HI6008 Business Research- Theories of Internationalization

2.1.1. Stage approach theory

This theory depicts internationalization process is a sequence of established stages. The Uppsala model (Wagner, 2009) explains this theory the best way possible. When studying companies in Sweden, (Wagner, 2009) found that companies internationalized through a sequential series of steps. Later after refining the theory, the focus of the model directs to four steps that a company should follow during the process of internationalization. They are; understanding the market, decision making, current business operations and aspects of change (Wagner, 2009, p. 318)

Through this theory, it is assumed that the knowledge of the market and the market commitment will affect the decision to commit and the decision making that concerns current operations. It return, affects the knowledge of the foreign market and the company’s knowledge on the market (De Wit, 2012). Gradual growth shows that companies start their internationalizing in markets that are in a small psychic distance. Psychic distance is factors like language barrier, political systems, difference in culture etc.

2.1.2. Network approach theory

This approach explains internationalization using connections in finance, technology and business applications with other partners to make domestic business activities international. To establish these networks, technological, management and finance resources are very important (McDougall, 2014; and Dhanaraj, 2013).

Companies usually establish their position in foreign markets the same way their competitors are (Andexer, 2008.). Companies have to be involved in a domestic network in order to establish a relationship with foreign markets before internationalizing

2.2.3. ‘Born globals’ theory

In this theory by (Oviat et al, 2009), companies do not have to go through stages or have network connections to successfully internationalize. This theory claims that some companies ’born globals’; begin their exporting operation sooner than any other after they are formed. Some of these companies are formed from the beginning for the sole purpose of internationalization. Lot of resources and capital is put into use for these companies though

2.2Theoretical framework

(Shenkar and Lu 2008), too much competition from the domestic market may exert  too much pressure on a business operation and intern push the company to increase size of their operation through exports in an aim to reduce the cost of production. There may be a lot of companies manufacturing domestically in a country. This will saturate the market making it impossible to compete and at the same time operate normally for the many companies in the market there are many domestic manufacturers in a country making the domestic market saturated and that becomes too competitive for the many companies. The companies will therefore internationalize to make the market less competitive .expanding operations to foreign markets makes the domestic competition less and assures more profits while at the same time  it protects the operations of the company locally(Muhlbacheret al., 2016).

2.2.2. Utilization of Opportunities

Another motivating factor for the internationalization of companies aiming towards the growths of the companies is the growth opportunities that exist in countries throughout
the world due to economic growth. Economic growth means that a country needs more of what they do not have and they can produce more of what they already have for them to keep up with the growth, they have to reach out to new markets. China is a good example. With one of the biggest economy which is rapidly growing. The Chinese has their hands in almost every market in the world(Muhlbacheret al., 2016).

This condition is whereby acompany’s decision to internationalize is based on other competing companies adopting. This type of internationalization might be good for companies that adopt it if the companies are able to fully maximize the potential in such. However, companies should always be careful not to get into new and foreign markets without knowing what theyare getting into (Perkins, 2007) .this is mostly done by companies trying to keep up with the competitiveness of the market

2.2.4. Barriers to Internationalization

There are trends that facilitate internationalization. Internal and external barriers to internationalization exist despite the trends. Some of the external factors that affect internationalization of companies include administrative (both internal and international)rules and trade barriers (both formal and informal).internal barriers that may prevent companies from internationalization include difference in cultural practices, lacking the required information or skills, poor infrastructure and deficiency of funds (Muhlbacheret al., 2016)

A survey conducted by the European Commission in the year 2003 found that the biggest barrier to the process of internationalization was the cost of internationalization. The cost includes carrying out the research for the market, the cost of legal consultation services, translating documents, and adaptation of the products, travel and the high financial and business risk. Minimal financing is also another barrier that messes with the success of internationalization of companies. Financial difficulties may force companies to withdraw from internationalizing which may intern lead to massive losses affecting the company locally (Coviello and Munro,2007).

In Australia and Canada studies carried out show that financial difficulties  caused the failure of some companies trying to internationalize (OECDAPEC, 2007).
Poor leadership in management might also lead to companies’ failure in their attempt to internationalize. Studies in the United States of America and Canada support this (UPS, 2007).
(Shenkar and Lu 2008) companies should have market power for them to be positively competitive in new markets. They should command their own share of the market of should have a product that is unique and good enough to compete with other products.Studies conducted by (Crick, 2007) and (Barneset al.2016) both support that having a market share in foreign markets plays a big part in successful internationalization. Prioritizing competition, knowledge and lack of information are some of the barriers of internationalization. Other barriers may include the size of the company, foreign competition poor leadership and administration. In support, according to (Shenkar and Lu2008) integrating the different business cultural practices, poor infrastructure, lack of sufficient funding unskilled labor and government intervention are also barriers of successful internationalization

2.2.5. Internationalization Strategies

Companies may use different approach to achieve internationalization including exporting, allying themselves with other foreign companies, opening office in the foreign markets. (OECD, 2015) claims that companies have increased their operations in accusations and mergers, cross border alliances and inter-firm collaborations and networking. (Lloyd-Reason and Mughan
2014) identified that companies tend to extend their business operations to foreign markets where the business cultures are the same as their own.

