WEBVTT Kind: captions Language: en 00:00:14.880 --> 00:00:21.840 Hi, good afternoon, welcome back. So, here uh we are starting our lecture 00:00:23.760 --> 00:00:31.360 9,where we have left at the transaction costs. So, I have explained you the there are 2 types 00:00:31.360 --> 00:00:37.360 of transaction cost in the previous uh da discussion, that search cost and contracting 00:00:37.360 --> 00:00:42.640 cost and then also post search there is a monitoring and enforcement cost. Very simple; 00:00:42.640 --> 00:00:47.440 first one is that you find out a dealer. To find a dealer, you need to have visit so many 00:00:47.440 --> 00:00:50.880 times to the international market, you have to meet so many dealers, 00:00:50.880 --> 00:00:55.280 you have to meet so many different countries, because where you are expanding through dealers. 00:00:55.280 --> 00:00:58.720 So, there is a search cost is enormous search cost. Clear? 00:00:59.360 --> 00:01:03.920 Then also there is a contracting cost, there is a cost for legal people to sign 00:01:03.920 --> 00:01:07.360 agreement and various countries different legal systems are there; 00:01:07.360 --> 00:01:11.840 you have to sign a legal agreement. So, there is a cost there. So, that is known as the 00:01:13.840 --> 00:01:21.920 pre cost or pre ante cost. And the ex-post cost or pre is typically monitoring. Now we have searched, 00:01:21.920 --> 00:01:26.880 you have got the distributors, dealers in that foreign market, you have already in 5 different 00:01:26.880 --> 00:01:31.520 markets, you have got some 5 or 10 dealers, you have already signed a contract with them. 00:01:31.520 --> 00:01:35.920 Now that comes here once you sign. Then the dealer starts doing the business of 00:01:35.920 --> 00:01:42.320 your product which you produce from your country A, the seller country. Here, you have to sell, 00:01:42.320 --> 00:01:48.880 send your person to monitor the business and then monitor all the enforcement and everything. If 00:01:48.880 --> 00:01:54.400 the dealer is not doing something correct, you have to ensure that you correct that, 00:01:54.400 --> 00:02:00.240 so that there is no unethical practices there and everything is perfect, the customers are happy. 00:02:00.240 --> 00:02:04.720 So, I can tell you from my experience in the industry where we have worked, 00:02:05.360 --> 00:02:11.440 we have worked for the very, very high uh cost, life-saving medical equipments 00:02:11.440 --> 00:02:17.360 in various international markets, where the post cost of monitoring was very, very high, 00:02:17.360 --> 00:02:22.480 because you know the hospitals in various countries, they buy the equipments from us 00:02:22.480 --> 00:02:28.480 and they want to ensure that when the equipment is down, we have to provide immediately service. 00:02:28.480 --> 00:02:33.680 Now situation, imagine a situation, we (sup) suppose we have sold an critically an 00:02:34.240 --> 00:02:40.000 anesthesia machine or an ICU ventilator; you must have heard the anesthesia machine is used in the 00:02:40.000 --> 00:02:48.160 operation theatre to anaesthetize the patient. So, or an ICU ventilator is a mechanical ventilator 00:02:48.160 --> 00:02:53.920 which is given to a patient in a ICU when the patient is not able to breathe of his own. 00:02:54.480 --> 00:03:00.000 Now, these equipments are typically very, very crucial. If the machine is down due to 00:03:00.000 --> 00:03:06.400 some reason, the equipment is down, the patient is, will be extremely difficult for the hospital 00:03:06.400 --> 00:03:10.880 to have, because these are very, very high cost capital (equip) intensive equipments. 00:03:10.880 --> 00:03:16.960 So, you cannot have se severe large amount of inventory available with you. See, if the machine, 00:03:16.960 --> 00:03:23.200 the equipment is down, you have to ensure that it has to be serviced immediately, so okay. So, that 00:03:23.200 --> 00:03:30.240 is typically the adoption or the enforcement cost for you. You have to ensure that you are there, 00:03:30.240 --> 00:03:36.080 you ensure that your customer, when there is a breakdown, your dealer immediately services 00:03:36.080 --> 00:03:43.520 that machine and then does the uh preventive maintenance or (prep) uh rectifies the unit, 00:03:43.520 --> 00:03:48.880 so that the patient, there is no danger for the patient and there is no problem for the hospital. 