In the decision about whether to outsource, manufacturing of ...

[Mr3Hunna]

In the decision about whether to outsource, manufacturing of products is considered of high importance to a firm.
 
  Indicate whether the statement is true or false

Question 2

Why might firms choose to pursue internationalizatio n strategies? In a short essay, identify five major motivations for expanding overseas. Classify these motivations as strategic or reactive and provide an example of each.
 
  What will be an ideal response?

[ndhahbi]

Answer to Question 1

FALSE

Answer to Question 2

Strategic Motivations
a. One reason why firms might expand internationally is to seek opportunities for growth through market diversification. Firms expand to tap into the market potential that exists outside the home country. One example is the expansion of automatic teller machines (ATMs) throughout the world.
b. Firms expand to earn higher margins and profits. Foreign markets are often underserved or not served at all. Less intense competition, combined with strong market demand, implies that companies can command higher margins for their offerings. For example, compared to their respective home markets, bathroom fixtures manufacturers American Standard and Toto (of Japan) have found a more favorable competitive environment in rapidly industrializing countries such as Indonesia, Mexico, and Vietnam.
c. Firms internationalize to gain new ideas about products, services, and business methods. The experience of doing business abroad helps firms acquire new knowledge for improving organizational effectiveness and efficiency. For example, just-in-time inventory techniques were refined by Toyota and then adopted by other manufacturers all over the world.
d. Firms might internationalize to be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products. Companies often establish international operations in countries where needed raw materials are located, or where raw materials and labor can be more flexibly accessed. One example is the aluminum producer Alcoa, which established operations in Brazil, Guinea, Jamaica, and elsewhere to extract aluminum's base mineral bauxite from local mines.
e. Firms expand to gain access to lower-cost or better-value factors of production. Internationalizatio n enables the firm to access capital, technology, managerial talent, labor, and land at lower costs, higher-quality, or better overall value at locations worldwide. For example, some Taiwanese computer manufacturers have established subsidiaries in the United States to access low-cost capital.
f. Firms internationalize to develop economies of scale in sourcing, production, marketing, and R&D. Economies of scale refers to the reduction of the per-unit cost of manufacturing and marketing due to operating at high volume. For example, the per-unit cost of manufacturing 100,000 cameras is much cheaper than the per-unit cost of making just 100 cameras. By expanding internationally, the firm greatly increases the size of its customer base, thereby increasing the volume of products that it manufactures.
g. Firms might expand to invest in a potentially rewarding relationship with a foreign partner. Firms often have long-term strategic reasons for venturing abroad. Joint ventures or project-based alliances with key foreign players can lead to the development of new products, early positioning in future key markets, or other long-term profit-making opportunities. For example, Black and Decker entered a joint venture with Bajaj, an Indian retailer, to position itself for expected long-term sales in the huge Indian market.

Reactive Motivations
Firms expand to better serve key customers that have relocated abroad. In a global economy, many firms internationalize to better serve clients that have moved into foreign markets. For example, when Nissan opened its first factory in the United Kingdom, many Japanese auto-parts suppliers followed, establishing their own operations there.
Strategic or Reactive Motivations
Firms might also internationalize to confront international competitors more effectively or thwart the growth of competition in the home market. International competition is substantial and increasing, with multinational competitors invading markets worldwide. The firm can enhance its competitive positioning by confronting competitors in international markets or preemptively entering a competitor's home markets to destabilize and curb its growth. If the firm acts to confront an existing competitor, it would be responding reactively. If the firm acts to preempt a competitor, it would be responding proactively.
One example of a proactive response is Caterpillar's preemptive entry into Japan just as its main rival in the earthmoving equipment industry, Komatsu, was getting started in the early 1970s. Caterpillar's preemptive move hindered Komatsu's international expansion for at least a decade. Had it not moved proactively to stifle Komatsu's growth in Japan, Komatsu's home market, Caterpillar would certainly have to face a more potent rival sooner.