Three + One: Multidimensional Strategy of Internationalization

Introduction Most contributions on internationalisation strategy start by pointing out the growth in international competition and the increasing complexity of the business environment that companies are facing today. In contrast, we start from the complexity of contributions on internationalisation strategy which emerged as a response to changing environmental conditions and try to reduce this complexity. This is necessary because many publications only elaborate one aspect of internationalisation. Some authors concentrate on market selection and market entry (e.g. Young et al. 1989, Root 1994, Woodcock/Beamish/Makino 1994), others discuss problems of standardisation or differentiation (Fayerweather 1969, Prahalad 1976, Bartlett 1979, Doz/Bartlett/Prahalad 1981, Leontiades 1985, Doz 1986, Henzler/Rall 1986, Meffert 1986). Still others delineate how competitive advantages can best be achieved by increasing integration and coordination within the corporation (Hamel/Prahalad 1985, Kogut 1985a, 1985b, Hedlund 1986, Porter 1986, Hamel/Prahalad 1988, Kogut 1990). The artificial separation of different aspects of internationalisation has induced a growing number of authors to systemise the confusing variety of internationalisation strategies and to outline the interdependences between them. Ghoshal (1987), for example, introduces an "organizing framework" which classifies strategies by strategic objectives and sources of competitive advantage. A similar concept was presented by Hamel/Prahalad (1988), who classify strategic options by strategic intent and sources of competitive advantage. Roxin (1992) distinguishes several generations of internationalisation strategy and Ringlstetter/Skrobarczyk (1994) identify different fields of planning and "strategic switches". With this article we intend to contribute further to the classification of internationalisation strategies by tracing them back to four basic dimensions which lie at the heart of almost any strategic internationalisation move. Towards Understanding Internationality: The Three Static Dimensions Internationalisation strategy alters the international "Gestalt", i.e. the international fingerprint of a firm. As internationality can be regarded as a multidimensional phenomenon, some authors have already distinguished different dimensions of internationality (Johanson/Mattsson 1986, Porter 1986, Welch/Luostarinen 1988, Jarillo/Martinez 1991, Macharzina 1992, Kutschker 1994a). A consolidation of these concepts leads to three basic dimensions of internationality: (1) the number and the geographic-cultural distance of the corporation's foreign markets, (2) the extent of value added in these markets and (3) the degree of integration within the corporation (Kutschker 1994 a). Number and Geographic-Cultural Distance of Countries Obviously, the number of countries in which a company is operating, influences the degree of internationalisation of the corporation. Generally, a corporation which has activities in many foreign countries is considered to be more international than a company which is only involved in a few markets. However, in addition to the absolute number of countries, the geographic and the cultural distance between the home market and the foreign markets have to be considered (Johanson/Wiedersheim-Paul 1975, Johanson/Vahlne 1977). A German corporation operating in Austria, Switzerland, Belgium and the Netherlands is less international than a German corporation which has activities in Japan and Brazil. Moreover, if a Germany-based corporation already has activities in the United States, setting up a business in Canada does not increase the degree of internationalisation as much as if Canada was the first "bridgehead" in North-America. Value Added The involvement in foreign markets can vary from country to country. International activities can extend from mere export to completely self-sustaining subsidiaries. In order to differentiate between different degrees of involvement, we introduce the range and extent of value added in foreign markets as a second dimension. …