00:03:48.880 --> 00:03:55.360 Okay. So, monitoring and enforcement cost, the the the frequency of travel of the uh business 00:03:55.360 --> 00:04:00.400 executives or the international managers are so frequent, the cost of monitoring and enforcement 00:04:00.400 --> 00:04:10.480 is very co there. Here, then, now the company measures what is my total transaction cost. 00:04:10.480 --> 00:04:17.440 Okay. If my total transaction search cost and the post cost if is higher, 00:04:18.640 --> 00:04:23.120 then I should start, instead of operating through a dealer, 00:04:23.120 --> 00:04:27.760 I should remove the dealer and I should put my foreign subsidiary. Clear? 00:04:27.760 --> 00:04:33.520 So, the theory is the chart; I must acknowledge, an excellent way this 00:04:33.520 --> 00:04:39.760 diagram has been prepared and my my thanks to the researchers who has prepared this slide. 00:04:39.760 --> 00:04:46.400 It is so easily you can understand from here that there was a friction between the dealer and the 00:04:46.400 --> 00:04:52.240 (produ) seller and the buyer because they are in the 2 different countries. One objective is that 00:04:52.240 --> 00:04:57.600 they want to make the maximum amount of profit, another also wants a maximum amount the profit, 00:04:57.600 --> 00:05:01.760 and there is always a conflict, one wants the more terms, more discounts, 00:05:01.760 --> 00:05:05.920 more credit terms and the seller is, there is a always a friction between that. 00:05:06.640 --> 00:05:14.320 So, you initially entered in a mode of a dealer or a distributor mode. And then you are constantly 00:05:14.320 --> 00:05:19.600 monitoring your total cost, your initial cost and also monitoring your present cost of 00:05:20.240 --> 00:05:26.320 uh monitoring the dealers in 5 different countries or 10 different countries and also the enforcement 00:05:26.320 --> 00:05:33.520 costs. Now, if you look at this total cost, compare it with an establishing a foreign 00:05:33.520 --> 00:05:41.840 subsidiary, how much cost it will be there; if this cost is higher, this transaction cost is 00:05:41.840 --> 00:05:49.520 higher, then you go for directly placing, instead of a distributor, you put your foreign subsidiary. 00:05:49.520 --> 00:05:52.320 So, this, when you start your foreign subsidiary, 00:05:52.880 --> 00:05:57.120 this theory, the transaction cost theory will explain you that if your 00:05:57.120 --> 00:06:03.280 total cost of monitoring its search cost of distributors and monitoring cost of distributor 00:06:03.280 --> 00:06:11.040 is more compared to sta building, compared to starting an foreign subsidiary there, you must 00:06:11.040 --> 00:06:16.480 start a foreign subsidiary. But if you look your; suppose, I just give you a hypothetical number; 00:06:16.480 --> 00:06:24.560 say your cost of searching a dealer and monitoring a dealer is coming say around 10,000 dollar 00:06:24.560 --> 00:06:30.080 per month, in a in a year 120,000 dollar in a year it is coming a cost to you. 00:06:30.960 --> 00:06:37.440 So, you are doing this 120,000 dollar. Instead of that, if you see that 00:06:38.400 --> 00:06:44.320 I can make, I can build an international firm there my own subsidiary and I can reduce that 00:06:44.320 --> 00:06:50.400 friction there, I can have my own subsidiary, my own people there and that cost will be lower 00:06:50.400 --> 00:06:58.960 compared 120,000 dollar, then I will start my foreign subsidiary. So, this theory tells when you 00:06:58.960 --> 00:07:06.240 should really move from your distribution network to your own foreign subsidiary. So, transaction 00:07:06.240 --> 00:07:13.600 cost analysis is very, very crucial to move from a distributor network to a foreign subsidiary. 