Module 4 Response MBA575
MODULE 4 RESPONSE MBA575 1
Module4 Response MBA575
Module4 Response MBA575
Economics is a broad subject that relies onboth theoretical and practical approaches. The theoretical approacheshave given rise to many theories, which are inclusive of theinternalization theory. The theory is mainly concerned withorganizations preferences of investment with respect to investmentoptions especially when considering new marketing bases in foreignmarkets. The theory indicates that licensing has disadvantages suchas giveaway of product information, reduced control over foreignmarketing strategies and minimized competitive advantage especiallyif it relies on management rather than the product.
Knickerbocker theory focus on oligopoly andmultipoint competition.in the former, the number of competitors arecentralized and limited while in the latter, there are feworganizations, but they compete in various marketing platforms. Thetheories are similar as they both deal with investments andcompetition[CITATION Ver14 l 1033 ].The competition may arise when one firmimitates strategies employed by the other organization. Additionally,both theories focus on profit making as the outcome. The maindifference between the theories is that in utilization you havecomplete control over licensing while in Knickerbocker the licensecan be purchased for a fee. Also in internalization is difficult tostop the theft of ideas since firms are small sized but in theKnickerbocker, the case is rather different. Considering that theftof ideas brings about competition, I would consider Knickerbockertheory in that it will prevent the occurrence of the same.
According to economic researchers, theinternalization theory is also known as the market imperfectiontechnique. This theory explains why organization relies on investmentapproaches rather than depending on licensing. The mentionedapproaches are applicable as foreign marketing entry strategies. Thistheory puts across three disadvantages of licensing which areinclusive of unintended loss of proprietary information, lack ofcomplete control over what is covered in the licensing agreement, andineffectiveness if the competitive advantage relies on management andproduction capabilities of the firm. The internalization theoryaddress three major perspectives, which are inclusive of ownershipadvantages, locational benefits and internalization returns.
The Knickerbocker`s theory discusses both theoligopolies and the multipoint approaches[CITATION Han16 l 1033 ].Oligopoly is a marketing platform that has few firms.In most cases, about four firms are owning over 80 percent of themarket shares. However, what is common in this market is theimitation of ideas, which will eventually, lead to competition, asthe firms try to outwit each other. The firms use pricing options tosurvive in the market by adapting to what the competitors are doing.In the multipoint platform, the firms adapt similar marketingstrategies to prevent other firms from gaining competitiveadvantages. This theory perfectly describes the use of imitationstrategies in the foreign oligopoly market. The internalizationtheory has an explanation of why one of the firms in oligopolysituations adopts a given strategy, but the Knickerbocker`s theoryfails to do that.
Li, J. a. (2014). 12 Patterns of international competition in service industries: global oligopolistic reaction and national competitive advantages. Coalitions and Competition (Routledge Revivals): The Globalization of Professional Business Services, 178.
Nayak, D. a. (2014). A selective review of foreign direct investment theories. ARTNeT Working Paper Series, 143, 2-22.
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