Dilemma of Internationalisation

On the basis of the above context, it can be said that the enterprises know considerably well, which type of strategy of internationalisation they should select. However, after they have decided the effective strategy it is be implemented. But it is commonly found that the implementation of the said strategy is not very easy. Further, it is rather difficult to obtain the anticipated results and effects from the said strategy. These are related to the problems regarding method of management and the organisation of multinational companies and is an important topic of discussion for the Japanese enterprises also. Finally, let us try to consider the dilemma which has originated from the exercise of internationalisation. There are basically two dilemmas which originate as a result of internationalisation progress. These are:

1. The dilemma of economic logic and political logic;

2.The dilemma of management of organisation and management strategy.
In the first dilemma, the enterprise gets sandwitched between economic and political logic. This is an absolutely unavoidable phenomenon which occurs in every case of internationalisation. Many enterprises move and cross the national borders with ease, looking for places with low cost. If the cost is low, any country would like to import and anyone would like to place its production facilities in that country. This is the logic of economy.

In contrast, the human beings do not move from one border to another very easily (in combination with the logic of economy). He lays emphasis on the interest of loss or gain, on the basis of nation as a unit. This forms the logic of the politics and also clashes with the logic of the economy. For example, the trade friction in the automobile industry, which is the prime cause behind the present day economic trade friction between America and Japan, besides the problems of import of rice into Japan, is a typical example of this type.

The second dilemma originates between the management strategy with main focus of economy, and the management of internal organisation. For example, it can be said that the internationalisation of the enterprise activity is inevitable. However, as the enterprise activity expands beyond the borders, it interacts with the geographical problems or the problem of difference in culture or language between the constituting members of the organisation. Therefore, there is a very probability of facing difficulties in communication within the organisation to that extent. As a result, the joint working by all the constituting members of the organisation may not yield the necessary and anticipated effect.

The strategy of internationalisation does exist in the present day enterprises, but is not sufficient. Rather, it is more important to bring about a feeling of commonness among the members of the organisation, which supports the activities and provide the necessary infra-structure in the organisation, solving the problem of contradiction which develops as a consequence of internationalisation. The building of a management concept where the local people as well as the Japanese people can participate with a feeling of belongingness, shall form the key for finding solutions to such problems.

Strategy for Internationalisation types

Multi-national enterprises are in a position to decide the basic pattern of how the countries in which they are present should compete with each other by having international portfolio.

Let us try to understand the patterns which one followed in the actual management strategy adopted by the multi-national countries.

Berthrette & Gosharu have classified the international strategy into three types on the basis of case studies of 9 enterprises. These three types are given below.

1. Global type strategy
2. Multi-national type strategy
3. International type strategy

1. Global type strategy
In the case of global strategy the intensive development and production by present company in the country of origin forms the basis and in this strategy, the efficacy at global scales is given importance.

2. Multi-national type strategy
In this strategy, the overseas subsidiary with higher degree of autonomy carries out the operations, while matching the diversified environment of the respective country.

3. International type strategy
Basically, importance is given to the transfer of technology and knowledge from the parent company in the country of the origin or the overseas subsidiaries.

International Portfolio

The enterprises which are moving into multiple number of countries will have international portfolio (overall combination). The selection of pattern also requires strategic decision.

Let us try to learn in brief regarding the theory concerning the selection here. The first selection concerns the relationship between the individual operations which constitute the portfolio and the making of overall characteristic. The second selection deals with the distribution of roles for respective country. These two selections, of course are not independent of each other.

The first selection deals with the selection of basic policy regarding the way the countrywise competition should be, and the basic selection branches are multi-domestic, global and glocal.

· Multi domestic
This is a policy of adopting the strategy of product, production and marketing, maching the requirements of the respective countries, where the individual country considers it as a diversified existence. The strategy of internationalisation of overall enterprise is the simple composite of the respective countrywise strategies. The degree of cooperation of operations carried out countrywise is not very strong.

· Global
The world is seen as one entity and common products are provided to as many countries as possible if there is common demand trend. The global policy concerns building up a world level system for the product and supply of such goods in the most efficient manner. The respective countrywise strategies form part of global strategy.

· Glocal
The term glocal has been derived by combining glocal and local. This is an intermediate policy between multi domestic and global. In the case of glocal, the policy, which forms the core fore for the global strategy is retained while an autonomous strategy to deal with the requirements of each country is also formulated. For doing so the respective countrywise strategies do not form a part of global strategy and the global strategy also does not work for simplification and harmonisation of the respective country strategies.

The second selection deals with the problems of distribution of roles of the respective countries in the portfolio. For example, there can be a case where the plant responsible for research and development is located in Japan, the production base is located in America and Europe is targeted as sales market.
Various type of patterns can be considered for the selection of such types of distribution of roles.

