2
High
3
Low
1
Moderate
2
Inflows of FDI 1 2 1 2
Unemployment (high equals more FDI opportunities) Moderate unemployment levels
2
Moderate unemployment levels
2
Moderate unemployment levels
2
Low unemployment levels
3
Taxes (high taxes equals less potential profits) Moderate taxation
2
Moderate taxation
2
High taxation
3
Moderate taxation
2
Availability of Consumer Electronic Market Moderately available
2
Moderately available
1
Highly available
1
Moderately available
2
Average 1.44 2.44 1.33 2.11

Social/ Cultural/ Environmental

Social/ cultural/ environment Risks Japan Brazil China Sweden
Accommodating/ Sociable Moderately sociable
2
Highly
sociable
1
Highly
Sociable
1
Highly
Sociable
1
Freedoms (More freedom equals better markets) Moderate freedoms
2
High freedoms
2
Less freedoms
3
High freedoms
1
Equity and equality Moderate
2
High
1
Moderate
2
High
1
Population Density (high equals better) Moderately
Populated
2
Densely
Populated
1
Densely populated
1
Moderately
Populated
2
Average 2 1.25 1.75 1.25

Technology

Technological Risks Japan Brazil China Sweden
Electronic
Technology (thus (easily compatible with Elecdyne
Greatly advanced
1
Less advanced
3
Greatly advanced
1
Moderately advanced
2
Need for Technology (thus market availability) Relative need
3
Great need
1
Relative need
3
Moderate need
2
Average 2 2 2 2

Based on the above external analysis (using the PESTEL business tool), the key issues with regards to Elecdyne’s internationalization can be summarized as follows:

Risk/Suitability Japan Brazil China Sweden
Political and Legal 1.5 2.25 2.25 1.25
Economic 1.44 2.44 1.33 2.11
Social/ Cultural/ Environmental 2 1.25 1.75 1.25
Technological 2 2 2 2
Average 1.985 1.8325 1.6525

Furthermore, the following key factors, regarding Elecdyne’s internationalization, can be deductively represented as follows:

Factor Japan Brazil China Sweden
Cost minimization 3 3 2 2
Access to technology 1 2 1 1
Market Access/ Size 3 1 1 1
Risk Factors
(Economic and Political)
2 3 2 2
Culture Fit 2 1 3 1
Average 2 1.8 1.4

Summary

In both summaries, it is indicatively eminent that despite the fact that Brazil, China and Sweden are viable markets for Elecdyne’s internationalization. In business, the least risks presented by a market, the better it is in terms of facilitating the prospected ideas (Ormanidhi & Stringa, 2008).

And from the analysis done above, Sweden apparently averages better (the lower the average, the more suitable) and is therefore the best place for implementing Elecdyne’s internationalization plans. Of course there are a couple of instances that both Brazil and China average similarly (like in market access) or better than Sweden but, in overall; Sweden presents a more balanced market for Elecdyne’s internationalization.

List of References

Hedstrom, G., Poltorzycki, S., & Strob, P. 1998. Sustainable development: the next generation of business opportunity. Prism, 4: 5–19.

Hurn, B., 2009. Will international business always speak? Industrial and Commercial Training, 41 (6), 299-304.

Meldrum, D., 2000. Country risk and foreign direct investment. Business Economics, 35 (1), 33-41.

Mintzberg, H., 1994. The rise and fall of strategic planning: reconceiving roles of planning, plans, planners. New York: Simon and Schuster.

Ormanidhi, O. & Stringa, O., 2008. Porter’s Model of Generic Competitive Strategies. Business Economics, 43 (3), 55-64.

How to Internationalize

Having known the most viable country for its market expansion plans, Elecdyne needs to choose a fitting method of internationalizing Sweden. The available options for this venture include licensing, exporting and Foreign Direct Investment (commonly abbreviated as FDI). Choosing the licensing option will be unsuitable based on the fact that majority of Elecdyne’s technological licenses are held by other related companies thus cannot be re-licensed.

Although exporting is a good way of accessing new marketing avenues, it is known for not being able to reduce costs or improve the access to technology—which are two key factorial considerations in internationalization (Thill & Bovée, 2008). Resultantly, Elecdyne will not be able to adequately achieve its goals of reducing costs while concomitantly gaining access to technologies.

This, therefore, leaves Elecdyne with FDI as its only option. However, in using FDI, several options are availed. These include Joint-venture, merger/acquisition and Greenfield site. A summative SWOT analysis of these three options, with regards to the key factors for internationalization, is given in the table below.

