Lecture 7_Global Expansion_Post

Lecture 7_Global Expansion_Post - Corporate Strategy:...

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Corporate Strategy: International Expansion
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Selling products or services outside of a firm’s domestic market Firm Introduces Innovation in Domestic Market 1 Product Demand Develops and Firm Exports Products 2 Production Becomes Standardized and is Relocated to Low Cost Countries 5 Firm Begins Production Abroad 4 International Strategy Lifecycle 3 Foreign Competition Begins Production
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Large investment projects may require global markets to justify the capital outlays Weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators Increase Market Share Domestic market may lack the size to support efficient scale manufacturing facilities Return on Investment Motivations for International Expansion
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Economies of Scale and Learning Expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R&D, and distribution - Can spread costs over a larger quantity/sales base - Increase profit per unit Location Advantages Low cost markets may aid in developing competitive advantage: e.g. labor, tax, regulation May achieve better access to: - Raw materials - Lower cost labor - Key suppliers - Key customers - Natural resources Motivations for International Expansion
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Firm Strategy, Structure & Rivalry Factor Conditions Demand Conditions Related & Supporting Industries Source: Porter (1990) Porter’s Diamond: Determinants of National Advantage
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Factor Conditions Availability, Quantity, and Quality of: Human resources Physical resources Knowledge resources Capital resources Infrastructures
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Demand Conditions Home demand composition
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Lecture 7_Global Expansion_Post - Corporate Strategy:...

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