Globalization of Markets and the Internalization of the Firm
Born global firms refer to the new venture that serves to satisfy a global niche from the onset. In other words, born global firms are new ventures that, by design, are international and not by emergence. The main characteristics of born global firms are as follows:
Limited financial and tangible resources
Compared to large multinational enterprises that have been deemed as dominant in investment and global trade, born global firms are relatively small and have fewer human, financial, and tangible resources(Tenev, 2012).
High activity in the international markets from or near the founding
After their founding, born global firms begin to export their services or products within a couple of years and may export a quarter or more of their total production. Most of the born global firms advance in their stages of internationalization through the undertaking of foreign direct investment and collaborating with foreign partners. To engage the firm into a systematic internationalization process is informed by the nature of the firm, the specialization of the firm within the specific value chain, industry sector or market, or the type of technology being developed by the firm.
Present across most industries
Most of the born global firms are technology firms, but studies reveal that born global firms are widespread beyond the technology sector and across industries. Don't use plagiarised sources.Get your custom essay just from $11/page
Managers have a strong international entrepreneurial orientation and global outlook.
The managers in born global firms have a perspective that sees foreign markets as not just the addition of their domestic markets. Their mindset has healthy entrepreneurial thinking. They are aggressive and proactively compete in international markets; they innovate and take risks.
There is an emphasis on differentiation strategy.
Born global firms adopt a differentiation strategy by developing differentiated designs and highly distinctive products that target niche markets, which may be too small for larger firms’ tastes.
There is an emphasis on superior product quality.
Born global firms are founded to exploit business opportunities based on the development of new products or services of a higher quality and better designed than what the competitor offers.
Leveraging advanced information and communication technology
Most born global firms leverage ICT top segment customers into narrow global markets niches and serve buyers highly specialized needs.
There is the use of external, independent intermediaries for distribution in foreign markets.
Many of born global firms expand internationally through exports by engaging in international sales or leveraging the resources of independent intermediaries located abroad.
The drivers of market globalization that have allowed born global firms such as Instagram to internationalize at, or near, their founding are:
The worldwide reduction in barriers to trade and investment
The national government’s tendency to reduce barriers to trade and investment has encouraged global economic integration. Tariffs on imports products have declined, which has encouraged the free international exchange of goods and products. World trade organizations have facilitated a reduction in barriers to trade (Cavusgil et al., 2014).
Advances in technology
Advances in technology have facilitated cross border investment and trade remarkably.
Integration of world financial markets
Financial market integration has made it easier for internationally active firms to borrow funds, raise capital, and engage in foreign currency transactions. Cross border transactions are made easier because the funds can be transferred easier between buyers and sellers.
Industrialization, economic development, and modernization
The new emerging markets, mostly from rapidly developing economies, have moved to competitive, sophisticated producers and exporters of premium products such as computers, electronics, and aircraft, unlike low value-adding commodities it engages in before.
Market liberalization and adoption of free markets.
The free-market reforms in the former Soviet Union and china smoothed the integration of former command economies into global economies. For example, Asian economies embraced free-market norms.
The advantages a young company can gain by entering international markets soon after their founding are as follows:
Increases Competitive advantage
International marketing gains a competitive advantage by providing a service or a product, which the competitor does not provide. Marketing internationally also creates those advantages by tapping into a consumer base whose needs are not being satisfied. You create a branding opportunity that can pay off in other sectors of that market that learn about your products and decide they want to take part.
Expand your customer base
This is a big advantage of foreign marketing since it provides an opportunity to access a new whole set of consumers, which in turn increases profits and brand awareness. The rapid change in communication has made it easier to expand the customer base .channels such as google, twitter, Instagram and Facebook have made communication easier. It has made countries a tiny fraction of the global customer base.
Protects against Economic Downturns
Pushing your products and services to foreign markets is a significant advantage of international marketing. Increase revenue overseas helps offset any downturns in the home economy. This makes the business weather some bad times, and makeup losses suffered if the economy tanks (Quain, 2018).
References
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014).
International business. Pearson Australia.
Quain, S. (2018). The Advantages of Marketing Internationally. Retrieved 28 January 2020,
from https://smallbusiness.chron.com/advantages-marketing-internationally-61158.html
Tanev, S. (2012). Global from the Start: The Characteristics of Born-Global Firms in the
Technology Sector. Retrieved 28 January 2020, from https://timreview.ca/article/532