Factor Joint Venture Merger/Acquisition Greenfield site
Cost minimization Cost shared with the local partner high integration costs incurred when adapting to parent MNE High liability of newness cost in the verge of adapting to host country
Access to technology Partners can easily steal technologies Gives access to new technologies Does not allow access to other’s technologies
Market Access/ Size Allows access to new markets Allows access to new markets Allows access to new markets
Risk Factors
(Economic and Political)
Greatly reduces economic and political risks Relatively more economic and political risks when compared to the joint venture Highest political and economic risks in comparison to all other FDIs
Culture Fit Culture conflicts can arise occasionally Culture conflicts tend to be prevalent Establishment of independent operating routines reduced culture conflicts

Summary

Going by the intricacies of these FDI options, the joint venture would best fit Sweden. This is because the joint venture presents immense potential cost benefits for Elecdyne who direly need cost minimization more than any other thing.

Of course the joint venture is not the best when it comes to technology access and culture fit, but all these can be overlooked based on the relative similarity of Japan and Sweden in terms of their culture and technological progress. Learning institutions like universities tend to provide good markets for electronic equipment. As a recommendation, Elecdyne should therefore prioritize such institutions when sourcing for potential joint-venture partners.

List of References

Thill J. V., & Bovée C. L., 2008. Excellence in business communication. Chicago: Pearson Education Limited.

Products to develop

Considering reports on the nature of the Swedish market, there is a great need for home entertainment, networking with other people across the world and staying trendy with the latest technological gadgets in the market (George, 2002). The following products would, therefore, be best for the internationalization in Sweden.

Firstly, Sweden has been, reportedly, improved in terms of its access to the internet and more people are increasingly sourcing for internet tools. Providing Wi-Fi and broadband items to the targeted Swedish market would perform greatly. This will satiate the need to network with the rest of the world (Windsperger, 2004).

Secondly, the use of satellite televisions and LCD TVs has been greatly received across the world. Providing these to the Swedish market would be hugely rewarding based on the fact that few companies in Sweden can manufacture such products. A majority of the public thus relies on exports from countries like USA (Hennigan, 2010). Providing such products at a fair price would, undoubtedly, be a great success. In addition, owning products of this nature would satisfy the need to stay trendy.

Thirdly and lastly, for the purposes of home entertainment, providing video game equipments for popular games played across the world—would be very effective. Today, video games are played not only by children but even adults. Providing these games to the enthusiastic and receptive Swedish market would definitely result in huge success—in terms of costs as well as socialization (Allwood, 2003).

As glimpsed before, the Swedish market is a highly enthusiastic market that easily accepts change—especially when it comes to beneficial stuff. So apart from these three prioritized products, other products and services can also be provided for purposes of maximizing the potential of the Swedish market (Hedstrom et al. 1998).

However, if only one product is to be selected, the video game console, providing internet equipment like WI-FI would be my best pick based on the bon-fire effect it has had across the world.

Conclusion

From the analysis and discussions that have presented in this paper, it is inherently clear that the process of internationalization is a highly involving one that needs several factors to be cautiously considered. Additionally, all these factors—whether internal or external—are interdependently related to one another and in order to succeed in internationalization; all of them should be precariously factored.

For example, through political and legal stability in the external environment, economic markets can be easily controlled. Again, technological advances and developments in information, communication, and technology have also been able to greatly affect internal business processes.

A good example is the replacement of human labor with computers which are able to do certain jobs easily and devoid of errors. Consequently, in its internationalization agendas, Elecdyne should ensure that all these factors are well implemented so as to facilitate the success of its operations.

List of References

Allwood, J., 2003. Web.

George, Y. S., 2002. Gender, science, and technology in higher education and research in Sweden: five years after national policies implementation. Web.

Hedstrom, G., Poltorzycki, S., & Strob, P. 1998. Sustainable development: the next generation of business opportunity. Prism, 4: 5–19.

Hennigan, M., 2010. . Web.

Windsperger, J., 2004. Economics and management of franchising networks. OH: Springer.

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IvyPanda. (2019, July 12). Internationalization of the Business. Retrieved from https://ivypanda.com/essays/internationalization-of-the-business-report/

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IvyPanda. "Internationalization of the Business." July 12, 2019. https://ivypanda.com/essays/internationalization-of-the-business-report/.

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IvyPanda. 2019. "Internationalization of the Business." July 12, 2019. https://ivypanda.com/essays/internationalization-of-the-business-report/.

References

IvyPanda. (2019) 'Internationalization of the Business'. 12 July.

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