INTERNATIONALISATION PROCESS IN DEVELOPED AND DEVELOPING COUNTRIESBy Diptesh banerjee & Nikolaos B.

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INTRODUCTION

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).

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CONTS.

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[].

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OVERVIEW

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MEANING OF INTERNATIONALISATION

With reference to the process models of internationalisation, Welch &Luostarinen (1988) define internationalisation “as the process of increasing involvement in international operations”.

Internationalization(sometimes shortened to “I18n”) is the process of planning and implementing products and services so that they can easily adapted to specific local languages and cultures, a process called localization. The internationalization process is sometimes called translation or localization enablement.

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FORMS OF INTERNATIONALIZATION0

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This model has taken from lecture slide Globalisation versusInternationalisationDr. Anna Zueva

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ADVANTAGES

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.

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CONTS.

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)

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INTERNATIONALISATION FOR FIRMS IN DEVELOPED COUNTRIES

‘‘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 from industrialised developed countries.

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CONTS.

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.)

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OTE COMPANY PROFILE

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)

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COMPANY AT GALANCE

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INTERNATIONALISATION FOR FIRMS IN DEVELOPING COUNTRIES

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).

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CONTS.

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.

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

GDP 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 characteristicsFamilyPhilanthropyOutward orientation

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GROUP HOLDING STRUCTURESir Darobji Tata Trust Sir Ratan Tata Trust

Other Tata Trust

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 systems

Tata InfoTech [28.62% share holding]

Titan

Voltas

Tata ELXI

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INTERNATIONALISATION STRATEGY Driven by operating companies Geographically selective Greenfield, JVs, acquisitions Partner development of select countriesTata’s internationalisation:Most Tata companies have internationalisedRevenue from overseas geographiesCountry prioritization: Priority countries (mostly OECD, mostly inorganic

growth) – USA, UK, Germany, ChinaEmerging economies(mostly Organic Growth) –

South Africa, GCC, Thailand, Indonesia, Vietnam, Brazil, Chile, 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

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CONCLUSION The pattern of internalisation for less developed and newly

industrialized countries are different. 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 countries is likely to further deepen.

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REFERENCES Industry evolution and internationalization processes of firms

from a newly industrialized economy - Ho-Fuk Lau[Department of Marketing, 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

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QUESTIONS

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