International enterprises
Reasons for internationalization:
- saturation of domestic markets → exploitation of new markets
- risk management: minimization of risks through new markets (diversification)
- improved capacity utilization through additional sales abroad
- nearness to markets and customers → service
- better image
- reduction of costs → lower wages, cheaper raw materials, building ground and other location advantages
- avoidance of losses through exchange rate fluctuations
- exploitation of foreign know-how
- evasion of protectionist trade barriers
Types of internationalization
- Foundation of a subsidiary (greenfield start)
- Takeover (aquisition): a domestic enterprise is purchased completely by a buyer from abroad
- Merger: a new company is formed by two partners of roughly the same size
- Joint-venture: Installation of a new enterprise which is owned and led by two or more partners
- Cooperation with a foreign partner for a limited period of time. Partners work together on certain markets/products for mutual benefit
What should enterprises take care of?
- political risks
- natural circumstances (e.g. climatic or topographic conditions)
- logistic infrastructure (traffic system)
- legal system
- social relationships and ties
- culture/values
- level of technological standard
3 types of international enterprises
- enterprises with only selective international business transactions
- multinational companies: run foreign production facilities and/or subsidiaries → decentralised management, subsidiaries are responsible for optimum strategies
-
global players: want to secure world market shares for themselves with international, standardized products
→ centralised management
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