00:07:13.600 --> 00:07:20.880 So, here what has happened basically, a change from a producer between the customer, the producer 00:07:20.880 --> 00:07:26.960 and the customer, the intermediary has moved out because the transaction cost for monitoring and 00:07:27.520 --> 00:07:34.960 search cost was so high, you have replaced it with your own subsidiary there, but the producer and 00:07:34.960 --> 00:07:41.040 the end users remain same. So, the intermediaries have change based on the transaction cost. Clear? 00:07:41.040 --> 00:07:46.400 So, that is the way you should always monitor. And this is very helpful, transaction cost is 00:07:46.400 --> 00:07:53.120 very helpful when you move from distribution network to a direct subsidiary network. Clear? 00:07:53.120 --> 00:07:58.640 So, that is the uh brilliance and excellence about this transaction cost analysis, 00:07:58.640 --> 00:08:02.720 and you have to always ensure, you have to always do this. And the various companies, 00:08:02.720 --> 00:08:08.560 they operate throughout the world, they when they took, when they will take take out the 00:08:08.560 --> 00:08:13.440 dealer and have their own direct presence, if that cost is lower than the transaction costs, 00:08:13.440 --> 00:08:19.200 they will go for a direct placement. Clear? Then comes the network model of 00:08:19.200 --> 00:08:24.000 internationalization. This is another theory, another model in entry in the marketplace. 00:08:24.000 --> 00:08:29.680 So, what are the entry we, till now we have discussed? We have discussed about the entry of 00:08:30.640 --> 00:08:35.040 Uppsala theory, we have discussed about the transaction cost analysis, 00:08:35.040 --> 00:08:40.560 when to move out of the distributors and then start your own self sales subsidiary; and then, 00:08:40.560 --> 00:08:44.000 this next one is a network model of internationalization. 00:08:44.560 --> 00:08:50.480 So, there are independence, interdependence between the various parties taking part into 00:08:50.480 --> 00:08:55.280 the business. There are many measurements of interdependence and relationship. 00:08:55.280 --> 00:09:01.200 For example, how much total supplies are provided by suppliers to be called as the main supplier? 00:09:02.320 --> 00:09:07.280 How much of the total purchases are made by a customer to be listed important customer? So, 00:09:07.280 --> 00:09:14.000 these are very, very crucial things.Now here, the network model of (inte) internationalization: 00:09:14.640 --> 00:09:19.760 The industrial system comprises of various firms engaged in activities such as production, 00:09:19.760 --> 00:09:25.680 distribution, use of goods and services. There is a web of engagements of relationship called 00:09:25.680 --> 00:09:29.840 network of relationship between the firms. I have given the reference here. 00:09:29.840 --> 00:09:31.840 You can use that for that.So, 00:09:34.960 --> 00:09:41.120 the network model, the firm's network is crucial factor in international 00:09:41.120 --> 00:09:45.760 internationalization of the firm. Depending on the network strength, a firm may decide 00:09:46.880 --> 00:09:53.120 international expansion, establishment of new relationship in the foreign market; international 00:09:53.120 --> 00:09:57.840 penetration, development of the current network in the existing markets in operation; 00:09:57.840 --> 00:10:02.000 I will show you in next slide, in with the diagrams which will be easy for you to understand. 00:10:02.640 --> 00:10:07.360 And then, time being bear with me, uh with this uh slide, but I will give you 00:10:07.360 --> 00:10:11.840 the eg examples here in the next slide which will be easy for you to understand. And then, 00:10:11.840 --> 00:10:16.480 the international integration, enhancement of the coordination of positions occupied by the 00:10:16.480 --> 00:10:23.680 business organization within the foreign network. So, these are the inter-network models.This 00:10:23.680 --> 00:10:29.600 is the illustration. Okay. Now, this will be easy for you because previous slide was 00:10:29.600 --> 00:10:34.320 lot of text material, this will be much more visualization for you to understand. Okay. 00:10:34.880 --> 00:10:41.200 So, Country A is typically an home country, okay, Country A is an home country. 