International Strategy
International diversification is a strategy which a firm expands the sales of its goods or services across the borders of global regions and countries into different geographic location or markets. An international strategy is a strategy through which the firm sells its goods or services outside its domestic market. An international strategy results in international diversification. Firms pursue an international strategy to seek new opportunities to create value in international markets. The primary reasons firms pursue international diversification is to:
• Increase market size
• Increase return on investment
• Seek economies of scale, scope, and learning
• Obtain resources and achieve other location advantages
Firms that pursue an international strategy must decide whether to compete in all or many global markets, or to focus on a particular region. Competing in all markets provides the potential for economies because of the combined market size. Also, firms may be influenced to expand their global reach because competing in emerging markets can lead to higher performance. However, a firm that competes in industries in which the international markets differ greatly may wish to narrow its scope because of the liability of foreignness. Factors such as differences in labor forces or an inability to understand customers in a particular market can lead to disadvantages for firms competing outside their primary domestic markets. Also, the trend toward regionalization is supported by governments that have developed trade agreements to increase the economies power of their regions.
The three basic approaches to international corporate-level strategy are:
• Multidomestic strategy – an international strategy in which strategic and operating decision are decentralized to the strategic business unit in each country to allow that unit to tailor products to the local market.
• Global strategy – an international strategy through which the firm offers standardized
• Increase market size
• Increase return on investment
• Seek economies of scale, scope, and learning
• Obtain resources and achieve other location advantages
Firms that pursue an international strategy must decide whether to compete in all or many global markets, or to focus on a particular region. Competing in all markets provides the potential for economies because of the combined market size. Also, firms may be influenced to expand their global reach because competing in emerging markets can lead to higher performance. However, a firm that competes in industries in which the international markets differ greatly may wish to narrow its scope because of the liability of foreignness. Factors such as differences in labor forces or an inability to understand customers in a particular market can lead to disadvantages for firms competing outside their primary domestic markets. Also, the trend toward regionalization is supported by governments that have developed trade agreements to increase the economies power of their regions.
The three basic approaches to international corporate-level strategy are:
• Multidomestic strategy – an international strategy in which strategic and operating decision are decentralized to the strategic business unit in each country to allow that unit to tailor products to the local market.
• Global strategy – an international strategy through which the firm offers standardized