Article_Review

Journal: Knight and Cavusgil (2004). Innovation, organizational capabilities and the born-global firm. 1. Firm’s sustainability through Key Success Factor (Innovation, Knowledge, & Capabilities). • Born global is a strategy that new firms can use to provide rapid growth and performance. They no longer need to start from small and slowly expand into big company. Going global enables firms to increase the homogenization of buyers’ preference which makes it easier for international business. The technology advancements are catalyst for born global firm which provides information and ease the transportation, international logistics and communication such as emails and internet in cheaper price. Emergence of innovation based on the various study and accumulation of the knowledge which will create the capabilities to support the born global firms. Knowledge is the most important sources due to provide advantages which can facilitate foreign market and operations and maintain the quality of product. For example, Malaysia furniture firms should go for born global as a better strategy form company instead of traditional stage models. 2. Utilizing the new term of born global firms with capabilities of knowledge and talents • In the intensive global economic landscape, existences of born global firms contradict with the traditional theories of internationalization. In the Malaysian context, SME (Small and Medium Enterprises) are playing a vital role in the economy of nations and seen as the backbone of industrial development. Malaysia’s SMEs are still undergoing the classic process of enterprise development from start up stage to growth and expansion toward global competitive market. Many SMEs in Malaysia are trying very hard to survive even in domestic market. Therefore, the challenges of the SMEs can be solved by utilizing the new term of born global firms with the capabilities of knowledge and talents. SMEs do not need to compete with the main player in the industry while the global markets enable them to sustain their market position and their brand name. Big player might treat SME as the small “KID” in the industry, but the KID (Knowledge, innovation, dynamic) with the internal meaning of knowledge, innovation and dynamic of management will become the rivals to them. A vivid example can be seen from the shoes industry in Malaysia VESS and NOSE (only 11 years in market) who successfully compete with “PRINCESS” (30 years in market) by targeting the Middle East market. 3. Elements of born global approach • Youth and lack of experience as well as paucity of financial, human capital no longer become the impediment for large scale and global success of firm. However, the fundamental of the born global firms still requires the venture capital and human capital. Born global with joint venture and acquisition are the best mode of entry instead of exporting only when doing international business. Therefore, any firm who aim for born global firm should evaluate their firm and strengths in order to identify the opportunities. The overall study can give a better insight for marketers and entrepreneurs to re-evaluate their company’s conditions and eventually allow the company for expansion to global market. Journal: Lopez et. al (2009). Born global or born regional' Evidence from an exploratory study in the Costa Rican software industry. 1. Traditional model vs. Empirical Evidence • Traditional models. Traditional models only have assumptions that a firm is born-global after a long period of time before it can internationalize. The firms are assumed that it must acquire experiences, grow in domestic market and to slowly study markets that are foreign to the firms. Also, resources must be built up to overcome uncertainties and cost of investments. • Empirical Evidence. There are existing firms that are small, young, limited resources that have cross their borders internationally. Firms are not limited to have large monetary and organizational resources if going internationally is less costly such as service industry. Also, knowledge intensive firms may be born global because replicating the technology has low marginal cost such as software or information technology products. Besides that, it is also mentioned that the knowledge and experience of founders and employees in the firm plays a role for early internationalization. Firms that have prior experiences and knowledge about other markets have the tendency to internationalize rapidly. 2. Criteria for Born-Global • Total revenue from sales. Knight and Cavusgil (2005: 16) state that ‘‘companies that, from or near their founding, obtain a substantial portion of total revenue from sales in international markets.’’ • First exports. Moen (2002:158) defines born globals as firms “having export sales higher than 25% and an establishment date post 1990”. Madsen, and Servais (2004) also mentioned that firms “obtain more than 25% of total sales from foreign market”. • Timeline. Madsen, and Servais (2004), “operationalize born globals as companies younger than 20 years that started to internationalize within 3 years of their founding”. • Time and revenue from sales. Knight (1997: 1) ‘‘a company which, from or near its founding, seeks to derive a substantial proportion of its revenue from the sale of its products in international markets.’’ Knight and Cavusgil (2005) also mentioned a similar statement, it is clear that born globals are set apart because of their proclivity to export, and also because they export while still in their early youth. • Use of resources and sales a competitive advantage. Oviatt and McDougall (1994: 49) define an ‘‘international new venture as a business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries’’. From the researches done by several people, it is concluded that there are not one exact way to define a firm as a global-born. However, it can be finalized that a firm is considered born-global if it has either first fulfill any of the criteria mentioned above. 3. Factors affecting the choice for born global approach • From the journal, it was said that there are few born global firms among Costa Rican software providers. This may be due to the factors which affect the choice for born global approach by certain firms. Although born global approach can provide advantages to firms in terms of profitability, it can also introduce difficulties that might tear down a firm’s structure. Factors such as cultural traits and business practices of different countries that may pose uncertainties or risks to the firm should be taken into consideration by firms. Hence, these factors are seen as affecting a firm’s decision for born global approach. • It also affects a firm’s decision in trading. For instance, it was mentioned in the journal that firms chose to trade with nearby countries or regional neighbors which has almost the same culture and business practices. With reference to table 5 in the journal, there is only one firm that is said to be a true “born global” firm in which that the rest of the firms chose to export to nearby countries that have close proximity of culture and business practices and hence categorized as born regional rather than born global although that they are involve in exporting. There are several more factors that might affect the choice of a firm to go for a born global approach. By considering these factors, it could provide firms with ample understanding of the different markets in different countries that would eventually allow them to pursue the appropriate strategies when considering for the born global approach. It is also fair to conclude that gradual internationalization is not dead. Journal： Johanson & Vahlne (1977) The Internationalization process of the firm-A model of knowledge development & increasing foreign market 1. Internationalization Internationalization process is processes of firms gradually increase their abroad business activity. The increase of activity consists of economic and business factors, which influence the characteristic of the pattern and pace of the firms towards going abroad. Internationalization required firm to understand the challenge to develop international operations. Depending on the direction of the firm, increase involvement of the firm in the specify country or successive establishment of operations in the new country. 2. Process of internationalization Normally, for firm to begin their international involvement, firstly, exporting activity to the target country, in which they supply goods to create the demand of the country. After demand create on the country, firm will establish export channels to ensure the firm consistence product existence in the market. In long term, the firm brand will be well known and there consistence demand from the country. This stage, when firm have a strong brand, it can have an opportunity to establish a sales subsidiary, and finally firm begin production in the host country, for cheaper labor and geographical advantage. 3. Internationalization Model Market Knowledge Commitment decisions Current activities Market Commitment In this model, market knowledge and market commitment affect both commitment decisions and activities that been perform. Firm strives to increase its long term profit and minimize risk. Market commitment concept Composed two factors – first is the amount of resources committed, second the degree of commitment, the difficulty of finding an alternative use for the resources and transferring them to it. Resources that located in specify market area considered a commitment to the market, but resources can be sold and financial resources can easily be used for other purposes. The degree of commitment is higher the more the resources in question are integrated with other parts of the firm and their value is derived from these integrated activities. Resources located in the particular market are most committed to the market. Other parts of market commitment are the amount of resources committed that is easy to grasp; size of the investment in the market, organization, personnel and others areas. Market knowledge Knowledge is effecting commitment decision; due to knowledge define opportunities and problem that effect the decision. Knowledge also influence on evaluating environment and performance of various activities. Experiential knowledge is the critical kind of knowledge in the present context that cannot easily acquire as it needs time and experiences that will be important for less structured and well define activities. General knowledge and market specific knowledge are required for establishment and performance of a certain kind of operation and activity in a country. There is a direct relation between market knowledge and market commitment. Knowledge can be considered as a resources that create more effective decision and success of the firm.