Introduction
Internationalisation of companies has been rampant over the years with firms seeking to enlarge their client base with focus on foreign markets. In addition, firms have been seeking to promote their market performance as the need to outsource grips markets. Internationalisation adopts two forms namely downstream internationalisation and upstream internationalisation. Two further forms involving these two streams may also be applied where they may run concurrently or sequentially. The sales and marketing departments in companies have the primary role of initiating internationalisation processes depending on their market outlook as evidenced by John Kuada1.
This paper seeks to analyse the UK Juicers Company in correspondence with the theories of internationalisation which include economic, learning and network. It also looks at the motivation, benefits, processes as well as the form of internationalisation and how this decision can be developed for further levels of internationalisation.
The UK Juicers Company – Overview
The UK Juicer Company is run by a family in North England and specialises in offering its clients the best juice extractors for their homes, offices and also for industrial use. With changing needs and people yearning for healthier home made juices, this family decided to specialise in the juicing business with the idea of bridging the gap as well as capitalizing on the opportunity. On the other hand, online shopping is gaining momentum and that is why this company has set up an online supermarket where clients get to buy the juicing equipments.
This is one great step towards internationalising this company since the internet is accessible to many people in the diaspora. This company specialises in juicers for fruits, vegetables, citrus and wheatgrass. In addition, this company also stocks blenders, dehydrators, rebounders, grain mills, water purifiers, as well as other commercial equipment. Many of their orders however are from within the UK though the need to globalise is inevitable according to their Company Profile. 2
How the UK Juicers can employ the theories of Internationalization
There are three theories of internationalisation which include the economic factor, the learning and the network factors. These three influence the decisions a company will make as it embarks on internationalisation. Going ‘foreign’ comes with a cost and according to the economic theory; the company must have a compensating advantage which will cushion it in such a situation. In this case, the UK Juicers company would be faced by two options: either to venture into internationalisation on its own or through an external partner. If the company chose the latter, it would be sure of spending less as the partnership will ease the financial burden on it.
The network theory revolves around the company’s interaction with others interested in the same line of business. In addition, the network theory chains marketers together through bonds which could be administrative, social, legal, technical, economic or cognitive. The UK Juicer Company would attempt this by exporting its merchandise to the international market. This would advertise its products in the foreign markets and this would make internationalisation easy as the products will not be new in the targeted market according to Feldhusen et al. 3
The learning theory on the other hand is based on the knowledge that the company has as far as the foreign market is concerned. This knowledge helps a company exploit and explore new international business ventures which would open it to more foreign markets. This knowledge dictates the speed at which a company springs into the internationalisation process. In this case, the UK Juicers Company would have to research more on the operations at an international level and thus be better placed in crossing borders as evidenced by Dirk Clercq. 4
Motivation, process, benefits, and forms of internationalization
For any business to grow the involved parties must broaden their vision and internationalisation is the way forward. The motivating factors that may lead to a company like UK Juicers wanting to cross the borders include sales expansion, diversification of supplies and sales sources as well as the acquirement of resources. Companies also seek to minimise competition by monopolizing the industry and thus having more business transactions.
The process of internationalisation involves the company going through changes which are generic. Every company goes through different process depending on the level of internationalisation as well as available incentives. In other cases, the capability of the people at the helm of things dictates the internationalisation process. How long the process may take varies from one company to the other where some take a longer or shorter time depending on the complexity. Once the process is initiated, an incubation period is effected to allow for evaluation. This is where the company analyses its input and outcome to determine if the process is taking off as desired according to Per-Anders Havnes. 5
International competition is becoming stronger by the day and that is why companies such as the UK Juicers have to embrace internationalisation if they will make profits. For them to open an online shop is one way of reaching the masses where they will have a larger client base. Some of the benefits of internationalisation include making a debut into new markets. This opens up the company to many business opportunities as the client base enlarges. Due to this, the company is bound to make higher profits which boost its economic scale.
Their products also rise in demand and this triggers a higher production to feed demand. As a result, the company is able to lower its cost of operation and this translates to profits. Another benefit of internationalisation is the ability to access high technology at a lower cost. Most of the well developed countries offer resources at a lower cost and this allows them to enjoy the host country’s competitive advantage. The life cycle of products is also lengthened as the expansion saturates the market.
