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Business and Marketing Strategies - Globalization,
Internationalization, and Multinational Enterprises
Index:
1
...


Internationalization Process
-

-

-

3
...
1 What are Institutions?
3
...
3 Political Risk

Multinational Enterprises (MNEs)
-

-

-

-

5
...
1 What is Internationalization?
2
...
3 Internationalization Methods
■
Exporting
■
Franchising and Licensing
■
Offshoring and Outsourcing
■
Foreign Direct Investment (FDI)
2
...
5 Theoretical Frameworks Supporting Internationalization
■
OLI Paradigm (Eclectic Theory)

Institutions
-

4
...
1 What is Globalization?
1
...
3 Historical Examples of Globalization
1
...
5 The Role of Globalization in Business Expansion
■
Opportunities
■
Challenges

4
...
2 Key Characteristics of MNEs
■
Ownership Structure
■
Competitive Strategy
■
Global Networks and Operations
■
Regulatory and Institutional Adaptation
4
...
4 Examples of MNEs
■
Emerging Market MNEs
■
Historical MNE Example
■
Modern MNEs
4
...
1 Ownership Advantages
5
...
3 Internalization Advantages
5
...
Globalization
1
...

Process by which economies, societies, and cultures become increasingly interconnected through
trade, communication, and cultural exchange
...

Essentially, globalization represents the shrinking of the world into a global village, where events in
one part of the world can influence those on the other side​
...


1
...

Economies become interconnected by reducing trade barriers, such as tariffs and quotas,
allowing goods, services, and capital to move freely across borders
...

-

Example of International supply chains:

An iPhone is designed in the U
...
, but its parts are manufactured across China, South Korea,
and Japan, with assembly done there before it is sold worldwide
...

Global media, art, food, and fashion flow freely across borders
...


-

Example: The global popularity of Western fast food chains

—> Like McDonald's or cultural phenomenas such as K-pop from South Korea, which have
become wildly successful worldwide
...

-

●

Example: Students from developing countries often pursue higher education in
countries like the U
...
, U
...
, or Australia, gaining global perspectives and skills
...

The internet, mobile technology, and digital platforms make it easier than ever for businesses
and individuals wanting to engage in global commerce or communication to take their
operations global, by reducing barriers to entry
...


1
...

Later, colonial empires like the British Empire expanded this and integrated the world by establishing
trade routes and solidifying economic dominance across entire continents​
...
4 - Types of Firms Involved in Globalization:
1
...
MNEs often dominate global markets due to their size, capital, and ability to
scale internationally
...

Characteristics of MNEs:
■
■
■

Centralized operations with decentralized subsidiaries in different countries
...

Heavy use of FDI to establish local subsidiaries, factories, and branches
worldwide
...
Small and Medium Enterprises (SMEs):
- Definition: Smaller companies that engage in international trade but typically do not have the
resources to set up extensive overseas operations like MNEs
...

- Example: A small textile manufacturer in Southeast Asia might export its products
globally by partnering with a larger distribution company or using an e-commerce
platform like Amazon
...

■ New technologies such as the internet and digital marketing allow SMEs to
reach global customers without the need for physical expansion
...


3
...
Born globals take advantage of modern technology, digital
platforms, and globalization trends to expand quickly into international markets
...
Both companies, although
relatively small when they began, leveraged the internet to reach global audiences
almost immediately​
...

■ They often focus on niche markets that have global demand
...


1
...
It offers:

●
●
●

Market Expansion: Access to new customers in different geographic regions, allowing for
business growth and diversification
...

Innovation and Competition: Exposure to international competition forces businesses to
innovate continuously, offering better products and services to consumers globally
...

Regulation: Different countries have varying legal and regulatory frameworks, creating
complexities in doing business across borders
...


SUMMARY GLOBALIZATION:
Globalization is a multifaceted process with significant economic, cultural, and technological impacts
...
At the same time, it presents challenges that require businesses to
adapt to new competitive environments and varying regulatory frameworks
...