00:10:42.560 --> 00:10:48.000 See, the home country here, you have your home countries; your head office is in this home 00:10:48.000 --> 00:10:53.680 country; various government organizations and your suppliers are there in the home country 00:10:53.680 --> 00:10:57.280 and your production is in a different country. 00:10:57.280 --> 00:11:01.840 You do not manufacture the product in that home country, you manufacture the product 00:11:01.840 --> 00:11:09.280 in a another country. And then, you sell from that country to country E and country F. Okay. 00:11:10.320 --> 00:11:17.200 And then you have another country where you have your own sales subsidiaries and you have another 00:11:17.200 --> 00:11:23.920 some set of countries where you have agents and customers. So, see that the the one country, 00:11:23.920 --> 00:11:29.200 the country here, in this country, the home country, you do not have any manufacturing here, 00:11:29.200 --> 00:11:34.560 okay; you are not even selling into that country. It is possible, might be selling in that country, 00:11:34.560 --> 00:11:39.680 you may not have any sales in that country. But you manufacture in one country; 00:11:40.480 --> 00:11:43.440 in that country, you have a; in a different country, you manufacture. 00:11:44.320 --> 00:11:50.000 In another set of countries, you have your own sales subsidiaries and your customers there 00:11:50.000 --> 00:11:56.000 in that country. In in some other countries, you have the only agents there and you do not 00:11:56.000 --> 00:12:02.720 have a sales subsidiary. So, this is a network of various different nomenclatures and network here. 00:12:02.720 --> 00:12:09.120 Clear? What happens, look here, the country in that, the country where we produce, 00:12:09.120 --> 00:12:13.120 we are not selling into that country. Why we are producing? Maybe the labour is very 00:12:14.000 --> 00:12:19.920 labour-intensive and labour is like inexpensive there, so we go and we sell into that, 00:12:19.920 --> 00:12:24.480 we manufacture in that country, because maybe that product is a labour-intensive product. 00:12:24.480 --> 00:12:28.400 So, we produce in that country. And labour is inexpensive or cheap, 00:12:28.400 --> 00:12:33.600 so we manufacture in that country. And we do have the suppliers and subsidiaries there 00:12:33.600 --> 00:12:37.680 who gives the supply to the, in the manufacturing plant. And then they, 00:12:37.680 --> 00:12:42.160 and the supplier can be in the home country for some of the components, some of the highly 00:12:42.160 --> 00:12:47.440 crucial components, can come from the home country to the manufacturing country. Some 00:12:47.440 --> 00:12:52.480 there can be local manufacturers in that home country can also supply there. Clear? 00:12:52.480 --> 00:12:55.200 So, there you are manufacturing, but you are not selling into that country. 00:12:56.480 --> 00:13:03.600 You are now having sales subsidiary in third set of countries where you have sales subsidiaries, 00:13:03.600 --> 00:13:09.520 because that market is a large market and you operate there and you sell. And there is another 00:13:09.520 --> 00:13:14.880 set of countries where you have only agents and distributors and you will sell directly to the, 00:13:14.880 --> 00:13:21.520 through the agents and distributors, sell to the customers. So, look in this scenario that you 00:13:21.520 --> 00:13:28.000 you are not, you belong to a country, your home country where you have no manufacturing there. 00:13:28.720 --> 00:13:33.920 You may have some suppliers in that country for your product which they supply to that second 00:13:33.920 --> 00:13:40.720 country where the product is manufactured. And the third set of countries where you 00:13:40.720 --> 00:13:45.280 sell your products is your downstream function. You sell your products there 00:13:45.280 --> 00:13:50.000 in the third set of countries. And the fourth set of countries, you may not operate through 00:13:50.000 --> 00:13:56.480 an dealer; uh sorry, uh the your own subsidiary, you may operate through an agent. And in Country 00:13:56.480 --> 00:14:02.880 E and F also you sell directly to Country E and F. So, this is known as a network model. 