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Chapter 8

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COMM 315
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Chapter 8 International StrategyIIdentifying International Opportunities Incentives to Use an International StrategyInternational strategy is a strategy through which the firm sells its goods or services outside its domestic market Reasons to use this strategyoIncreased demand in foreign countriesoTo extend a products life cycle oTo secure needed resources key supplies of raw material lower production costs oUniversal product demand borderless demand for globally branded products may be due to similarities in lifestyle in developed nations oIncreases in global communication facilitate to visualize and model lifestyles in different culturesoIn some industries technology drives globalization because the economies of scale necessary to reduce costs to the lowest level often require an investment greater than that need to meet domestic market demandTraditional motivesextending the product life cyclesecuring key resourceshaving access to lowcost laborEmerging motivesRisks oEmployment contracts and labor forces different significantly in internal marketsoJoint ownership with a local company in order to invest in local operations this allows the foreign firm to avoid tariffs oHost governments frequently require a high percentage of procurements manufacturing and RD to use local sources Incentives that influence firms to use international strategies four basic benefitsoIncreased market sizeFollowing an international strategy is an attractive option to firms competing in domestic markets that have limited growth opportunitiesThe size of an international market also affects a firms willingness to invest in RD to build competitive advantages in that market Larger markets usually offer higher potential returns and thus pose less risk for a firms investmentsoReturn on investmentLarge markets may be crucial for earning return on significant investments such as plant and capital equipment or RD Therefore most RD intensive industries such as electronics are internationalRecoup investments more quickly due toThe pace of new technology increase more products become absolute more rapidly and competitors can imitate the technologies relatively quick oEconomies of scale and learningEnjoy economies of scale particularly in manufacturing operations
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