Through the examples of MNEs, SMEs, and born globals, it's evident how different types of firms
leverage globalization differently, depending on their size, resources, and market goals
...


2
...
1 - What is Internationalization?
Internationalization refers to the process by which a company expands its business operations
beyond its domestic market to engage in cross-border activities
...

It is a strategic decision that firms make to grow, increase profitability, and tap into new opportunities
globally
...


2
...

1
...

For instance, firms in industries with saturated domestic markets may find internationalization
critical for business survival and growth
...
For example, Coca-Cola
operates in nearly every country around the world, which allows it to maintain high global
revenues
...
For example, a firm that only sells products in the U
...
is vulnerable to economic
downturns in that country
...

2
...

For example, Huawei expanded into Western markets not only to sell products but also to
gain knowledge of advanced telecommunications technologies
...
For example, Apple offshores the manufacturing of its iPhones to
countries like China to take advantage of lower production costs and skilled labor
...
European fashion brands, such as H&M, often manufacture their clothing in
Southeast Asia to reduce costs while still maintaining global quality standards​
...
3 - Internationalization Methods:
Firms use different methods of internationalization depending on their goals, resources, and the
competitive landscape
...

1
...

Direct Exporting: The firm sells directly to customers in foreign markets
...

Indirect Exporting: In this method, a company uses intermediaries like agents or distributors
to sell its products overseas
...

-

Example: Samsung started exporting its products to Europe and North America in
the 1970s as its first step towards internationalization​
...
Franchising and Licensing:

-

Definition: Franchising involves granting a foreign company the right to operate
using your business model and brand in exchange for royalties or fees
...


Franchising Example: McDonald’s has expanded globally through franchising, allowing
local entrepreneurs to operate under its brand name
...

Licensing Example: Disney licenses its characters and intellectual properties to foreign
companies to produce toys, apparel, and other products, allowing it to earn revenue without
direct involvement in manufacturing
...
Offshoring and Outsourcing:
Offshoring: Moving production or service processes to another country, usually to reduce
costs
...

Outsourcing: Contracting a third-party firm to carry out specific business functions in another
country
...

-

Example: Apple outsources its iPhone manufacturing to Foxconn in China, where
production costs are lower, allowing the company to maintain high profitability​
...
Foreign Direct Investment (FDI):
- Definition: FDI occurs when a company invests directly in facilities or businesses in a
foreign country, either through acquisitions, joint ventures, or setting up entirely new
subsidiaries (known as "greenfield investment")
...
Samsung used joint ventures to manufacture products abroad starting in
the 1990s​
...

Greenfield Investment: This involves setting up entirely new operations, such as factories or
offices, in a foreign country from scratch
...

- Example: Huawei has made significant FDI by establishing technology hubs in Egypt
(OpenLab platform) and Thailand (5G infrastructure)​
...
3
...
In Egypt, Huawei set up an OpenLab,
which serves as a collaborative platform for local businesses and industries to benefit from
Huawei’s advanced technologies
...
These moves highlight Huawei’s strategic use

of FDI to not only gain market access but also to influence technological infrastructure in key
regions​
...
4 - Risks and Challenges of Internationalization:
1
...
A lack of cultural awareness can result in
miscommunication or business failure
...


2
...

- Example: Uzbekistan recently reformed its political environment, attracting new FDI,
but businesses investing in politically unstable countries face high risks​
...
Currency and Exchange Rate Risks: Companies that operate in multiple countries are
exposed to fluctuations in exchange rates, which can impact profitability
...


2
...
The theory is based on three main
advantages:
1
...
g
...

2
...
g
...

3
...
g
...


