Risks and Rewards of Internationalization Essay

Risks and Rewards of Internationalization - Essay Example They have to compete with local as well as foreign firms. Many firms are founding new investment opportunities and new avenues of profit by going international. Internationalization also brings along with it its fair share of challenges. Firms have to adapt quickly in order to survive in the new world order. Internationalization has now become an important part of a firm’s strategy. It has become important to realize which strategies can be transferred abroad and what strategies are to be imported .Different markets pose different challenges, some of them may be solved by using global means whereas others need to be tackled through local strategies. In view of this; glocalisation is the new term which has been developed by researchers. Ohame (1994) has claimed that glocalisation means thinking global and acting local. (Hagiu, 2009) Although Internationalization has presented firms with numerous growth opportunities it also has presented various challenges such as an uncertain cultural, political and legal climate. The emerging markets such as India and China have unstable political and legal frameworks. It is difficult for firms to adjust to them and May sometime lead to collapse of the internal organization. Consequently firms have to find the best possible alternative when going for internationalization. They have to decide whether they want to go alone or venture into a partnership. This paper will analyse all such issues and the possible risks and rewards associated with internationalization. Internationalization: Definition Internationalization in simple terms can be defined as the process through which firms identify the international markets which are lucrative for them and try to enter it. Internationalization as a strategy can be adopted by firms by either acting alone or by acting in collaboration with other firms. (Cavusgil, 2009) Firms which act alone usually set up subsidiaries in the market which they want to enter or they may even buy up f irms which are already present in that market. An example of this technique can be seen when Vodafone entered the Indian market it bought a majority stake in the company Hutch which already had a presence in the Indian market. Most firms are wary to go alone in a new market and that too market of an emerging economy. So they prefer to partner with other firms and make a strategic alliance with one or more than one partners. These partners may be local business firms or multinational corporations who have been present in that market for a long time. E.g. – Honda ventured in the Indian market by tying up with Hero – the local Indian partner. (Ferná, et al., 2005) Ways to Penetrate New Markets Different methods can be used by firms looking for internationalization of their business. Some of them will be discussed here - Export Method This is the simplest method of entering an international market. This was the method utilized by firms in the times before globalization . Export method is also very relevant today if the international market is not promising enough and the sales number do not explain setting up shop in the country. The advantage of this method is that the firm does not have to build up infrastructure nor does it have to partner with clients. (Jones, 2009)The firm simple pays the custom duty and its products enter the market. However if the firm is looking to capture the market of the country; export method is not a viable option unless you have an advantage which cannot be removed. Cases in point here