Various Issues related with Internationalisation

1. Environmental factors
Internationalisation gives birth to problems peculiar to internationalisation. This is because of change in various environmental factors for any enterprise due to crossing of borders with regard to market and activity zones. There are basically three factors, namely the market environment (types of domain, the market structure, business transaction. customs etc.), political system and military system and the culture and language of the nation’s concerned.

The internationalisation involves a situation where the enterprise activity is to carried out under these three environmental factors where these factors from a complex state (two or more than two environments including that of one’s own company).

2. Three movements and the related topics
Let us now see what type of effect internationalisation has on the enterprise activity?

The effect of internationalisation which is visible to the eyes is the working of man, material and money beyond the borders of the nation. However, in the background, there are three movements, namely information resources (technology, knowhow, brand and management control capability etc), added value (the value generated by the organisation; this is almost the total of the manpower cost and the profits) and the culture (life, customs, behavioral pattern and value or standards etc.) These three movements are considered to have big effect on the enterprise activity.

The internationalisation progresses smoothly provided these three movements do not fluctuate beyond a limit with the internationalisation of enterprise.

For example, the fountainhead of international competitive strength cannot be obtained, if the resources like knowhow and brand etc. do not move. The sources of direct investment in overseas production cannot be materialised unless the added value is transferred locally to some extent. The products or the services cannot become acceptable unless the transfer of culture is permitted to some extent. In the event of lack of such flexibilities, there is possibility, of repercussion also.

Considering from the viewpoint of such relationship two issues can be thought of concerning the internationalisation of enterprise activity. One is “strategy of transfer”, in the other words, how to move the three factors which have impact and the second is “how to deal with the problems arising due to the movement”, in another words, how to move these three factors in more effective manner. The enterprise has to select which country it should move to for internationalisation while considering these two issues.

Strategy for Internationalisation

The Motivation for Internationalisation

1. Essential reasons
The internationalisation of an enterprise widens the horizons for activities on various fronts like sales, procurement, production, developments and other operation activities across the country barriers. It provides a wider market and activity areas for any enterprise. For example, in the case of an automobile plant of Honda, which has been operating in America, it can be called as the internationalisation of the plant, which forms the base for the production activities.

Here, we shall try to see how the border crossing by any enterprise with regard to the market and activity zone differs from the regional expansion within the country. Further, let us try to study various topics of management which evolve as a consequence of internationalisation. The internationalisation of sales market has been carried out for quite sometime in the form of export of exports. Further, even the internationalisation of procurement market has also been in practice since Meiji era in Japan.

The essential reasons for carrying out type of internationalisation have opening of new market and acquiring the resources. The market opening here basically refers to the sales market and the internationalisation for acquiring resources refers to tapping of overseas procurement market for the management resources including the raw material, capital investment which are required to carry out production.

2. Secondary reasons
The above mentioned two reasons can be called as the factors responsible for initiating the internationalisation of the enterprise. However, the internationalisation of this sort gives birth to the following mentioned internationalisation resources.

The reasons responsible for the birth of internationalisation are the harmonisation with international political system, harmonisation with international economic system and the improvement of the efficiency of international management.

· Harmonisation with the international political system
Location of an enterprise in a foreign country for the sake of evading trade friction is a typical example of this reason. The location of an enterprise in a foreign country aims at avoiding the possibility of bad effect on the enterprise activity arising out of confrontation between the two nations due to the political interest.

· Harmonisation with the international economy system
This reason refers to setting up of production of procurement facilities overseas to checkmate the variations in profits due to foreign currency rates fluctuation, especially for those enterprises which have their major sales on dollar payment. In other words, this is a mechanism of providing defensive rules to avoid any negative influence of one’s activity arising out of the characteristics of international economy system. It also aime at turning this chartacteristic to one’s own advantage. The internationalisation of financial activity is an example where characteristics of international economy are being properly used.

· Improving the efficiency of international management
The production of goods like a television and stereo system etc. in a country having low labour cost, as seen in the case of Japanese electrical home appliances industry’s entry into South-East Asia, is a typical example of improving the efficiency of international management. However, the local production of automobiles in America and Europe by the Japanese automobile industry may also be called as the examples of improving the efficiency of management, in ultimate sense.

The local production of automobiles in the foreign nations, in most of the cases, was initiated for evading the trade friction originally. In other words, for the sake of Harmonisation with the international economy system. However, as a consequence of such an exercise, the efficiency of activity in American and European market increased and it became possible to provide the products matching the needs of time.

In this way, the improvement of efficiency in international management called for further developments of activity in the direction of further internationalisation so that the enterprise activities, which has undergone internationalisation for the sake of development of new market and acquiring the resources can be managed more effectively.

The above mentioned three reasons explain how the internationalisation differs essentially from the expansion of activities on regional basis within the country. Furthermore, the extension from essential reasons to secondary reasons shows the tendency of internationalisation of enterprises giving birth to further internationalization.