Internationalization And Globalization

Over the past two decades, we have witnessed globalization succumb to the snowball effect, altering our lives both individually and collectively within cultural, political and economical areas. We can identify a link between these factors and the ever increasing number of multinational companies (MNC) today. In 2015, we have reached a stage of globalization where you can argue that the necessity for success and expansion is obtaining a strong international presence. Even though this vision may apply to various kinds of industries and firms, however, the reasons why firms internationalize often revolves around the same assumptions. In order to understand why firms decide to internationalize, we can look at multinational companies that exist

According to Gooderham, Grøgaard & Nordhaug (2013), the dominant understanding of why MNCs exist, is labeled ‘internalization theory». This is based on transaction cost theory and John H. Dunning explains this further by his eclectic paradigm theory (1993) also known as the OLI-framework, which proposes that firms will seek operational control of assets abroad, that engage in foreign direct investment (FDI), when three conditions are met , ownership, location and internalization. The first one (O) is ownership advantages, which revolves around whether the firm has superior advantages like for instance production techniques, entrepreneurial skills, trademark or return to scale. In the case of Über, we can identify a strong competitive

For some firms, this may involve the opportunity of e.g. greater benefits in a foreign market regarding costs, trade barriers etc. The distinction between market-access and cost motives for FDI is a key issue that has attracted much attention. Über is pursuing a «horizontal» FDI , meaning that they are locating abroad in order to improve its market access to foreign customers, simply replicating its domestic production facilities at a foreign location. However, they did need take into account each city’s unique structure in terms of density, transportation alternatives, culture and pain points. Their first international launch in 2011, happened in Paris, which in fact resembles San Fransisco more than e.g. New York does. The San Fransisco model needed to be altered to fit each city’s unique structure, but the demand for service transportation is universal and by combining it with their own competitive advantages, expanding across borders would mean that Über’s customer base could increase with several million