Analysis of Theoretical Approaches to Strategic Issues

Abstract

There are various theories relating to strategy and internationalisation of firms and numerous authors have contributed to the discussion of these issues. The author has picked three strategy approaches able to explain internationalisation of firms. First, Porter’s market-based view (1.1) which closes a gap between strategy theory and internationalisation theory by asking how firms act in global markets¹. Second, the resource-based view (1.2), which considers firms as a bundle of resources and capabilities available for deployment by the firm’s business units.² The third theory that will be explained is transaction cost theory (1.3), represented mainly by Williamson. This approach considers the transaction as base for decision making. This theory explains why firms internalise³ transactions rather than relying on the domestic market.

Zentes, Swoboda and Morschett (2004), p. 64.

Morgan, Kaleka and Katsikeas (2004), p. 91.

The terms “internationalisation” and “internalisation” sound alike but must be used carefully: “internationalisation” refers to all activities a firm does to do business in foreign markets; “internalisation” refers to the concept to handle transactions within a firm rather than buying on a market.