OLI-Model Internationalisierung PDF

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Business Internationalization -

- Assay due on March 24th 2020

Models of Internationalization - Dunning’s Eclectic Paradigm (OLI) 1. Introduction Businesses in all forms usually occupy employees, undertake investments and/or strive to generate income/profits. These goals can be satisfied by acting in a sustainable matter with the main features of surviving and growing in the long run. To latter there are different strategies. This article focuses on the growth opportunity through international expansion of businesses. Based on a survey by Well’s Fargo 87% of US-American companies are convinced that going international is inevitable for long-term growth (Wells Fargo & Company 2016). Furthermore it brings along advantages like the access to new personnel, and increased number of consumers (Jan-Emile van Rossum 2017).When businesses decide to follow this strategy, they often debate about in what approach they can expand globally and what they need to consider. In economics there are many studies on internationalization of businesses. In the following the “Dunning’s Eclectic Paradigm (OLI)” is to be explained for the decision processes of becoming a multinational enterprise (MNE). 2. Model The Dunning’s Eclectic Paradigm compromises aspects from different field of management and economics and is known under the name OLI-model, which is reasoned through its main points of analysis (compare Figure 1):

Figure 1 Questions to be asked during debates of becoming a MNE according to Dunning’s OLImodel. A FDI is only profitable if the multinational expansion brings along advantages in ownership, location and internalization (B2U 2016). O: Ownership In the decision-process the first question to be ask is the following: “Does my business have a special advantage in the foreign country compared to other local or foreign companies?” (J. Peter Neary). The variety of given advantages comprise e.g. (Morrison 2009): ➢ Tangible assets. This can be new products that do not exist in foreign markets yet and promise great success. An example is the introduction of the iPhone of Apple Inc. in countries outside the US. The product generated a market disruption of the cell-phone industry by showing features as pleasant design and internet communication (Paetz 2014). ➢ Intangible assets. Included here is the know-how brought to a foreign country. This also includes utilizing own patents to produce and sell internationally, as well as staff trained in home country or marketing skills (Morrison 2009).

Business Internationalization - Laura Bahr - Assay due on March 24th 2020 If the top-management does not see any advantages in the ownership aspect, the focus should be on domestic business activities. L: Location Expanding the business to a specific country needs to be profitable to the company. This can be due to e.g. geographic advantage, like opening a production in the Netherlands. It generates advantages since the country is between “great economies like the UK and Germany and is moreover located next to the ocean” (B2U 2016) . Its location therefore eases a fast and cheap distribution. A business can also choose to locate to countries with lower labour-costs. If the opening of a business-site in a foreign country does not bring any location-advantages, the company should rather focus on exports, meaning home-production. I: Internalization This aspect deals with the question “How are modes of entry choices related to firm performance?” (Cantwell und Narula 2003). When the company analyzed that it will have advantages due to ownership and chosen location, it needs to decide if they want to go abroad themselves or license another firm in the country to produce for them. Aspects of this debate are e.g. if the business wants to reveal company secrets, if they feel better to keep the control of their own businesses or if the business can circumvent trade barriers or tariffs. If on this stage, the company can create benefits, the expansion into foreign countries can justify a FDI. 3.Transmission to current state of economy OWNERSHIP: A German company has a patent on a new disinfection detergent, which can be produced quick and cheap. Poland would benefit from this intangible asset because the country is facing shortage of medical supplies due to the corona crisis 2020 (Pooler and Evans 2020). LOCATION: The city Poznan in Poland is highly connected with other major big cities and ports through highways, airports and trains. The labour costs are comparatively cheaper in Poland than in Germany. Due to closed borders as a political answer to the pandemic (Reuters 2020), the company circumvents trade barriers (based on traffic jam and restriction of medical supply trade within in EU) when opening a site in Poland. INTERNALIZATION: Since they do not want to pass on their secret on how to produce the detergent, the company decides to do a FDI instead of license another company. Though, all aspects were proven to influence each other in real life (Morrison 2009). Furthermore, real-life situations bring more problems like reduced investmentcapabilities. Therefore, the model should always be seen in a broad enterprise context and current asset situation.

Bibliography B2U (2016): OLI: Choosing the Right Entry-Mode Strategy. Online verfügbar unter https://www.business-to-you.com/choosing-the-right-entry-modestrategy/. Cantwell, John; Narula, Rajneesh (2003): International Business and the Eclectic Paradigm: Routledge. J. Peter Neary: World Economy FDI: The OLI Framework, zuletzt geprüft am 18.03.2020. Jan-Emile van Rossum (2017): 5 benefits of international expansion. In: The Business Journals, S. 54–56. Online verfügbar unter https://www.bizjournals.com/bizjournals/how-to/growth-strategies/2017/12/5-benefits-of-international-expansion.html, zuletzt geprüft am 18.03.2020. Morrison, Janet (2009): International business. Challenges in a changing world. New York, New York: Palgrave Macmillan. Paetz, Paul (2014): Disruption by design. How to create products that disrupt and then dominate markets. New York: Apress. Online verfügbar unter http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&AN=930915. Pooler, Michael; Evans, Judith (2020): Stocks of hand sanitiser ingredient run low in Europe. Products vital to combat coronavirus could become more expensive and scarce. In: Financial Times 2020, 15.03.2020. Online verfügbar unter https://www.ft.com/content/96c8f9c8-66b3-11ea-a3c9-1fe6fedcca75. Reuters (2020): Poland's Border Crossings Become Bottlenecks in Wake of Coronavirus Closures. In: NY Times 2020, 17.03.2020. Online verfügbar unter https://www.nytimes.com/reuters/2020/03/17/world/europe/17reuters-health-coronavirus-poland-borders.html. Wells Fargo & Company (2016): Despite Weak Global Economy, U.S. Companies Still Turning to International Markets for Growth. In: Wholesale Banking. Online verfügbar unter https://newsroom.wf.com/press-release/wholesale-banking/despite-weak-global-economy-us-companies-still-turning, zuletzt geprüft am 18.03.2020....