Starting a business implies to perform value-creating activities. All these activities are connected to the different stakeholders, such as suppliers, consumers or even marketing channels. Michael Porter defined the value chain as a combination of all support and primary activities that take part into the creation of the product or service. (See appendix to have a deeper description of all the activities). Creating value comes with the discovery of an opportunity and the exploitation of it. Michael Porter “created value chain analysis as a means to organize and understand the customer-value-creating activities and processes within a company” (Price, 2011). The company focuses on its internal business activities that affect its costs and that …show more content…
They use it to assess their competitive advantage by analysing the environment in which they would evolve. Dismantling the value chain of the competitors will highlight their main weaknesses and thus where the start-up would be able to create value and build afterwards its own value chain. Start-ups use traditional companies to uncover opportunities from their weaknesses. If many weaknesses are identified it would then make sense to enter the market and to take advantage of them and offer a solution to solve them.
IE companies differentiate from other companies in the sense that they seek opportunities across national borders. They analyse and exploit these in order to create products and services with added-value for the customers, as well as creating value in the organization itself (Oviatt and McDougall, 2000). “A combination of innovative, proactive and risk-seeking behaviour”.
Nowadays, IE studies are not only limited to new ventures, but they also include large and older firms. Due to globalisation, as previously mentioned, firms seek opportunities abroad. It thus leads us to four different types of models based on the degree of internationalisation of the firm and time (Dorrenbacher, 2000) (see figure 5 and following explanations).
The first indicator relates
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the spatial concentration of activities within a region.
The second indicator relates to how long a company needs before entering a new country market.
Having an international focus right from the start, BGs have been attributed several definitions and characteristics over the years. Many authors got interest in the subjects and wrote about BG.
Rennie is the first one to use this term in 1993. He defines a BG firm as “a small firm that started to export two years after its creation and that generates 76% of its revenue with export” (Rennie, 1993). The main aspect is here the early stage of internationalisation with a focus on foreign sales.
Knight and Cavusgil (1996, 2004) define a BG according to how it will grow, i.e. how it will manage its resources on a global level, and be launched abroad in order to create value in a niche market. For their studies, they first focused on high technology companies, which are more represented (Knight and Cavusgil, 1996) and generalized it to all industries in 2004. A BG firm has to meet a few criteria to be called as such:
- internal capabilities to develop a business with its own resources and knowledge
- the ability to sustain innovation and create knowledge
- to have developed internal
Exporting, licensing, and using trading companies are preferred modes of international market entry for firms with a(n) ____ structure.
The internationalisation process of the firm has been a subject, which has been motive of study for a number of
The value chain, made by Michael Porter, is really important to see how a company structure is created. The value chain is constituted by two parts: support activities (firm infrastructure, human resource management, technology development, procurement) and primary activities (inbound logistic, operations, outbound logistic, marketing and sales, service). (Johnson et al. 2011, p.97-99)
There are a large number of activities (for example, doing research on the network, finding potential customers, selecting appropriate emerging markets, summarizing advantages of the product in the domestic market and so on) need to be involved in, and all of them are very important for the company at the pre-export stage. In other words, the pre-export behavior of the company should include the following points. Jansson and Soderman (2012) suggest that firms should focus on their domestic markets and accumulate enough experience, which are the cornerstone and quite useful for the firms to expand the international markets. Then, the firms need to select suitable markets by talking to local people or face-to-face communication. Furthermore,
The BCG Matrix composes organizations along two measurements—business development rate and market share. Business development rate relates to how quickly the whole business is expanding. Market share characterizes whether a specialty unit has a bigger or littler share than competitors.The question mark exists in another, quickly developing industry, however has just a little market share. The question mark status in the BCG matrix is dangerous: It could turn into a star, or it could come up short. ConocoPhillips has needed to carve its capital venture through the downturn, going from $17 billion in 2014, to $10 billion in 2015, at last arriving at $5 billion this year. “That’s the amount of transformation you had to make in this
Dunnings Eclectic Paradigm model best describes what had attracted Tesco’s internalisation entering the American and Japanese markets. The Eclectic Paradigm consists of three factors that explains where, how and why the internationalization of a firm entering a new market. Ownership, location and internalization are the three dynamics which makes up the OLI (Dunning, 2001).ownership advantages can be either asset-based or transaction-based, in relation to Tesco the ownership advantage in which the firm had acquired was the lean supply
Value chain analysis looks at every step a business goes through, from raw materials to the eventual end-user. The goal is to deliver maximum value for the least possible total cost. It is a systematic approach to examining the development of competitive advantage. The most basic breakdown of primary functions includes inbound logistics, operations, outbound logistics, sales and marketing and service. People should use the other models and frameworks within this software to further differentiate between, and add to, these domains. Product Innovation is one area that is not normally included in the de jure model but is often included in the de facto model. Value Chain Analysis describes the activities that take place in
Corroborating this view, Tayeb (2000) stress the importance of psychic distance concept, sequential and incremental stages emphasized in the theory. One thing that is certain is that “The Uppsala Model” can be used to generalise firm’s internationalisation process. Considering other important elements as this model does not account for heterogeneous nature of organisation, businesses and locations choice, which can influence internationalisation process, especially for EMNCs Internationalisation Process. Internationalisation process according to Jansson (2009), is divided to five different degrees or states. Domestic focus, pre-export stage, evaluate the possibility of exporting, their, stage is experimental export, active involvement and committed involvement. The fifth stage
The BCG matrix helps to identify the high growth prospects by classifying the firm products as per the growth rate and market share. It evaluates the strategic position of the company product and its potential. The classification is divided into 4 quadrants as follows; (Ionescu 2011)
Harvard Business School invented the concept and believed that competitive advantage cannot be understood by looking at a firm as a whole. The disadvantages of a value chain could include a company becoming too segmented and result in a construed conception of the company’s most important values. Thus, the importance of a successful value chain lies within the linkage of the different processes it incorporates. All in all, the value chain can provide organizations a strategic framework for managing the hundreds of activities that go into making the final product.
The traditional internationalization models regard that firms’ capabilities (internal factors) lead firms to make internationalizing activities. On the contrary, OC paradigm refers to internationalization as a process that internal and external factors interact so that firms obtain a competitive advantage in the global level. According to this innovative model, firms achieve superior performance by adapting and integrating in view of a varying environment. Considering that BGs try to survive, operating under uncertain conditions that change all the time, OC constitutes the most suitable way for studying them.
The idea of a value chain was first suggested by Michael Porter (1985) to depict how customer value accumulates along a chain of activities that lead to an end product or service. Porter describes the value chain as the internal processes or activities a company performs “to design, produce, market, deliver and support its product.” He further states that “a firm’s value chain and the way it performs individual activities are a reflection of its history, its strategy, its approach to implementing its strategy, and the underlying economics of the activities themselves.” Porter describes two major categories of business activities: primary activities and support activities. Primary activities are directly involved in transforming inputs into outputs and in delivery and after-sales support. These are generally also the line activities of the organization. They include:
Companies can decide to go global or to enter international markets for various reasons, and these different objectives at the time of entry that enable the business to produce different strategies and the performance goals, and even forms of market participation.
The same critics that Zahra has addressed to Oviatt and McDougall’s analysis applies on his list of factors contributing to the INV’s competitive advantage. We should acknowledge that every country has some economic or cultural specificity; therefore there are some universal business rules which apply on the entire global market. The traditional firms, who possesses years of local market experience, ownership and abundance of their resources are more qualified to compete on the international level.