Chapter 8: International Strategy - Incentives, Benefits, and Purpose

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Chapter 8: International Strategy.
1 What incentives influence firms to use international strategies?
The concept of international strategy allows firms to sell their goods and services outside its domestic market. However, the decision for a firm to use the strategy is influenced by factors such as; the firm may decide to venture into the market outside the domestic market to gain access to raw materials that it uses to manufacture its products. The firm might be under increased pressure resulting from the demand for its product in a particular market forcing it to integrate the operations of the business on a global scale to boost the efficiency of service delivery to customers. The strategy also helps in increasing the product’s life cycle, locating a company close to the market increases the shelf life of the goods. The business may decide to venture into a foreign market to tap into the opportunities created by the revolution in technology in that particular market. For instance, the potentially large demand for goods and services in China and India created by the digital economy has seen a rise in the number of firms venturing into those markets.
2 What are the three basic benefits firms can gain by successfully implementing an international strategy?
The international strategy to venture into markets outside domestic provides a lot of opportunities for businesses. The strategy increases the potential market size for businesses by providing an additional customer base that creates an environment for potential growth. By expanding business operations to a number of markets, the firm is able to benefit from economies of scale. For instance, the firm is able to exploit core competencies in the foreign markets through sharing knowledge and resources hence creating a synergy that can make a firm learn how to deliver higher quality products at a lower cost. Venturing into foreign markets provide the firm with learning opportunities. A firm can participate in research and development activities to enhance innovations of a new product which is important to both the short and long-term success of the business. The strategy also has locational advantages, international locations can provide cheap labor, cheap energy, access to customers, and access to critical raw materials to the firm.
3 What four factors are determinants of national advantage and serve as basis for international business-level strategies?
A firm’s choice of international business-level strategy is dependent on factors such as; demand conditions, related and supporting industries, firm strategy structure and rivalry, and factors of production. The factors of production influence the potential of the firm to compete in any market. The factors of production are grouped into; basic factors (natural resources and labor), advanced factors (educated workforce and digital communication systems), generalized factors (highway and supply debt), and specialized (skilled personnel). A country with ...