Diversification is of essence in internationalisation and marketers are able to focus on the bigger picture which in this case is the larger foreign market. Growth in the way people perceive business is inevitable as they become exposed to different ideas from their counterparts. This enables them to become more innovative in the way they package their products and they are also open to varied ideas on new entrants in the market as highlighted by Abbas Alkhafaji. 6
The UK Juicers Company has equal rights to venture into internationalisation regardless of its size, industry or market orientation. SMEs (Small and Medium Enterprises) are reaping great profits from this process due to the relevance it has created in the market. As discussed earlier in this paper, internationalisation can either take an upstream or downstream form. Commitment is vital when it comes to these processes and that is why the executives on the ground must work hard to ensure that they realise this dream.
On the other hand, internationalization is not limited to flow of goods but also encompasses the sharing of technological know-how, information flow, as well as commitments. Incremental growth characterizes this process as it highlights the company’s potential to expand into international markets. Companies however need be warned that they must work on their domestic reputation first before they attempt to venture into foreign markets. For instance, if they are experiencing low sales, decreased production as well as a decreased number of staff, they need to re-evaluate their performance. These show that there is a prominent malfunction in the company which must be sorted first.
The internationalisation process involves forms namely the Innovation Model by Bilkey and Tesar and the Uppsala Internationalisation Process by Johan and Vahlne. Both models show that this process requires experiential knowledge which encompasses the input and outcome. The Innovation Model is more bent towards the process itself whereby it accredits it to organisational characteristics of the company. On the other hand, the Uppsala Model emphasizes more on experiential knowledge whereby the creation of marketing opportunities lies in the knowledge that people have about the market.
The Innovation Model thus works better for SMEs such as the UK Juicers company which is more of a family business. This company would therefore fare better if it embraced this model rather than the Uppsala Model which is more suitable for established businesses. The Innovation Model operates on four steps which involve the company pre-involvement in the internationalisation process. This is followed by the company sourcing for opportunities and then experimenting on them. If they work favourably, the company then embarks on committed involvement to realise its objective according to Blomstermo and Sharma. 7
Conclusion
Internationalisation of companies is clearly the way forward for companies such as UK Juicers in today’s competitive world. All the underlying factors evidenced by this paper add more strength into the process and portray it as a necessity. Companies will definitely reap the fruits of their labour as they will experience an enlarged market base as well as diversification in their operations. Sharing business concepts will other traders will help them grow in ideas and products. The motivation factors are rich enough to provoke the internationalisation process as the gains are far much higher than loses. The UK Juicers Company would therefore access the foreign markets better if it followed the Innovation Model which is suitable for Small and Medium Enterprises.
References
Alkhafaji, A, Strategic Management: formulation, implementation, and control in a dynamic environment, The Haworth Press, New York, 2003, p. 147-150.
Blomstermo, A & Sharma, D, Learning in the internationalisation process of firm, Edward Elgar Publishing Limited, UK, 2003.
Clercq, D, ‘The Internationalisation of small and medium sized firms: The role of organisational learning effort and entrepreneurial orientation’, Ghent University, Vol. 2 no.16, 2005, pp. 1-29.
Company Profile, UK Juicers Limited. About Us. n.d. Web.
Feldhusen, F, ‘Internationalisation theories and their application to one of Sweden’s most successful exports’, Malardalen University, Vol. 4, no. 8, 2006, pp. 1-48.
Havnes, P, ‘The dynamics of the internationalisation process – Interpretation of empirical evidence’, International Small Business Journal, Vol. 23, no. 3, 2002, pp. 2-6.
Kuada, J, ‘Internationalisation of firms in developing countries: Towards an Integrated conceptual framework’, Centre for International studies, Vol.2, no.27, 2005, pp. 1-19.
Footnotes
- J. Kuada, ‘Internationalisation of firms in developing countries: Towards an Integrated conceptual framework’, Centre for International studies, Vol.2, no.27, 2005, pp. 1-19.
- Company Profile, UK Juicers Limited. About Us. n.d. Web.
- F Feldhusen, ‘Internationalisation theories and their application to one of Sweden’s most successful exports’, Malardalen University, Vol. 4, no. 8, 2006, pp. 1-48.
- D Clercq, ‘The Internationalisation of small and medium sized firms: The role of organisational learning effort and entrepreneurial orientation’, Ghent University, Vol. 2 no.16, 2005, pp. 1-29.
- P Havnes, ‘The dynamics of the internationalisation process – Interpretation of empirical evidence’, International Small Business Journal, Vol. 23, no. 3, 2002, pp. 2-6.
- A Alkhafaji, Strategic Management: formulation, implementation, and control in a dynamic environment, The Harworth Press, New York, 2003, p. 147-150.
- A Blomstermo & D Sharma, Learning in the internationalisation process of firm, Edward Elgar Publishing Limited, UK, 2003.