Different modes of Internationalization Essay Example | Topics and Well Written Essays - 3000 words

Different modes of Internationalization - Essay Example There are various methods or strategies in which the corporations enter into the foreign markets. This essay provides a detailed analysis of the options that are available for a company for its overseas expansion. Trade Countries of the world get involved into trading relations with one another in order to get some advantage of the resources in which each of the countries specialises in. The absolute advantage theory of Adam Smith states that the countries that specialises in one particular resource would exchange the resource for something that the other country specialises in. For example one country may have enough amount of wine and a second country may have abundance in cheese. Then these two countries would exchange their resources of wine and cheese with the resource that they have in abundance. David Ricardo on the other hand had put forward his comparative advantage theory in the context of international trade. According to him the countries that have comparative advantage i n the production of one good would export that good to another country which has comparative disadvantage in the production of that particular good. Advantages of Trade Creation of jobs and attraction of investments from various sectors which otherwise would not have operated to the maximum capacity. Introduction and exchange of technology and knowhow of production which adds to the total income of the countries that are involved in trade. Access to the international markets and thereby the customers can buy the various types of products and services Increases the competition among the domestic and the foreign players. Disadvantages of Trade Various issue related to the cultural identities of the nations crop up like most of the companies like Coca cola or Microsoft are built upon the cultures of the US and the other nations are forced to embrace it. The emerging nations are forced to meet the demands of the developing nations and thus they do not often meet the needs of the domesti c markets. The safety standards and the compensation of the workers are often not up to international standards. Political constraints make the trade relations between countries complicated which may lead to imbalances in the BOP position of the countries. FDI Foreign Direct Investment is a form of investment that a company or an individual which is based in a particular country would make in a foreign country in form of investments in new projects or existing projects of local undertaking. The company or the project in the foreign country in which the company invests would prefer to maintain control over it. The economies in which there are prospects for growth and has sufficient resources, there would be considerable amount of foreign investments. There are several ways in which the FDI can be made. Setting up subsidiaries Getting equity control over an existing company in the overseas country Strategic alliances For example a company based in Germany may be interested in any comp any producing electronic products based in China. The company can get into strategic alliance with the Chinese company or may become of