[MUSIC] [MUSIC] [MUSIC] [MUSIC] Welcome! These are today’s learning goals: Understanding dependence between domestic competitive advantage and internationalization strategy. Analyzing the suitability of strategic decisions in multilatinas’ internationalization process such as: speed of internationalization, new international markets selection and entry modes in these markets. >> As a result of technological development and certain political and social factors, it is difficult to imagine that companies today, would remain in their home countries and not exploit the possibilities outside their national borders. Besides being an introduction to internationalization, this module also focuses on three important aspects of internationalization:. speed, selection of the target country, and entry modes. >> A decision to internationalize is a strategic decision Internationalization is a process in which a company produces or sells beyond its national borders. Internationalization has six specific economic effects on the competitive advantage of every company. Internationalization adds volume and growth, reduces costs, creates differentiation, increases structure attractiveness and willingness to pay in the industry creating reputational benefits, normalizes risk, produces knowledge, and provides access to resources not available in the country of origin. These driving forces of internationalization give rise to different strategies used by multinationals to mobilize resources in order to create economic value. >> From a resource-based perspective, the two internationalization approaches are exploiting resources, and resource acquisition. Which of these a company chooses depends on the characteristics of the resources leading to the consolidation of domestic competitive advantage. This creates, on one hand, dependence on mobile resources (i.e., technology) and, on the other, specific resources in the domestic context (i.e., local supplier network) bring about different opportunities for multilatinas in their internationalization process. >> For example, for companies whose domestic competitive advantage depends on resources that are easily moved through national borders like technology or advanced production processes, political instability in their domestic market can stimulate the internationalization process in countries where there is a lower level of political and regulating uncertainty. Stability and predictability of factors affecting the business environment make it possible for enterprises to benefit from higher profitability. In this case, internationalization is easier, because technology can be redistributed, and its value remains or even increases passing from one market to the other. In this way, multilatinas that build their domestic competitive advantage with mobile resources between markets can exploit their assets, by replicating their domestic strategy beyond their borders. >> Moreover, there are multilatinas competing successfully thanks to resources from their specific domestic context, such as local brands and supplier networks. For these multinationals, it is more difficult to redistribute their activities between markets by reproducing their domestic strategies, as these are more closely related to the domestic context. Therefore, this type of multilatinas invest abroad with a strategy that consists in acquiring new resources in the foreign country, because it is not possible to directly benefit from the resources they have built in their domestic market. >> We will now learn about multilatinas’ speed of internationalization.
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Internationalization has traditionally involved a series of steps that companies follow gradually. This process is based on an internationalization model that depends on the growing accumulation of knowledge on international markets and a progressive commitment of resources to these markets. In this process, the company begins exporting to neighboring countries or to those relatively well studied and similar regarding the commercial practices of the country of origin, given the lack of information on foreign countries and companies’ natural propensity to reduce uncertainty in markets. The decision to internationalize a company is considered a strategic one, in which there is a major influence of the decision maker’s individual conditions and circumstances in the case of SMEs, and of structural factors, which are more important regarding the internationalization of top companies. >> There are other approaches that advocate diametrically opposed positions as a consequence of an accelerated internationalization process, based on the presence of different factors, and not necessarily a progressive one. Born global companies or international new ventures represent a business reality different from the internationalization approaches based on sequentiality, as they are companies known for having an important presence in foreign markets since the beginning of their business activities. >> The resources on which competitive advantage is based also have an impact on the speed of internationalization. When these resources are redistributable, it does not take much time from the moment the investment opportunity in an international market is discovered to the establishment of operations abroad. >> Moreover, when domestic resources are essential for competitive advantage, acquiring or creating these resources abroad takes time. Once business opportunities in a new country have been identified, these multilatinas are likely to take some time to plan the next steps in the implementation process of their internationalization strategy. We will now learn about the market selection process. The decision to internationalize implies selecting foreign markets that provide a better opportunity for each company, depending on their resources and capacities. A larger distance between domestic and foreign contexts requires a company to adapt its resources to a higher degree. One way of understanding the required degree of adaptation for a successful internationalization process is taking into account four types of distance between the country of origin and the possible international market. >> The cultural distance mostly affects companies in sectors such as food or entertainment, where aspects including traditions, values, religion, and language affect customer’s willingness to acquire or consume a product or a service. Administrative and political distance affects companies operating in highly regulated sectors or those that are important in terms of national security, such as the defense sector or the agricultural. The relation between a colony and a colonizer has a significant impact on administrative or political distance between countries, which reduces the complexity of the internationalization process. >> Geographic distance is decisive for companies trading perishable or bulk goods, such as cement. Geographic proximity is a very big advantage in the internationalization process. In fact, in the case of multilatinas, their predilection for regionalization rather than for internationalization is evident, as these companies prefer to expand in their neighbors’ markets. >> Economic distance is essential for companies whose international competitive advantage relies on exploiting the differences between rich countries and poor ones, such as textile manufacturing companies. Economic distance is related to asymmetries between rich economies and poor ones in every conceivable aspect, such as GDP, infrastructure, productivity, etc. >> It is important to highlight that, in terms of their capacity to handle their institutional context, multilatinas have developed important de resiliencia ante la incertidumbre política, administrativa y económica. advantages regarding resilience when faced with political, administrative and economic uncertainty. >> Their internationalization strategies do not depend completely on the search for safety or predictable contexts. Multilatinas’ internationalization strategies are related to the resources and capacities with which they build their domestic competitive advantage. In general, there is an internationalization pattern that depicts multilatinas as companies in the pursuit of regional opportunities more than global ones, and which prefer mergers and acquisitions as an entry mode when they create affiliates in the target countries. Those companies, whose resources are really rooted in their domestic contexts, are more patient when it comes to internationalization, but companies whose resources are easily moved between borders opt for more accelerated processes. >> It is fascinating to discover the details and further our understanding of multilatinas' internationalization processes. Read on for some of the most captivating stories on internationalization. [MUSIC] [MUSIC] [MUSIC] [MUSIC] [MUSIC] [MUSIC]