Traditionally, the major activity related to international business used to be export, but today there has been a shift towards internationalisation of the company whilst achieving competitive advantage driven by globalisation, technology, politics and economical changes. Access to new and bigger markets for growth is one of the reasons of internationalisation and this is in turn influenced by the opportunities that exist in the foreign market (Masum & Alejandra, 2008).
2.1 Foreign Market entry modes
Entry decisions that management has to consider before going international are:
• Market attractiveness
• Timing of entry into the market
• The scale and involvement of its resources
After the above three main …show more content…
Such entry mode is useful in countries were government regulations prohibit foreigners from entering their market. Technical knowledge is shared with other firms with the risk of creating competition and there is no control over the manufacture and marketing strategy that will be adopted (Masum & Alejandra, 2008).
• Franchising: This is the strategy that is currently employed by Tim Horton’s to expand internationally. Tim Hortons will give the rights to another firm in France, allowing them to sell products from Tim Hortons standard menu and also ones adapted to the local market under the name of ‘Tim Hortons’ whilst following strict rules set by the franchise. The franchise will receive royalty payments depending on the sales without any risks and costs related to opening in another country on its own. With this approach, Tim Hortons can achieve global presence in a short time period.
• Foreign Direct …show more content…
The choice of market location is done in a cautious but efficient way with profitability being the primary goal (Hermannsdottir, 2008).
Dunning’s Eclectic Theory
For a company to become international it has to have a competitive advantage in the domestic market. The core competences give the firm the prospect to last in the domestic market and once this is established, the company will then decide whether and where to internationalise by evaluating the macroeconomic environment of the new country (Dematias, 2012).
The International Product life cycle model
Companies which shift from exporting to FDI follow this model whilst their product is moving from the introduction to the growth phase and eventually reaching the maturity stage. Companies will keep exporting their products and shift towards FDI once they have enough knowledge about the foreign market. This usually takes place in the maturity