00:14:02.880 --> 00:14:08.160 So, typically, lot of large global companies, they follow this networking. And it is 00:14:08.160 --> 00:14:14.400 extremely beneficial for them because they will produce; like if you know about the apple, 00:14:14.400 --> 00:14:19.600 they produce in couple of countries their iPhones and they sell globally and they have their own 00:14:19.600 --> 00:14:25.600 subsidiaries in various countries. In (subsidi) larger markets, they have their own subsidiaries; 00:14:25.600 --> 00:14:30.240 in smaller markets, they might send through agent. I do not know exactly their details in the 00:14:30.240 --> 00:14:35.280 various countries, but I am sure they must be having some, either sales subsidiaries or agents. 00:14:35.280 --> 00:14:41.440 So, they they manufacture in 1 or 2 countries, but they sell it in in a different, 00:14:41.440 --> 00:14:45.680 through the subsidiaries in certain countries or through agent in this country. So, this is 00:14:45.680 --> 00:14:54.080 typically known as the network theory.Then comes eclectic theory. This is also known 00:14:54.080 --> 00:15:02.080 as the Dunning's eclectic or OLI approach. So, 3 matrices are deciding upon this mode of entry. So, 00:15:02.080 --> 00:15:08.080 mode of; all we are discussing to in this class are the mode of entry. So, one was Uppsala. 00:15:08.080 --> 00:15:12.800 Uppsala says that you only go to the nearest geographies, you only go to the 00:15:12.800 --> 00:15:18.880 nearest geographies and the nearest uh what is called cultures, and then expand slowly 00:15:18.880 --> 00:15:24.640 from distribution, from a ad hoc export to dealer and then distributor and then 00:15:24.640 --> 00:15:29.280 sales subsidiary and then manufacturing; Uppsala says that. Then we learnt about the 00:15:29.280 --> 00:15:33.840 transaction cost theory. In the transaction cost theory, what we learnt? We learnt that 00:15:34.480 --> 00:15:41.840 we we ensure that what is my search and my cost of monitoring and continuously do that. 00:15:41.840 --> 00:15:48.320 If my search plus monitoring cost is more than establishing a subsidiary, I should go for 00:15:48.320 --> 00:15:53.680 establishing a subsidiary instead and removing the dealers. If that cost is lower, higher, 00:15:53.680 --> 00:15:59.920 I should still continue with that uh distribution model. So, that transaction cost theory says that. 00:15:59.920 --> 00:16:06.640 Network model: I have explained to you where you have one country where you manufacture and then 00:16:06.640 --> 00:16:11.840 you have these other country where you have your headquarters and then a set of countries 00:16:11.840 --> 00:16:15.600 you operate through a sales subsidiaries, in set of countries your distributor. 00:16:15.600 --> 00:16:19.680 This may not be the manufacturing is in your own country, you may manufacture in some other 00:16:19.680 --> 00:16:24.640 countries. That is typically the network model. So, all these countries are typically, the all 00:16:24.640 --> 00:16:32.880 (netw) the, these are all networked together. The last one is the Dunning's eclectic paradigm, which 00:16:32.880 --> 00:16:38.240 is known as the organization specific advantage. So, the there are 3 metrics deciding upon the mode 00:16:38.240 --> 00:16:44.880 of entry. So, these all discussing about the which mode I should take to enter the foreign market. 00:16:44.880 --> 00:16:48.960 So, the organization specific, what are the my specific advantage of entering the 00:16:48.960 --> 00:16:55.600 market? Location specific: Whether that particular location has got some specific advantage to enter. 00:16:55.600 --> 00:17:01.360 Internationalization specific advantage or ISA to understand the mode of entry. Business having 00:17:01.360 --> 00:17:07.520 all the 3 advantages suggested to set up an wholly owned subsidiary in a foreign market. 00:17:07.520 --> 00:17:14.480 So, let it be.In this diagram, okay, the 3 investment: The first is the ownership. 