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The Use of Internationalization Strategies in Traditional Business Practices - Essay Example

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This paper will explain some of the most important variables why forging alliances or partnerships and the acquisition of foreign companies are legitimate and effective strategies. Alliances and acquisitions are critical approaches employed by organizations that have internationalization ambition…
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The Use of Internationalization Strategies in Traditional Business Practices
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Download file to see previous pages “Springboarding” or “piggybacking” work during an acquisition and is also achieved when forging alliances with established companies in a location that the organization intends to penetrate. This strategy is more important for companies located in non-traditional FDI countries. The reason is that these economies do not have well-developed institutions as well as a viable domestic market necessary to support an outward expansion. China has recognized this dilemma especially when it took into consideration the fact that it lags behind major global economic players in terms of outward FDI (Taylor 2002 and Zhang and Filippov 2009). What distinguished the country from other non-traditional investing states is the manner by which the country aggressively pursued a policy of internationalization for its national firms (Bell 2008, pp.254). Favorable business, political and financial landscapes, featuring state support, has to lead to a conducive environment that fosters the growth of MNCs. Other developing economies do not have this advantage. That is why there is a huge opportunity for MNCs coming from these countries because the strategy allows the high degree of exploitation of the ownership-specific competitive advantages in foreign countries (Luo and Tung, 2007, pp.485). When Lenovo started expanding in Japan, its market share was estimated to be around 5 percent but when the forged an alliance with the Japanese firm NEC, which commenced in January of 2011, the figures changed dramatically (Peng, 2009, pp.354). Lenovo made sure that it had the controlling stake, enabling the company to maximize the benefits of the joint venture. It controlled 51 percent of the shares while NEC retained 49 percent out of the alliance (Xing 2011). The result was extremely favorable. Today, Lenovo is claiming to be the number one PC company in Japan toppling NEC’s performance in the process (Lenovo 2012).
Lenovo continues to use the alliance and acquisition strategy in its expansion in several other locations around the world with varying versions or a differing mix of approaches to this internationalization model, leading to varying degrees of success. This particular aspect highlights another related area that is an equally important consequence of alliances and acquisitions: technology transfer. This area will be explored further later on. All in all, however, through acquisition and alliances, a firm undergoing internationalization can penetrate markets that would normally be difficult to enter for an emergent multinational company. In the experience of Lenovo, for example, IBM’s brands like ThinkPad allowed the company to create the impression that Lenovo is IBM, or at least, an organization with comparable capabilities. Lenovo continued to manufacture the ThinkPad product line in order to reinforce this goal (Gupta, Wakayama and Rangan, p.195). In its marketing campaign, its message was consistent: IBM technology is equal to Lenovo technology, subtly modifying the message as it underscored how the new brand is an improvement in the area of innovation and technological creativity (Gupta, Wakayama and Rangan, p.195). ...Download file to see next pagesRead More
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