International Business

In: Business and Management

Submitted By anishoara
Words 8082
Pages 33
Responses to Review Questions

Answer One
What are the factors that influence a company's decision to go abroad? Please explain how these are related to each other. In the discussion on the internationalisation process of a firm, the product life cycle model plays a major role. Please explain and discuss the usefulness this model.

(A) Generally, the first decision to go abroad is a specific one. It is a decision to look at the possibility of a specific investment in a specific country, not a general decision to look around the globe for investment opportunities. At this stage the organisation has no experience with the complexities of foreign investment, although it often has had some export experience. There are no standard operating guidelines, which can be given to deal with these complexities. What is needed mostly is a strong push and/or commitment to go abroad. A company benefits from these earlier experiences in the subsequent investment decisions. The organisational factors include:

• role of the management
• motives of the organisation
• success at home

Other than these internal forces, a number of factors in the environment, outside the organisation, may also force a company to go abroad. These drivers of internationalisation may include:

• unsolicited proposal that cannot be ignored. These may include proposals from a foreign government, distributor or customer

• competitive drive or bandwagon effect following other competitors or a general belief that presence in a certain market is a must

• strong competition from abroad in the home market.

It is normally a combination of internal and external factors that is the reason behind a decision to go abroad. Although sometimes it is possible to explain investment in a certain market with one of the above factors, e.g. a number of investments in China can be directly related to…...

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