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Business Internationalisation Process: Dunning

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BUSINESS INTERNATIONALISATION PROCESSES: DUNNING’S ECLECTIC THEORY
Tutorial Activity 1.4

Part one consists of the factors that the firm Elecdyne should take into account when internationalising: 1. Labour costs – This specifically focuses on the hourly rate of the potential employees and company costs. Minimum wages in each of the countries (Germany, United Kingdom and China) may fluctuate causing Elecdyne to pay more or less from time to time. The company costs that have to be taken into consideration would be the time and resources that it would take to train the staff in the countries where Elecdyne wants to internationalise. 2. Buying and Supplying – The GBP equivalent to the country’s currency could vary so Elecdyne may at times gain a profit if the exchange rate is lower for Japan but lose out on profit if the exchange rate is higher than Japan. This could also affect the electronic products that Elecdyne would supply and sell internationally. 3. Market demand – This area concentrates on the fact that would there be enough demand for Elecdyne’s electronic products globally. Elecdyne would have to analyse the market demands of its chosen countries where Elecdyne wants to internationalise. Elecdyne would have to take into account that the consumers needs and wants vary in each country. 4. Networking - could lead to knowledge transferral and partnership in study and growth from interaction between global companies. This could help Elecdyne’s business growth and increase profits.

Part 2 consists of identifying a suitable framework to use to illustrate the factors that have been focused on in part one:

In order to illustrate and present the factors which have been talked about in the above stage suitably, the Dunning framework model has been chosen to accomplish that. Dunning’s eclectic theory has been selected as it recommends an explanation for internationalism through looking a 3 specific issues. These comprise of “Locational”, “Ownership Specific” and “Internalisation”.
According to Sciencedirect.com “For more than two decades, the eclectic (or OLI) paradigm has remained the dominant analytical framework for accommodating a variety of operationally testable economic theories of the determinants of foreign direct investment (fdi) and the foreign activities of multinational enterprises (MNEs)”.

Part 3 is about comparing and gathering relevant information on the countries that were chosen: Germany, UK and China with Japan using a suitable analytical framework discussed in the stage above.

Japan

Job Vacancies – According to tradingeconomics.com “Job Vacancies in Japan decreased to 739.22 Thousand Persons in August of 2012 from 739.71 Thousand Persons in July of 2012, according to a report released by the Ministry of Health, Labour and Welfare, Japan.”

Wages – According to tradingeconomcis.com “Wages in Japan decreased to 408.92 JPY THO in July of 2012 from 523.27 JPY THO in June of 2012, according to a report released by the Ministry of Health, Labour and Welfare, Japan.”

Exchange rate – According to tradingeconomics.com “The USDJPY spot exchange rate appreciated 0.2815 or 0.36 percent during the last 30 days.”

Bankruptcies - According to tradingeconomics.com “Bankruptcies in Japan decreased to 967 Companies in August of 2012 from 1026 Companies in July of 2012, according to a report released by the Tokyo Shoko Research.”

United Kingdom

Job Vacancies - According to tradingeconomics.com “Job Vacancies in the United Kingdom decreased to 473 Thousand in August of 2012 from 474 Thousand in July of 2012, according to a report released by the Office for National Statistics, UK.”

Wages - According to tradingeconomics.com “Wages in the United Kingdom remained unchanged at 471 GBP in July of 2012 from 471 GBP in June of 2012, according to a report released by the Office for National Statistics, UK.”

Exchange rate - According to tradingeconomics.com “The GBPUSD spot exchange rate depreciated 0.0159 or 0.98 percent during the last 30 days.”

Bankruptcies - According to tradingeconomics.com “Bankruptcies in the United Kingdom decreased to 4115 Companies in June of 2012 from 4270 Companies in March of 2012, according to a report released by the Office for National Statistics, UK.”

Germany

Job Vacancies - According to tradingeconomics.com “Job Vacancies in Germany decreased to 484.50 Thousand in September of 2012 from 493.40 Thousand in August of 2012, according to a report released by the Deutsche Bundesbank.”

Wages - According to tradingeconomics.com “Wages in Germany increased to 135.20 Index Points in July of 2012 from 106.60 Index Points in June of 2012, according to a report released by the Deutsche Bundesbank.”

Interest Rate - According to tradingeconomics.com “The benchmark interest rate in Germany was last reported at 0.75 percent.”

Bankruptcies - According to tradingeconomics.com “Bankruptcies in Germany increased to 2367 Companies in June of 2012 from 2353 Companies in May of 2012, according to a report released by the Federal Statistical Office, Germany.”

China

Unemployment Rate - According to tradingeconomics.com “The urban unemployment rate in China was last reported at 4.1 percent in the second quarter of 2012.”

Wages – According to tradingeconomics.com “Wages in China increased to 42452 CNY in December of 2011 from 37147 CNY in December of 2010, according to a report released by the Mohrss, China.”

Exchange Rate – According to tradingeconomics.com “The USDCNY spot exchange rate depreciated 0.0453 or 0.72 percent during the last 30 days.”

Interest Rate - According to tradingeconomics.com “The benchmark interest rate in China was last reported at 6.00 percent.”

References

Dunning, J. - The eclectic paradigm as an envelope for economic and business theories of MNE activity. International Business Review, 9(2) 2000, pp 163-190

Strategy Train (2010) “Small Enterprise Strategic Development Training” [Online] Available: http://www.strategy-train.eu/

Trading Economics (2012) [Online] Available: http://www.tradingeconomics.com/

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