SUMMARY INTERNATIONALIZATION:
Internationalization is a complex, multi-faceted process that offers significant opportunities for growth
and expansion but also comes with inherent risks
...
Successful internationalization requires a deep understanding of cultural, political, and
economic conditions in the target countries
...
Institutions
3
...
They are the
“rules of the game” that define how entities (people, businesses, governments) interact within a given
country or across borders​
...
These institutions ensure the smooth
functioning of the economy, political system, and legal framework
...
These are embedded in the society's
culture and can vary significantly from country to country, affecting business practices and
social behavior in ways that laws cannot predict or control
...
2 - Types of Institutions
3
...
1 - Formal Institutions
These are the laws, rules, and regulations that govern the political, legal, and economic aspects of a
country
...
They can be categorized into several key areas:
a) Political Systems
Political systems refer to how power is organized and exercised in a country
...
The stability
and transparency of a political system are major factors for businesses, especially foreign investors,
as they determine the level of political risk involved
...
For example, in countries like the UK or the United States, businesses often face
less political interference because the political system is designed to balance power between
the state and the private sector
...

Autocratic/Totalitarian Systems: In contrast, autocratic or totalitarian regimes concentrate
power in the hands of a few, often leading to unpredictable changes in policy or regulations
...


Example: Uzbekistan is an interesting case
...
These changes significantly improved the investment climate, attracting foreign
businesses and increasing the country’s Gross Domestic Product (GDP)
...

b)

Legal Systems

Legal institutions refer to the courts, regulations, and enforcement mechanisms that uphold the rule of
law in a country
...

●

●

Common Law: Found in countries like the UK, the United States, and Australia, common law
systems are based on judicial precedents
...

Civil Law: In contrast, civil law systems (common in Europe, Latin America, and parts of
Asia) are based on written statutes and codes
...

Example: In China, the legal framework for foreign businesses is distinct from Russia’s
...

For example, a Russian company setting up an office in China may find that their employment
contracts, which are valid under Russian law, need to be adapted to Chinese regulations
...

c) Economic Policies
These include fiscal policies (taxation, government spending), monetary policies (interest rates,
inflation control), trade regulations, and industrial policies that shape the economic environment within
which businesses operate
...
Economic policies that promote open
trade (such as reducing tariffs) or provide financial stability through sound monetary policies
are attractive to multinational enterprises (MNEs) looking for investment opportunities
...


3
...
2 - Informal Institutions
Informal institutions are the unwritten societal norms and cultural values that influence behavior and
decision-making
...
MNEs often seek to expand their operations to capture new markets,
access cheaper resources, or leverage local expertise​
...
These companies often maintain their headquarters in one

country (e
...
, Unilever in the Netherlands and UK) while spreading their operations globally to
maximize production efficiency and revenue
...
2 - Key Characteristics of MNEs
1
...
They can establish subsidiaries, engage
in joint ventures, or acquire local businesses in foreign countries to establish a physical
presence abroad
...

- Full Ownership (Greenfield Investments or Acquisitions): MNEs may create
entirely new facilities abroad (greenfield investment) or acquire existing local
companies to gain instant market access
...

- Joint Ventures: MNEs may also collaborate with local firms in joint ventures, sharing
ownership and management responsibilities
...
For instance, Starbucks partnered with
local firms when entering the Chinese market to better understand local consumer
behavior and regulations​
...
Competitive Strategy
MNEs have several strategies to maintain their competitive edge in foreign markets, which
can be broken down into three main categories based on Dunning’s Eclectic (OLI)
Paradigm:
- Ownership Advantages: These include the firm's proprietary technology, brand,
patents, or specialized knowledge that give it a competitive edge abroad
...

- Location Advantages: These are factors that make a foreign country attractive to an
MNE, such as lower labor costs, proximity to raw materials, or large consumer
markets
...

- Internalization Advantages: This refers to the firm's ability to control operations
internally rather than relying on external suppliers or contractors, thus minimizing
transaction costs and safeguarding proprietary knowledge
...


3
...
This structure allows for flexibility, as local managers can
make decisions suited to their particular market while adhering to global corporate strategies
...


4
...
For example, McDonald's modifies its menu offerings to comply with local cultural
preferences and dietary restrictions in various countries, such as serving vegetarian options in
India​
...
3 - Impact of MNEs
MNEs are a major force in global business, and their presence can bring both positive and negative
impacts on host countries and economies:
1
...

■ Example: When Samsung established production plants in Vietnam, it
created thousands of jobs and significantly boosted the country’s e

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