When doing business in an international scale, it is important to understand what international business really means. Therefore according to Rugman & Collinson (2012) international business can be defined as “The study of transactions taking place across national borders for the purpose of satisfying the needs of individuals and organizations. Some of the well known International businesses (MNE’s) are Wal-Mart, Toyota Motors, General Motors and Volkswagen for their performance, moreover annual revenue.
Decisions with regard to movement in to global arena should be taken with care as there is certain degree of risk involved.
There should be value in moving to ...view middle of the document...
Certain demand factors to be considered are marketing advantages and customer mobility. The physical presences of a factory may give a company visibility and the company may also gain from a buy-local attitude.
Political factors that give an edge to operate internationally are, to avoid trade barriers and to gain economic developments incentives of the host country. Most governments see FDI as creating new employment opportunities and improving the technological base and generally increasing welfare of its citizen. Therefore many incentives are given by the governments to induce and stimulate Foreign Direct Investments. Some other general factors to consider are the role and ambitions of the management team, motives of the organization (Wall & Rees 2004).
. The major costs of producing and selling automobiles include labor, material and marketing expenditure. Environmental issues, growing urbanization and changing customer behavior are the key issues influencing the global automotive industry. (KPMG International, 2012) There are number of manufactures in the global automobile industry. Some of the key players in this industry include General Motors, Ford and Daimler Chrysler from USA; Toyota, Nissan from Japan; Volkswagen and BMW from Germany.
Germany has had the most prominent history of automotive manufacture in the world as the country is considered to be the birthplace of the automobile in late 1870s, and it is also the home to many world-famous and popular car brands, such as Mercedes-Benz, BMW, Volkswagen, and Porsche (Business vibes, 2012).
When Ferdinand Piech Arrived as Volkswagen’s chief executive in 1993, things were not favorable for the company. The carmaker was overspending, Overmanned and inefficient and the products were poor in quality. But now things have changed and it plans to spend 76 billion on new models and new factories by 2016. To make this a success VW has a corporate culture where the emphasis is on permanent innovation and willingness to take risks. Volkswagen way is to be determined, Diligent and attentive to detail with ruthlessness. (Economist, 2012)
(2.1)a) INTERNATIONALIZATION PROCESS
Internationalization is becoming increasingly important given the tendency to a “borderless world. Thus it is important to understand what benefits internationalization can provide to a firm. Some of the benefits are as follows:
Increased market share
Greater returns on major capital investments or new products or processes
Greater economies of scale, scope or learning
A competitive advantage through location (http://mos.uwo.ca)
According to Rugman & Collinson (2012), a typical Internationalization process consists of license, Exports, local packaging or assembly and lastly FDI. It could be further illustrated as below.
Figure- Entry in to foreign markets: internationalization process
(Source: Rugman,A.M, Collinson,S. 2012)
But with regard to modes of entry in to foreign markets...