International Business
Session 2
International vs. Domestic
OPPORTUNITIES
1.Seek opportunities for growth through
market diversification
2.Gain new ideas about products,
services, and business methods
3.Better serve key customers that have
relocated abroad
4.Be closer to supply sources, benefit
from global sourcing advantages, or
gain flexibility in the sourcing of
products
International vs. Domestic
OPPORTUNITIES
5. Gain access to lower-cost or better-value
factors of production
6. Develop economies of scale in sourcing,
production, marketing, and R&D
7. Confront international competitors more
effectively or thwart the growth of
competition in the home market
FDI Based Explanations:
Dunning’s Eclectic Paradigm
Three conditions determine whether or not a company
will internalize via FDI:
1. Ownership-specific advantages – knowledge,
skills, capabilities, relationships, or physical assets that
form the basis for the firm’s competitive advantage
2. Location-specific advantages – advantages
associated with the country in which the MNE is invested,
including natural resources, skilled or low cost labor, and
inexpensive capital
3. Internalization advantages – control derived
from internalizing foreign-based manufacturing,
distribution, or other value chain activities
Factors Relevant to Choice of
Foreign Market Entry Strategy
1. The goals and objectives of the firm, such as
desired profitability, market share, or competitive
positioning;
2. The particular financial, organizational, and
technological resources and capabilities available
to the firm;
3. Unique conditions in the target country, such as
legal, cultural, and economic circumstances, as
well as distribution and transportation systems;
4. Risks inherent in each proposed foreign venture
in relation to the firm’s goals and objectives in
pursuing internationalization;
5. The nature and extent of competition from
existing rivals, and from firms that may enter the
market later;
6. The characteristics of the product or service to be
