International Operations Companies Decide to Internationalize Operations

International Operations Companies decide to internationalize operations when the local market becomes saturated as a method to continue to grow and increase market share. Internationalization is the process by which companies shift operations from their home country into foreign markets. This process can be accomplished through a number of methods depending on the size, resources and strategy of the company.

Methods of International Operation Companies will normally expand into international operations by exporting to overseas markets through independent channels or by licensing foreign manufacturers to produce products for overseas markets (Dicken 2003, p. 207). The next step is for a company to establish sales outlets in overseas markets by either buying a local company or setting up a new facility (Dicken 2003, p. 207). The last stage in internationalization is when a company establishes production facilities overseas by either buying another firm or setting up facilities (Dicken 2003, p. 207). III.

International Strategy for Polymer Technology Systems (PTS) PTS is a medical diagnostic tools company founded in 1992 in Indianapolis, IN, USA (Cardiochek, 2008). Its main product is cardiochek, a handheld point of care diagnostic device to test blood cholesterol (CardioChek, 2008). The product was launched outside of the U.S. In 2002 and is currently available in 100 countries and six different languages (CardioChek, 2008). PTS began its international operations by exporting its devices to 70 different countries (Wall, 2007).

This is a good entry strategy for PTS because it was a newer company that did not have the experience or capital to open facilities or purchase local companies for distribution. PTS made a good move by hiring Hans Fredman as its international sales director in January 2003 (Wall, 2007). Fredman, based in London, is well connected with medical-device makers and worldwide distributors (Wall, 2007). Finding local distributors in each of its markets has been vital to the success of PTS's business (Wall, 2007). Exporters need the local expertise that distributors provide.

Many companies from the U.S. that expand internationally do not understand that doing business in other parts of the world cannot be conducted in the same way as they are accustomed to doing business locally. PTS focuses on finding, supporting and keeping good distributors because each country has different rules, regulations and customs, therefore the company relies on local distributors to represent the company's product (Wall, 2007).

Relationships are very important to building international export strategies because suppliers and distributers want to make sure they are dealing with a reputable and stable company that won't disappear overnight. The same is true for a company looking for a reputable distributor. This can only be accomplished by making the right contacts and investing in developing the relationships over time, which is what PTS has done. PTS tapped a good market and created a niche for itself early in the home medical device market.

Beginning with doctor's offices and home models the company expanded the devices for use by pharmacies to use in promotional health screenings which launched the devices into high use around the world (Wall, 2007). Boots, the largest pharmacy chain in the U.K. approached PTS to use the device in promotional cholesterol screenings in 1,400 of its stores and other companies in Europe soon followed (Wall, 2007).

Promoting its device for use in medical screenings became a major growth strategy for PTS in all of its foreign markets after its initial success in Europe (Wall, 2007). PTS further developed its operations strategy by partnering with European pharmaceutical companies that wanted to use the device to test patients' cholesterol and then promote their cholesterol-reducing drugs (Wall, 2007). AstraZeneca sent CardioChek meters to doctors to promote its new cholesterol-lowering drug Creston (Wall, 2007).

This strategy presents a certain risk to PTS because its product may become linked to the various cholesterol drugs which could bring bad publicity in the event that a drug is recalled or ends up in mass-tort litigation over unforeseen side-effects. On the positive side, linking its products to more favorable brands has opened new markets for the products growth. Food companies, such as Danone and Unilever, bought CardioChek devices to conduct screenings and promote "heart-healthy" yogurt and margarine (Wall, 2007). In December 2003, WalMart Stores Inc.

ordered 5,500 CardioChek meters for screenings at 4,000 of its U.S. stores and needed the devices in a day (Wall, 2007). The company cancelled Christmas vacations and got the product delivered on time, which clearly shows PTS understands the value of creating relationships both internationally and in the domestic market. The meters were so popular with consumers that Wal-Mart invited PTS to sell the meters as a retail product in its stores, which increased its domestic sales to 65% of all revenue (Wall, 2007).

The international market is still a major sales component for PTS despite its domestic success. PTS has focused its international strategy on exporting and distributing its products to other countries rather than opening production facilities in other countries. Producing its products in another country may be less expensive because of the availability of cheaper labor and source materials; however PTS has probably chosen to maintain its manufacturing facilities in the U.S. due to the technical nature of the devices it manufactures.

The company may have concerns about maintaining the quality control it expects for its product in another location where manufacturing facilities are not as easy for the U.S. owners to access. Concerns over patent protections may also be a factor in keeping production local. Another key factor in the successful international expansion of PTS was the availability of financing to provide working capital while waiting on receivables, which can take significantly longer in international dealings. PTS took advantage of.