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to Globalization of
Services
6th Course
mergers
downsizing
uncertaint
y
acquisitio
ns
improving the
bottom line
increasing
competitivenes
s
From internationalization to
globalization TNC in services
Basic characteristics:
Motivations:
Strategic motives - drive the decision to invest
abroad and become a TNC:
market seeking
resource seeking - raw material seeking
efficiency seeking
strategic asset seeking - knowledge
seeking
political safety seeking
client following
These categories are not mutually exclusive
Development of TNC:
Firm
strategy,
structure
and rivalry
Factor
conditions
Key factors of
production are
created!
Spatial proximity of
upstream and
downstream industries
facilitates the exchange
of information
Direct competition
impels forms to
increase productivity
and innovation
Demand
condition
s
Related and
supporting
industries
Internationalization theories
Hymer:
assumptions:
Information-intensive activities
Activities for which reputation = the product itself
Internationalization theories
Hymer:
The possession of advantages as a cause of
international operations.
it was the first time that the firm and international production
were the specific focus of attention
he emphasizes the role of market imperfections in stimulating
the internationalization of production
he showed that, once established, the control of overseas
productive assets itself became a source of competitive
advantage.
Internationalization theories
Vernon
:
:
Internationalization theories
Vernon
Nowadays:
Internationalization theories:
Location-specific factors:
Internalization advantages
Reasons:
to safeguard proprietary knowledge - banking and financial
services, most information-intensive and professional services
to ensure product quality - advertising, market research, some
consumer services
to minimize transaction costs associated with opportunism
to protect property rights
to avoid search and negotiation costs
to tap synergies from geographical diversification - financial
services
to obtain inputs or develop new markets - trading companies
In other services, non-equity links or minority joint ventures are
preferred - hotels, restaurants, car rentals
Cooperative ventures - a way of sharing financial risk in such
industries as investment banking or insurance.
Ownership advantage
Internalizin
g assets
YES
Selling,
licensing and
renting assets
NO
What type of
internationalization method
is more profitable FDI or
export?!
Localization advantage
FDI
YES
NO
Export
Sursa: adaptare dup Dunning, J. (1993) , Multinational Enterprises and the Global Economy , Harrow: Addison-Wesley
International expansion
offshoring of corporate services
functions
According to UNCTAD and BCG Consulting offshoring:
Location
selection
Captive
Offshoring
Domestic
Internalization
Offshoring to an
independent
supplier
Domestic
externalization
Country of origin
Model
Impact
Control
Offshoring
to
an
independent supplier
Captive offshoring
Internalization
Business
Organization
Externalization
Domestic
externalization
Domestic
Internalization
Source: Boston Consulting Group (2005), Achieving Success in Business Process Outsourcing and Offshoring