Coordinated by
Dr Connie Chui S. Chan
2023 S1 Week 2
Globalisation of markets and
Internationalisation of firms
IBUS 1101 Global Business
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Outline
• Canvas module 2
• The focal firm
• Internationalisation of the firm
• International environment
• Review the implications
• Q & A
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Internationalization Process of the Firm
Johanson & Vahlne: “Uppsala” model (1977) observed that firms
internationalised in incremental steps, and do not undertake huge foreign
investment commitments especially to distant locations.
The University of Sydney
Exporting
Sales agent
office,
licensing,
franchising
Joint
venture
Wholly
owned
subsidiary
Risk
Psychic Distance - - ->
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Entry modes
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More in Week 6
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Internationalization Process of the Firm
• Market knowledge comes with experience
• Positive correlation between experiential learning and commitment
• Relationship building through networks
• Evolution of the firm’s capabilities (not stages, but process)
• Firm coevolves with partners and parties in the environment
For details please refer to assigned reading for the week
(Vahlne, 2020)
The University of Sydney
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Quiz
• What are the main differences between conventional firms that grow and
internationalize organically and born global firms?
The University of Sydney
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Born Global firms
• Examples of BG in Australia:
• Biota Holdings Limited (VIC) –a publicly listed company involved in the discovery and development of
antiviral drugs
• Cochlear Ltd (NSW) –a publicly listed company that designs and markets multi-channel cochlear implants
for the hearing impaired
• CSL Ltd (VIC) –a publicly listed company that develops, manufactures and markets vaccines and
medications of biological origin
• MYOB Ltd (VIC) –a publicly listed company that designs and supplies business and management
software, services and support for businesses and accounting practices
• Rising Sun Pictures (SA) –provider of visual effects services for filmmakers, chiefly Hollywood studios
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Born Global Firms?
Critique
- BG is not distinct from conventional firms (Dow, 2017)
- Some categorized as BG are actually not (Rumyantseva & Welch, 2023)
- Majority of BG start-ups did not sustain performance and competitiveness
- Founders tend to exaggerate their contribution and downplay failures
- Some BG firms did not last
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Liability of Disruption
• Gig economy, digital business, disruptive business model
• Newness is not necessarily an advantage
• Negative responses of host country government, industry and society
• Some countries are not ready to accept certain types of innovation / changes
• Different to conventional concept of liability of foreignness
(Marano, Tallman & Teegen, 2020)
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The world is flat
Communications → elimination of distance?
Is the world getting flatter & smaller?
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The world is flat
2.0 hot and crowded – we need renewal
3.0 update on globalization
• opportunities for individual empowerment, achievements at lifting millions out of poverty
• drawbacks –environmental, social, and political
• Support for globalization
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Distance still matters
• Ghemawat
• Cultural, Administrative, Geographic and Economic
differences or distances between countries (C A G E)
• How do we cultivate a cosmopolitan corporation?
• Evolutionary approach: developing an open mindset
https://hbr.org/2011/05/the-cosmopolitan-corporation
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Extent of Globalisation
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• Only few MNEs can be considered truly global
• Most are focused in some regions and hubs
• The world is semi-globalised or partially globalised
• New challenges
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Discussion
• Is the world flat of spiky?
• It depends …
• When?
• From spiky to flat to spiky?
• Why?
• Despite drivers and benefits …
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Global Value Chain
• The focal firm
• Motivations
• Choice of location
• Which part of value chain
• Resources, R&D, manufacturing, distribution, retail
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Internationalization of the Firm’s Value Chain
The University of SydneyPearson Education
Upstream - - - - - - - - - - - - - - - - - - - - Downstream
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Challenges
• Pros and cons of globalization
• Unprecedented challenges: trade wars, pandemic and geopolitical tensions
• How do firms operate in a more complex and changing environment?
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Summary
• Opportunities vs Risk assessment
• Efficiency vs non-economic considerations
• Distance (cultural, institutional) pose challenges
• Negotiate and leverage differences
• Consider the growing importance of context and non-economic factors
• Uncertainties: internationalization is non-linear
• Firms select, adapt and innovate to overcome challenges
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Any Questions?
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