Internationalisation process in developed and developing countries

7/20/2010
INTERNATIONALISATION PROCESS
IN DEVELOPED AND DEVELOPING
COUNTRIES
By Diptesh banerjee & Nikolaos B.

INTRODUCTION

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The continuous relationship of individuals,
companies and nations through globalisation
has caused firms to move out of their
domestic market on to the international stage
to gain sustainable competitive advantage
(Michael E. Porter, 1985).
Internationalisation was historically perceived to
be the strategy of large firms. Small firm’s
internationalisation is more often combined
with threat than with opportunities and for
this reason they are however often considered
to be home market oriented (Lindmark, 1998
in Laine & Kock, 2001).

CONTS.

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However, internationalisation today is a
strategy of all firms irrespective of size.
Firms are no longer interested to stay at home
even where there are good prospects in the
home market. With the development of
internationalisation, many small firms are
growing as a result of scale advantages they
derive from the expansion. This has made the
process of internationalisation a topical issue
in many literatures.
This study aims at discussion about
internationalization and analyzes its effects in
firms of developed and developing countries as
well as examples[].

MEANING OF INTERNATIONALISATION

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 With reference to the  Internationalization(so
process models of metimes shortened to
internationalisation, Wel “I18n”) is the process
ch &Luostarinen (1988) of planning and
define implementing products
internationalisation “as and services so that
the process of they can easily
increasing involvement adapted to specific
in international local languages and
operations”. cultures, a process
called localization. The
internationalization
process is sometimes
called translation or
localization

FORMS OF INTERNATIONALIZATION

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This

MODEL OF INTERNATIONAL THESIS
model
has
taken

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from
lecture
slide
Globalisa
tion
versus
Internati
onalisatio
n
Dr. Anna
Zueva

ADVANTAGES

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 Internationalization can provide MNC’s with
specific competencies that they were not
available to the domestically operating firm
 Arbitrage and leverage opportunities for MNC’s.

 Increasing economies of scales for the MNC’s.

 Economies of scope

 More managerial perspectives

 Rapid expansion of knowledge based services (i.e.
professional and technological services banking ,
insurance etc.)
 Reduction of the telecommunication’s cost.

CONTS.

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 Higher economy growth with the participation of
the developing countries
 Helps balancing the recession in the US with the
development in Asia
 Increase of the consumption in the whole world
 Decrease of the unemployment
 Setup of institutions in developing countries
 Protection of the environment (i.e. Kyoto’s
agreement)
 Monetary stability (i.e. euro currency)

INTERNATIONALISATION FOR FIRMS IN
DEVELOPED COUNTRIES

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‘‘Internationalization’’ has been widely used to
describe the outward movement of the
international operations of a firm (Welch and
Luostarinen, 1988).
Theories on the internationalisation of firms are
largely based on Western multinational
corporations. Starting from Vernon’s product
life cycle theory (1966, 1971) through the
Uppsala international expansion stage model
(Johanson and Weidersheim-Paul, 1975;
Johanson and Vahlne,1977) and the more recent
works of Dunning on his eclectic paradigm theory
(Dunning, 1993, 1995) and Investment
Development Path (Dunning, 1981, 1986) -
predominantly concerned multinational firms

CONTS.

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Research has found that firms from advanced
economies derive ownership advantages from
their technological and size superiority. They
typically extend their sales and operations to
foreign markets through a process of
‘‘evolutionary, sequential build up of foreign
commitments over time’’ (Welch and
Luostarinen, 1988).
In support of this we are presenting example of
HELLENIC TELECOMMUNICATIONS
ORGANISATION (OTE S.A.)

OTE COMPANY PROFILE

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 Founded in 1949
 Telecommunication’s company
 30000 employees in 6 countries
 Owns the 54% of Romtelecom
 Owns 20% stake in Telecom Serbia
 Cosmote
 AMC participation by 85% in the capital of the
Albanian mobile operator (2000)
 Cosmfon acquisition of the 100% of it’s shares
(2003)
 Cosmote Romania participation by 70%in the
capital of the Romanian mobile operator (2005)
 Global acquisition of 100% of it’s shares (2005)

COMPANY AT GALANCE

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INTERNATIONALISATION FOR FIRMS IN
DEVELOPING COUNTRIES

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Most of the studies have been confined to firms
operating in well – established developed
countries. The pattern of internationalization in
less developed and newly industrializing
economies is different. Since the late 1960s, an
increasing number of firms from these
economies have emerged as active players in
foreign direct investment (FDI) (Wells, 1978;
Lau, 1992; Erramilli et al., 1997).
Developing-country MNCs first appeared as a
focus of interest about 25 years ago, with the
advent of some overseas expansion by companies
from a few countries (Lecraw, 1977; Lall, 1983;
Wells, 1983).

