Sample Essay

According to eclectic theory of Dunning (Dunning & McQueen 1982) companies go international to obtain three advantages. (1) Ownership advantages, (2) location advantages and (3) internationalisation advantages.

The ownership advantages that are faced by the company is that they are able to be responsible for and as well as control the operation of the company over a much larger scale resulting in larger volume of activity and, larger revenue occurring form the execution of the operations. Aside from this the businesses also make issue of the advantages offered by the location in terms of cheap labour, access to new and improved technology and reduced costs. The internationalisation advantages mostly pertain to the overall increased market share of the business and the expanding consumers I the international market.

Rugman (1987) asserts that ownership advantages can be tangible or intangible and are as follow (1) proprietary technology due to R& D activities, (2) Managerial, marketing, or other skills specific to the organisational function of the firm, (3) Product differentiation, trademarks, or brand names, (4) Large size, reflecting scale economies, and (5) Large capital requirement for plants of the minimum efficient size. With ownership of the technology the businesses are able to attain a strategic advantage over the other present in the market, while creating barriers for the possible new entrants to the market as well. Aside form this the company can also have the advantage of having a specifically highly trained staff and a host of different products and brand names in the profile of the company which can account for the different choice and criteria set up by the people for their decision making pertaining to purchase of goods and service. The global businesses also have the characteristic of being large enterprises which are able to make use of the economies of scale making their overall costs reduce as compared to their increasing overall revenues.

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Essay: Why do companies adopt Internationalisation?
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