2.2.6. Technology

The great advancement in technology and especially information technology has made internationalization an achievable dream for companies that are trying to internationalize. Companies are likely to extend their business operations to new markets by utilizing these technological advancements in information technology and communication (Benekiet al, 2011).development of new technologies stimulates growth in companies which in turn makes it easy for these companies to compete with companies either domestically or in foreign markets. With the internet companies can grab the attention of foreign market before they even start operating in these markets. The internet is everywhere so companies can use it to promote themselves and their product so that they have their own share of the market for when they start their operation. There is also e-commerce. Business transactions are made on the internet. Here businesses do not need physical offices. They online need an online platform which can be hosted and operated locally but it will serve all markets. All a business has to do is to make sure that they can deliver the products purchased from them on the internet. The internet has made it easier for businesses to communicate with their customers. It is also one of the cheapest way of interacting tool which can be done through the mail, social media etc. (Marilyn, 2016).

Advancement in technology has made everything somewhat easier. The process of internationalization is easier when we fully utilize the technology at our disposal. From conducting market research to the actual opening of operational business enterprises, it is now easier and faster. There are now better versions of all the equipment required in all sectors of building a business.

The following assumptions can be derived from the review above

• The size of the company matters a lot .am talking about how liquid the company is and the amount of resources they have
• The domestic competition in the local industry may play a big role in companies internationalizing. They might be forced to look for other markets to ease the domestic pressure
• Domestic competitors reaching out to foreign markets will also push companies to internationalize if they need to stay in business and compete at the same level.
• Technology is one of the biggest factors in any internationalization plan. Advancement in technology makes it easy for the new companies internationalizing. With technology changing on a daily basis, companies now have all the components required to internationalize at their disposal easier and faster.

Research design

I will be applying the qualitative research design. Burns and Grove (2013) explain qualitative approach as “a systematic subjective approach used to describe life experiences and situations to give them meaning.(Parahoo, 2007)

Qualitative approach is used by researcher to explore human behavior, experiences perspectives and feelings and toemphasize the understanding of these elements. Those who apply this approach adopt a person-centered humanistic and holistic perspective to understand human experiences (Field & Morse 2006). Absolute objectivity is impossible to achieve and qualitative methodology is not absolutely precise because human behavior cannot be predicted with certainty (Holloway & Wheeler 2012).

3.2. Sample size and Research population

(Holloway and Wheeler, 2012) state that the size of the sample does not have any effect on the importance and quality of the study. They also state that there is no specified way of measuring qualitative data. The sample may change depending on the number of people who will participate in the research project so the research has no way of clearly asserting the sample size; Sampling continue until saturation isachieved (until there is no more new information to be generated (Holloway 2007).

Until all the factors that affect the success of internationalization of companies in emerging markets have all been completely exploited then in our case saturation will be achieved

3.3. Sampling techniques

During this research project, I will be using probability sampling method. Also referred to as representative sampling method, sampling is carried out by assuming every member of the population has a known (non-zero) probability of being in a sample. Probability sampling is father divided in to two

• Systematic sampling

In this method, members of the population are chosen randomly and each and every one of them has a chance of being selected

• Random sampling

In this type of probability sampling, member of the population are chosen at specifically regulated intervals in terms of space time and order. There is a system followed in choosing the samples

For the purpose of this study both methods of probability sampling will be used according to how effective they will be

3.4.1. Interviews

The second main type of data to be collected in the mixed method design is the interview.( Burns ,2009) states that “Interviews are a popular and widely used means of collecting qualitative data.” This means that the researcher intends to get the right information direct from the source. To get the right information on specific market all I have to do as a researcher is to identify the right people to interview concerning said markets. It could be business people who are directly involved in the market or government officials who oversee the internationalization of companies in various markets or regions. In Asia for example I may target around three or four people to interview

3.4.2. Questionnaires

Questionnaires are among the most effective primary data sources while doing research. However, when designing them, the researcher has to make sure that they are “valid and reliable (Richards & Schmidt, 2012). Questionnaires can be presented in three ways.

1- closed-ended
2- open-ended
3 mixture ofboth (closed and open-ended)

Closed-ended questionnaires are the best in providing quantitative and numerical data. Open-ended questionnaires on the other hand deliver qualitative or text information (Blaxter et al. (2016) .A portion of my research data will be acquired using questionnaires as a data source. The population of the research is international so questionnaires will only cover the participants who are easy to find for cost purposes.

3.4.3. Surveys

A survey is research method of gathering useful about individuals. Questionnaire and interviews are in a sense a surveying method. They are also primary sources of data collection. Here under survey am going to try and explain how  I can gather information from secondary sources of information like the internet where in there is abundance of information, financial statistics, economic trends, regional trends, population trends and data bases. These are sources of information readily available out there. Some of this information is generated through research conducted previously; other information is records kept government institutions, organizations or banking facilities (Floyd, 2013)

The purpose of the study was to determine the factors which affect the success of internationalization of companies in emerging markets. Without conducting the research it will be difficult so state confidently but from the literature review and the theoretical framework, I can list some of the factors that I think will be art of my findings.

• The size of the company matters a lot .am talking about how liquid the company is and the amount of resources they have
• The domestic competition in the local industry may play a big role in companies internationalizing. They might be forced to look for other markets to ease the domestic pressure
• Domestic competitors reaching out to foreign markets will also push companies to internationalize if they need to stay in business and compete at the same level
• Technology is one of the biggest factors in any internationalization plan. Advancement in technology makes it easy for the new companies internationalizing. With technology changing on a daily basis, companies now have all the components required to internationalize at their disposal easier and faster.

Budget

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