00:17:15.840 --> 00:17:22.800 The second, if the ownership, if you have sufficient the cash, the capital available, 00:17:23.600 --> 00:17:27.680 if you do not have that sufficient capital available to invest, 00:17:27.680 --> 00:17:31.840 you still remain domestic, you do not operate to that international market. 00:17:32.400 --> 00:17:40.400 Then, if you have sufficient capital and then you have the location advantage to produce at home and 00:17:40.400 --> 00:17:46.000 export; if that advantage is not there, then you become international. If you have still 00:17:46.000 --> 00:17:52.960 having an advantage in manufacturing at home, no advantage, then you go ahead and manufacture here. 00:17:52.960 --> 00:17:58.320 The third one is the internationalization that you do not start immediately the direct 00:17:58.320 --> 00:18:04.480 operation, you give a license there and then someone else will manufacture your product 00:18:04.480 --> 00:18:10.880 based on that international license. If all these 3 are the advantages, 00:18:10.880 --> 00:18:16.880 like if ownership has an advantage, location has an advantage and also international advantage, 00:18:16.880 --> 00:18:22.400 all the 3 advantages are there in that country, then you make a foreign direct investment. So, 00:18:22.400 --> 00:18:28.320 OLI approach is typically ownership, location and internalization approach. 00:18:28.320 --> 00:18:32.320 If all the advantages are there in that foreign country, 00:18:32.320 --> 00:18:37.040 then only you should go. You have sufficient capital there available for you to expand, 00:18:37.040 --> 00:18:42.160 have a foreign direct investment; you do have the location advantage there 00:18:42.160 --> 00:18:47.760 and also you have the internationalization, the market is already internationalized market; 00:18:47.760 --> 00:18:51.280 there is a several competitors, several international companies are operating 00:18:51.280 --> 00:18:56.240 into that market; so, in that market, you make a foreign direct investment to be competitive. 00:18:56.240 --> 00:19:01.840 So, OLI approach, all the 3 advantages are there, then it makes you to go for 00:19:01.840 --> 00:19:08.320 the foreign direct investment. Clear? So, this is another way to another theory. This theory 00:19:08.320 --> 00:19:14.880 said that you look at all the 3 approaches that ownership, location and the internationalization, 00:19:14.880 --> 00:19:19.920 all the 3 approaches; if all the 3 approaches are yes, positive for that country, then you make 00:19:19.920 --> 00:19:25.920 a foreign direct investment. If one of that is not there, remain domestic. If location, 00:19:25.920 --> 00:19:30.320 there is no advantage of producing in a foreign land, produce in the home country and export to 00:19:30.320 --> 00:19:34.480 the foreign country; do not make subsidiary and do not make foreign direct investment there. 00:19:34.480 --> 00:19:38.800 The third one is a international; whether the market is really internationalized, 00:19:38.800 --> 00:19:42.480 whether there are several players at that market, international players at that marketplace, 00:19:42.480 --> 00:19:47.120 they are coming and operating, then you go there. If the market is not really internationalized and 00:19:47.120 --> 00:19:52.640 not very few can, not uh much, not uh very company, not much companies are operating there, 00:19:52.640 --> 00:19:57.760 do not go and expand to that market, you give someone else to produce and license. But if 00:19:57.760 --> 00:20:02.240 all answers are yes, you go and make a foreign direct investment. Clear? 00:20:02.240 --> 00:20:08.880 So, that is the reason if you see, this also helps, another theory which helps you to make a 00:20:08.880 --> 00:20:11.680 conscious decision about the foreign investments. 00:20:13.280 --> 00:20:21.280 And the last one is the born global. Okay. So, the born global firms, they decide 00:20:21.280 --> 00:20:29.360 that a firm can be said born global when revenues from or near its inception come from the operation 00:20:29.360 --> 00:20:33.680 in the international market. So, day 1, they are not looking into the domestic market; 00:20:33.680 --> 00:20:40.000 day 1, they are looking at the global market. So, quantitative; what is the quantitative definition? 