I want to introduce you to the Internationalization Analysis. This is a valuable and useful tool in your toolkit to help you conduct a larger strategic analysis. And as with any other tool or framework. You ought to begin by asking yourself, well, what's the purpose of this tool? The purpose of this particular tool is quite targeted. It's simply to help you evaluate and analyze the internationalization prospects of a particular business organization. Now, as you begin an internationalization analysis, there's a couple of key ideas to consider. First of all, you must start by thinking about the internationalization industry dynamics of the particular, probably your particular, industry or market segment. So that requires us to think about a couple of key ideas that are out there and that are sort of in tension with one another. I take these ideas from the work of Thomas Friedman and Pankaj Ghemawat, and Christopher Bartlett, and Sumantra Ghoshal. And the ideas are essentially these two notions that are intention. First of all, the idea of global integration, and second of all, the idea of local responsiveness. So these are a couple of key ideas that come from these two different perspectives on internationalization. So first of all, what's global integration? Well, that's the extent to which the production of goods or the provision of services for the entire globe is more efficiently produced in some sort of standardized or centralized way. And this comes from the idea of the world being increasingly flat. In other words, because of global competition and technology and a variety of factors the opportunity to attempt some sort of an international strategy is easier than ever. I think that's true. So that's what we mean by global integration. What do we mean by local responsiveness? Well, this is sort of the flip side of that. And this comes from the perspective that says, well, as you take a closer look at these different foreign locations that you might do business in, it turns out that, yeah, from a ways away it may seem flat, but from up close it seems kind of lumpy. In other words, there's a higher degree of local responsiveness that might be required in order for a business organization to succeed in that new location. So in other words, there's some things that might make internationalization a little bit more difficult. So generally speaking, there's a tension between these two ideas. And some industries experience high benefits of global integration. Other industries place a high premium on local responsiveness. Generally speaking, as one goes up, the other goes down. Not always, but often times these ideas are in tension. So we can essentially take these two ideas and put them on different axis to sort of put some sort of analytical chart on them. So on one axis we have global integration, on the other axis we have local responsiveness. And maybe the first step here is to think about how industries differ. As I mentioned, some industries place a premium on global integration. Others might place a premium, or realize a lot of advantages, from local responsiveness. So industries might differ. So perhaps the first step here is to understand the industry or market segment that you're focused on, and where you would put it on this diagram. Is it an industry that favors global integration and could really take advantage of standardization and centralized production, or is it an industry that places a large premium on local responsiveness? So again, we could think of a number of different industries and we could place them here based on how we would analyze them based on these two criteria. So industries like airplane manufacturing or agriculture, those might be industries where there's a high premium placed on global integration. There's not a lot of national differentiation between products, or we might produce them from certain locations where it's especially easy to produce those products. That's easy to transport them around the world and therefore global integration might be highly beneficial in those industries. On the other hand, you might think of industries like consulting or frozen food. These are industries that might place a higher premium on local responsiveness. The same kinds of frozen dinners that are for sale in Russia might be very different from the kinds of frozen dinners for sale in, say, Venezuela. So the first step is to just understand how your industry or market segment might differ on these two criteria, because that might help lead you to certain conclusions about how you ought to pursue an internationalization strategy. Now, one thing to remember is that scoping the industry, or the market segment is itself kind of an interesting and complicated idea. You can scope it more narrowly or more broadly, and that will have implications for what sort of insights you gain from an analysis like this. Okay, once you've sort of identified what the dynamics are in your particular industry, and that might impact the way you want to internationalize, then you might wanna move to a second step of thinking about firm differences within that industry. So this chart or graph looks similar to the one I showed a minute ago and the axis are the same. Local responsiveness on the horizontal axis, global integration on the vertical axis. But here, we're gonna focus on one particular industry. So let's take aircraft manufacturing, agriculture, or consulting, whatever it is. You've now zeroed in on that industry, but of course, within that industry, firms can differ in the way that they approach competing within that industry. So you may have decided based on step one that there's a high premium on, say, global integration in your particular industry or market segment. And then let's say this is an analysis of your competitors. This essentially becomes a sort of strategy map of the competitors in this particular industry or in that market segment. Here the circles represent the size of the firm, whereas on the prior chart, the size of the circle represented the size of the industry. So here, you could see that different businesses might take slightly different approaches on the local responsiveness, global integration scale. What that might tell you is that there's opportunity. There's opportunity for you to enter, for instance, if you're in an industry that favors global integration. If you can do that better than firm A, you might have a competitive advantage as you expand into this new foreign market. On the other hand, maybe you're in another kind of industry that values local responsiveness. But again, you might be able to see that there's some opportunity here for you to take advantage of a way you might out compete the existing competition. Well, finally, you might go to a final step which you've got to really engage in two key strategic questions in internationalization strategy. Where should we compete, and how should we enter that particular foreign market? So of course, both of those questions hinge on the consideration of a bunch of key issues. Where we compete is gonna be a function of do we have the capabilities to compete there? Do we have foreign market knowledge? What's the nature of the opportunity? How we should then enter that market once we've chosen it, it's gonna depend on another set of criteria. Each of the ways we might enter. Exporting, licensing and partnering, or foreign direct investment. All of these modes of entry have different pros and cons. So we have to consider the degree to which we're gonna adapt to local conditions that might impact the way we enter that new market. We have to also consider the relationships with other firms. So of course, this is a tool that greatly simplifies a very complex issue of internationalization strategy. I mean, oftentimes the leap from a national strategy to an international strategy represents a quantum leap in a business organization. Nevertheless, this is a tool that might give you a way to structure your thinking. And begin to think about the key issues involved with internationalization strategy.
