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GSM Lecture 3Management > Global Strategic Management > Methods of internalisation > Factors
Organisational factorsThe role of management - Managers' attitudes determines the extent of a firm's expansion, as a focus on short term goals inhibits plans for international expansion. The motives of the organisation - market (access to a market), resource (more resources) or efficiency (location of operations where things can be done more efficiently) -seeking motives, for example. Success at home - domestic growth is necessary before international expansion can be initiated. This is sometimes due to economies of scale, meaning that firms must be large before they can take on the world. Domestic growth can also bring down revenue to internally finance the internationalisation process.
Environmental FactorsAn unsolicited proposal - expanding with a foreign partner may raise the profile of possible expansion within the company. The approach may also be dismissed, but may prompt R&D to the point that the company can internationalise after all. The Bandwagon effect - oligopolistic companies are interdependent and exist in an environment which is uncertain. They take actions to protect their positions, meaning that when one firm expands abroad, the others follow in a cluster, as they don not want to be left behind (For more information see Understanding the Global Firm, lecture 5). Strong competition from abroad - if faced with foreign competition, a firm may retaliate by moving into that foreign firm's home country (See Understanding the Global Firm, Graham's study (1978), lecture 5).
Another factor is government intervention, which can block expansion of foreign firms for political reasons.
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