1. The internationalization process, the growth of the firm to the foreign markets, is not a spontaneous movement; it's the result of a management and strategic decision. Why internationalization? There are proactive and reactive motivations Proactive motivations 1.Profit advantage: the firms may perceive foreign sales as a potencial source of higher profit margins exploiting their capabilities and specific advantages. 2.Unique products: the firms may produce products with unique technological and innovations characteristics.

2. 3. Economies of scale: the international activities enable the firms to increase their output and therefore reduce the unit cost of production. The firms increase their output but don’t change the fixed cost. Unit cost of production Output

3. The reactive motivations The reactive motivations influence firms to respond to environmental changes and pressures. 1. Overproduction: during downturns in the domestic business cycles, foreign markets can provide an ideal outlet for excess inventories. This decision it's a temporary safety valve. When the domestic demand returns to previous levels, the international activities might be cutted (or just terminated). This strategy it's not appropriated. 2. Excess capacity when the equipment for production is not fully used can also be a powerful motivator for abroad activities.

4. 3. In other case, if the all fixed cost are assigned to domestic activities, the firm can penetrate foreign markets by price strategy using variable costs (by exchange rate, for example). However, that strategy is not sustainable. Because, in the long run, the fixed cost has to be recovered to replace production equipment. 4. Declining domestic sales: all the products have a life cycle in four stages: introduction, growth, maturity and decline. The firms can exploit anew stage of product life cycle in foreign markets, i.e.(id est) some product might be declining in USA and can be introduced in Angola.

5. There are several factors that influence the firms go to abroad. However, the international environment of the business is very competitive and the changes are faster. For exemple: Unique and new products incite imitations. The international competitive pressures impose a gradual reduction in the profit margins. R&D and innovations become factors of continuous changes in the product life cycle. Therefore: the firms that operate in the international markets must develop Dynamic Capabilities.

6. Example: Koncar Group (a croatian company) Business area: power and transport; designing and constructing plants and equipment for the production, transport and distribution of electrical energy; electromotor locomotives, electric vehicles… Sales Revenues (in %) 2011201220132014 Croatia4550 51 Export5550 49

7. A company with a high level of internationalization. Almost 60% of the international activities are near and origin regional. EU Member States49% Neighbouring Countries10% Africa and Asia15% America and Australia4% Other22% Export by Region (2014)

8. Exercise#1: internationalization - Sonae Indústria With a total of 21 plants located in 6 countries on 3 continents, Sonae Indústria is one of the largest wood-based panel producers in the world. At the end of 2014 the company had 3,596 employees worldwide and a consolidated turnover of 1,015 million Euros. Particleboard is the core of its product range; It’s very versatile product in terms of its possible uses and applications.

9. Brief History 1959: SONAE was founded in 1959 at the site of its present location in Maia (near Oporto). 1971: SONAE’s expansion and diversification began in 1971 when it took control of Novopan (other company of the same core business). 1975: Sonae enters the chemical industrial sector. 1984-1987: new expansion "wave"; Sonae acquires two new firms: Agloma and Paivopan. 1989: the first step in expansion abroad with the take-over of a particleboard manufacturer in Ireland, then strengthening its market position in the British market (Spanboard company).

10. 1993: rapid growing and international expansion; take-over of TAFISA, S.A. in Spain; Sonae became market leader in the Iberian Peninsula. 1994: Sonae extended its activities to Canada with the start-up of a plant producing, and expanding its commercial activity to Brazil and South Africa. 1998-2000: Sonae was involved in a multiplicity of projects; new plants: South Africa, Germany, France and Brazil. Until now: reinforcing its position in foreign markets acquiring other companies.

11. The core business of the Sonae Ind. is very specific. In the beginning of 90th there was scarcity of raw material (woods) in Portugal, and therefore the prices had been increased. The strategy was to try find out new markets to explore raw material. This business activities demand high proximity between the firm and its raw material. Therefore, in this case, the Uppsala model is not indicated to define the strategy of international expansion.