STAGES OF INTERNATIONALISATION

STAGES OF INTERNATIONALISATION

STAGE 1] DOMESTIC COMPANY :A company that limits its operations to national political boundaries.

STAGE 2] INTERNATIONAL COMPANY : Companies that focus on domestic practices but extend wings to foreign countries. International companies are importers and exporters, they have no investment outside of their home country.

STAGE 3] MULTINATIONAL COMPANY :MNCS formulate different strategies for different markets. Multinational companies have investment in other countries, but do not have coordinated product offerings in each country. More focused on adapting their products and service to each individual local market.

STAGE 4] GLOBAL COMPANY :Global companies either produce in one country and market globally or produce globally and market domestically. Global companies have invested and are present in many countries. They market their products through the use of the same coordinated image/brand in all markets. Generally there is one corporate office that is responsible for global strategy. Emphasis on volume, cost management and efficiency.

STAGE 5] TRANSNATIONAL COMPANY :Transnational company produces , markets, invests and operates across the world.Transnational companies are much more complex organizations. They have invested in foreign operations, have a central corporate facility but give decision-making, R&D and marketing powers to each individual foreign market.

MNC vs Global Company:

1.A multinational corporation, or MNC, is a company which produces goods and services and has offices in several other countries while a global corporation or company is a company which also has trade relations with several other countries.

2.MNCs usually pay local workers a lower salary rate than global companies.

3.MNCs have official headquarters while global companies do not.

4.Global companies sell the same product with their characteristic image while MNCs adapt their products to the needs of the host countries.

INTERNATIONAL BUSINESS APPROACHES :

ETHNOCENTRIC APPROACH : All key management positions are held by parent country nationals. The maintenance of domestic approach towards international business is called ethnocentric approach. Under ethnocentric approach, the domestic companies view foreign markets as an extension to domestic market.

II. POLYCENTRIC APPROACH :

The domestic companies, which are exporting to foreign countries using theethnocentric approach ,find at the latter stage that the foreign markets need analtogether different approach.Then, Under polycentric approach, the company establishes aforeignsubsidiary company and decentralists all theoperations anddelegates decision-making and policy-making authority to its executives.

Under ethnocentric approach, the domesticcompanies view foreign markets as anextension to domestic market.

REGIOCENTRIC APPROACH :The company after operating successfully ina foreign country, thinks of exporting to the neighbouring countries ofthe hostcountry. At this stage, theforeignsubsidiary considers theregions, environment for formulating policies and strategies.However, it markets moreor less the same product with different market strategies .Under regiocentric approach subsidiaries consider regional environment for policy/strategy formulation.

IV. GEOCENTRIC APPROACH :Under this approach, the entire world is just like a single country for the company. The companies select the employees from the entire globe and operate with a numberof subsidiaries. The headquarter coordinates the activities ofthe subsidiaries. Each subsidiary functions like an independent and autonomous company in formulating policies,strategies, product design, human resource policies,operations etc.