CONTS.

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The earliest major developing-world sources of
FDI in this period were a small group of
economies, including Argentina, Brazil, Hong Kong
(China), India, Republic of Korea, Singapore, and
Taiwan (Province of China).since, 2003, the
growth rate of outward FDI (OFDI) from
emerging markets has outpaced the growth from
industrialized countries (UNCTAD, 2005). While
OFDI from the BRIC countries – Brazil, Russian
Federation, India and China – has received more
attention (Sauvant,2005). In context to this we
are presenting example of TATA GROUP.

WHY TATA
 Turnover > US$28 bn, equivalent to over 2.5% of
India's GDP

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 Traditionally the biggest market capitalization(now
reliance)
 India’s largest employer in the private
sector(222,000+85)
 Many firsts/largest for India:

first private sector steel mill (TISCO 1970)
first private sector power utility
first luxury hotel (Taj)
first airline (now Air- India)
India's largest software company (TCS)
India’s largest watch & jewellery firm (Titan)
India’s largest cross-border M&As (Tetley, Corus)
Some unique characteristics
Family

GROUP HOLDING STRUCTURE
Sir Darobji Tata Trust Sir Ratan Tata Trust Other
Tata Trust

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Tata sons[65.89% share holding]
TCS Trent Rallis
Tata steel Tata investment corporation
Tata Motors Tata Teleservices Tata
industries
Tata Power Tata international Tata advanced
materials
VSNL Idea cellular
Tata Chemicals Tata
Teleservices
Tata tea Information
tech. park
Indian Hotels Tata autocomp

INTERNATIONALISATION STRATEGY
 Driven by operating companies
 Geographically selective

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 Greenfield, JVs, acquisitions
 Partner development of select countries
Tata’s internationalisation:
Most Tata companies have internationalised
Revenue from overseas geographies
Country prioritization:
Priority countries (mostly OECD, mostly inorganic
growth) – USA, UK, Germany, China
Emerging economies(mostly Organic Growth) – South
Africa, GCC, Thailand, Indonesia, Vietnam, Brazil, Chil
e, Mexico, Uruguay
Neighboring countries – Sri Lanka, Bangladesh
M&A’s, mostly in higher-income country, ex-
Tetly, Daewoo, Natsteel, Corus, INCAT, Tyco
Teleglobe, Jaguar, etc

CONCLUSION
 The pattern of internalisation for less developed and
newly industrialized countries are different.

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 Developed economies typically extend their sales and
operations to foreign markets through a process of
‘‘evolutionary, sequential build up of foreign
commitments over time’’ (Welch and Luostarinen, 1988).
 Developed economies have ownership advantages from
their technological and size superiority.
 Different types of networks are evolving that is beyond
mere export, investment and FDI from developing
economies.
 The government has supported emerging MNEs by
providing appropriate policy framework and
infrastructure so that they can boost overseas
expansion.
 In the coming years, the trend of OFDI and
internationalization of enterprises from emerging

REFERENCES
 Industry evolution and internationalization processes of firms from a
newly industrialized economy - Ho-Fuk Lau[Department of Marketing,

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The Chinese University of Hong Kong, Shatin, NT, Hong Kong, China]
 Internationalisation of Firms in Developing Countries: Towards an
Integrated Conceptual Framework - John Kuada[Aalborg University]
 The internationalisation of indian companies: The Case of TATA –
Andrea Goldstien[OECD – organisation for economic co-operation and
development]
 Tata website
 Internationalization and economic performance of enterprises, Jan
Hagemejer Marcin Kolasa, May 2008
 www.ote.gr
 www.cosmote.gr, www.cosmote.ro
 www.inesee.gr, www.cosmofon.com
 www.economywatch.com
 http://europa.eu
 www.imf.org
 www.globul.bg
 www.telecom.yu
 www.oecd.org
 www.amc.al

QUESTIONS

7/20/2010

Internationalisation process in developed and developing countries

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