Increased pressure to integrate operations on a global scale is another factor influencing firms to pursue an international strategy. As nations industrialize, the demand for some products and commodities appears to become more similar. This borderless demand for globally branded products may be due to growing similarities in lifestyle in developed nations. In an increasing number of industries, technology drives globalization because the economies of scale necessary to reduce costs to the lowest level often require an investment greater than that needed to meet domestic market demand. Moreover, in emerging markets, the increasingly rapid adoption of technologies such as the Internet and mobile applications permits greater integration of trade, capital, culture, and labor. The potential of large demand for goods and services from people in emerging markets such as China and India is another strong incentive for firms to use an international strategy. Even though India differs from Western countries in many respects, such as culture, politics, and the precepts of its economic system, it offers a huge potential market, and the government has become more supportive of foreign direct investment. We’ve now discussed incentives that influence firms to use international strategies. Firms derive three basic benefits by successfully using international strategies: 1. increased market size 2. increased economies of scale and learning 3. development of a competitive advantage through location (e.g., access to low-cost labor, critical resources, or customers) Three Basic Benefits of International Strategy As noted, effectively using one or more international strategies can result in three basic benefits for the firm. These benefits facilitate the firm’s effort to achieve strategic competitiveness when using an international strategy. 1. Increased Market Size - Firms can expand the size of their potential market—sometimes dramatically—by using an international strategy to establish stronger positions in markets outside their domestic market. Challenge effectively managing different consumer tastes and practices linked to cultural values or traditions in different markets 2. Economies of Scale and Learning - By expanding the number of markets in which they compete, firms may be able to enjoy economies of scale, particularly in manufacturing operations. More broadly, firms able to make continual process improvements enhance their ability to reduce costs while, hopefully, increasing the value their products create for customers. Operating in multiple international markets also provides firms with new learning opportunities, perhaps even in terms of research and development (R&D) activities. Increasing the firm’s R&D ability can contribute to its efforts to enhance innovation, which is critical to both short- and long-term success. Challenge diseconomies of scale if firm gets too big.
3. Location Advantages - Locating facilities outside their domestic market can sometimes help firms reduce costs. This benefit of an international strategy accrues to the firm when its facilities in
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