Week 7-Internationalization

Week 7-Internationalization - International Strategy...

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International Strategy Instructor: Mahka Moeen Spring 2012 1
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International Strategy International Strategy: a strategy through which the firm sells its goods or services outside its domestic market Reasons for having an international strategy International markets yield new opportunities New market expansion extends product life cycle Needed resources can be secured Greater potential product demand Borderless demand for globally branded products
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Why do firms internationalize? Gain access to a Larger Market: Expand sales by entering new markets Gain access to low cost input factors: Low cost raw material or labor Develop new competencies: Acquire valuable resources available only in foreign locations
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Boeing 787 Project
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Benefits of International Expansion Increased market size Domestic market may lack the size to support efficient scale manufacturing facilities. Return on investment Large investment projects may require global markets to justify the capital outlays New products become obsolete more rapidly. Economies of scale Location Advantages
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Internationalize or not? Test 1 Does a firm possess core competencies that retain their value in the foreign market? Test 2 Does the foreign country provide opportunities for a firm to build new core competencies?
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Going Global: Why Not? Increased coordination costs Liability of foreignness Additional costs of doing business in an unfamiliar cultural, political and economic environment. Other challenges: Geographic dispersion Logistical costs Complexity of competition Trade barriers
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Challenge of International Expansion There are several reasons that explain the limits to the positive effects of international strategies: Geographic dispersion Trade barriers Logistical costs Cultural diversity and barriers Complexity of competition Relationship between firm and host country
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Liability of Foreignness Institutional differences Intellectual property laws
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Week 7-Internationalization - International Strategy...

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