00:20:40.000 --> 00:20:45.760 Firms are classified as born global when they made their first sales in foreign market within 3 years 00:20:45.760 --> 00:20:51.760 of their inception and derived at least 25 percent of the turnover outside their home market within 00:20:51.760 --> 00:20:56.800 a period. So, that is the definition. I have given the reference there, at the International, 00:20:56.800 --> 00:21:03.120 the paper of Mr. Manish Ganvir and the Neeraj Dwivedi's paper and which it clearly says, 00:21:03.120 --> 00:21:08.560 this researcher has done that analysis; and if you can get an access, you can please go through that. 00:21:08.560 --> 00:21:14.480 My personal thanks to these researchers for doing an excellent research paper and I am referring 00:21:14.480 --> 00:21:20.080 that research here which will be helpful for my students to understand from this research. So, 00:21:20.080 --> 00:21:28.960 there are many examples.So, what can support a firm to be born global? So, high technology and 00:21:28.960 --> 00:21:33.520 knowledge intensive industry: So, technology is very, very important; so, born global company. So, 00:21:33.520 --> 00:21:38.560 technology is very intensive and it is very much required and the knowledge intensive. 00:21:38.560 --> 00:21:42.720 Technology advanced companies with high competitive advantage: Some of the companies 00:21:42.720 --> 00:21:49.920 like Google, Microsoft, Apple, these companies are typically born global companies. Okay. The 00:21:49.920 --> 00:21:56.320 potential customers are based in foreign market like Microsoft, Windows OS or Windows operating 00:21:56.320 --> 00:22:03.120 system or Windows uhm Office, MS Office. Throughout the world, this has got a market, 00:22:03.120 --> 00:22:07.680 throughout the world irrespective that, everybody needs uh the operating system 00:22:07.680 --> 00:22:13.520 or everybody needs an uh Microsoft Office for Word or Excel or PowerPoint or all those things. 00:22:13.520 --> 00:22:16.560 So, that is the potential customers throughout the foreign markets. 00:22:16.560 --> 00:22:20.880 Small domestic markets to support economies of scale or feasible for the operation.So, 00:22:23.920 --> 00:22:29.440 traditional and global firms: So, the initially the traditional firms; 00:22:29.440 --> 00:22:33.280 there is a difference between a traditional firm and a global firm. So, what is a 00:22:33.280 --> 00:22:38.160 traditional firm? Traditional firms are initially sell, develop in domestic markets, 00:22:38.160 --> 00:22:42.880 later go for internationalization. As I told you, these are typically traditional companies. 00:22:42.880 --> 00:22:48.080 So, traditional companies, what they will do? They will first develop in the local market, 00:22:48.080 --> 00:22:55.360 build the domestic business, then go and explore either Uppsala theory or transaction cost theory 00:22:56.400 --> 00:23:03.760 or OLS, step by step they will go and expand also known as the Uppsala internationalization 00:23:03.760 --> 00:23:08.880 model or stage model; they will go stage by stage. So, remember that ladder I have shown, 00:23:08.880 --> 00:23:15.920 that beautiful example of the graph which I have referred, where you see the researcher has shown 00:23:15.920 --> 00:23:23.600 that you you can go from the direct from agent and slowly increase up to a final subsidiary. 00:23:23.600 --> 00:23:28.880 And this is typically the traditional companies. Okay. And business firms gradually increase 00:23:28.880 --> 00:23:35.360 their overseas operation. But in contrary, the global companies, the born global companies, 00:23:35.360 --> 00:23:39.360 the international operations since the commencement of them. So, from day 1 00:23:39.360 --> 00:23:44.000 they are born global. So, maybe you, in 1 year or 2 years time they are global, 00:23:44.000 --> 00:23:48.400 also known as early internationalization high tech startup. So, you are, 00:23:48.400 --> 00:23:55.520 you have heard about lot of high tech startups, so, they always look whole globe as their market. 