International Strategy.

3144 WordsFeb 2, 200613 Pages
What is international strategy? "An international strategy is a strategy through which the firm sells its goods or services outside its domestic market" (Hill 378). One of the primary reasons for implementing an international strategy (as opposed to a strategy focused on the domestic market) is that international markets yield potential new opportunities. Raymond Vernon captured the classic rationale for international diversification (Vernon 191). He suggested that, typically, a firm discovers an innovation in its home-country market, especially in an advanced economy such as that of the United States. Some demand for the product may then develop in other countries, and exports are provided by domestic operations. Increased demand in…show more content…
Expected returns from the investments represent a primary predictor of firms moving into international markets. Still, firms from different countries have different expectations and use different criteria to decide whether to invest in international markets. Economies of scale, scope, and learning By expanding their markets, firms may be able to enjoy economies of scale, particularly in their manufacturing operations. "To the extent that a firm can standardize its products across country borders and use the same or similar production facilities, thereby coordinating critical resource functions, it is more likely to achieve optimal economies of scale" (Mauri & Phatak 234). "Firms may be able to exploit core competencies in international markets through resource and knowledge sharing between units across country borders" (Hill 384). This sharing generates synergy, which helps the firm produce higher-quality goods or services at lower cost. In addition, working across international markets provides the firm with new learning opportunities. Multinational firms have substantial occasions to learn from the different practices they encounter in separate international markets. Even firms based in developed markets can learn from operations in emerging markets. Location Advantages Firms may locate facilities in other countries to lower the basic costs of the goods or services they
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