00:23:55.520 --> 00:24:02.000 The firm, from the inception seeks to take the advantage and competitive strains for expansion 00:24:02.000 --> 00:24:06.560 of the business outside the domestic market. So, the, from the inception; 00:24:06.560 --> 00:24:11.360 so, the remember the traditional firms, they first developed the domestic market, 00:24:11.360 --> 00:24:14.800 but these born global companies, from the inception, 00:24:14.800 --> 00:24:19.920 they take the competitive advantage and expansion business outside the domestic market. So, 00:24:19.920 --> 00:24:25.680 they do not consider domestic market as their first entry or first developing the market. 00:24:25.680 --> 00:24:29.920 So, there is a big difference between the traditional companies and the born global 00:24:29.920 --> 00:24:36.960 companies. Okay. So, born global companies, if you typically look at this block diagram, new market, 00:24:36.960 --> 00:24:42.400 learning from the overseas market, technological advances and then you develop another new market, 00:24:42.400 --> 00:24:47.760 how this whole cycle works. So, there is the difference between a born global and 00:24:47.760 --> 00:24:55.680 the traditional companies. Clear? So, that is uh all from the uh the entry, various entry levels. 00:24:55.680 --> 00:25:01.680 So, to summarize in today's all these sessions or whatever we discussed in this today's session, 00:25:01.680 --> 00:25:08.240 which is, we discussed about the various stages of entry and certain theories. Now, these theories 00:25:08.800 --> 00:25:16.160 even for a practicing managers who are who who are uh; some of you may be a practicing managers; 00:25:16.160 --> 00:25:21.920 you must go through these uh theories which will be immensely helpful for you. I can tell you from 00:25:21.920 --> 00:25:28.240 my experience in these international market, these theories are extremely important for you, 00:25:28.240 --> 00:25:33.280 when to use transactional costs theory or whether to use Uppsala or whether to 00:25:33.280 --> 00:25:39.440 use network model theory or whether to use OLI or whether to be born global company. 00:25:39.440 --> 00:25:43.440 So, these are extremely crucial for you to understand the fundamentals 00:25:43.440 --> 00:25:50.000 of the various entry modes. And each of these theories are very, very important for you 00:25:50.000 --> 00:25:55.840 for taking a decision, conscious decision of entering a market. Okay. So, 00:25:56.560 --> 00:26:02.640 I would suggest that I have referred those, all the researchers name and the journals and 00:26:02.640 --> 00:26:07.680 the books from where I have taken this or some of these uh informations. So, 00:26:07.680 --> 00:26:14.480 please study that books and please; I acknowledge the uh the authors, the researchers who had 00:26:15.200 --> 00:26:20.880 produced such beautiful and excellent information for the practicing managers and the students. 00:26:20.880 --> 00:26:29.440 I am thankful to all of these people. They are, these informations are concised in such a way 00:26:29.440 --> 00:26:34.640 that you can use depending on your company, depending on your products and depending on 00:26:34.640 --> 00:26:40.400 various other parameters what we have discussed. Okay. Right. So, today we have completed how are 00:26:40.400 --> 00:26:45.120 the various modes theories, modes of entry in the international market, each with their 00:26:45.120 --> 00:26:50.480 positives and negatives and which one to take depending on your size of your operation, 00:26:50.480 --> 00:26:56.480 your company, your target country, your focus; several things are required, but to heads up 00:26:56.480 --> 00:27:00.880 a very basics on the 4 theories from the marketing perspective view. So, 00:27:00.880 --> 00:27:06.960 you are a marketing manager, so, you have to understand very basics of this one so that you 00:27:06.960 --> 00:27:14.240 can take a decision which mode should be better for you. Right. Thank you very much. Thanks a lot.