Diversification strategy of developing international markets

When deciding to go abroad by adopting international diversification, firm faces two main problems. The first one is the global – local dilemma concerning the standardization level of its products and services, that should be customized between countries in order to meet local market requirements. The second is the business scope, that is, firms should concentrate their assets and production in some limited locations or spread in the world. Such asset and production concentration depends on the firm goal in accessing and exploiting local advantages of countries according to the principle of economy of scope. For example, the success of McDonald’s on the Champs Elysées in Paris, and the success of Pepsi and Coca-Cola worldwide are example of the global convergence of customer needs and tastes; when these groups provide standardized globally products by focusing on cost leadership advantage at international level.

Firms need to study and develop their international diversification in their own way for both (i) balancing the adaptation and standardization of their products, and (2) taking advantage and opportunities in different local markets on the basis of economies of scope. The differences between countries can be significant, and firms can offer a diverse range of products to adapt to each market. For example, Nokia built a mobile phone manufacturing factory in Vietnam for exploiting the potential of local labor as well as for targeting the local consumer market. The characteristics of the phone lines that Nokia offer in this target market are cheap and customized by such product type, which are suitable for Vietnamese preferences.

There are different reasons explaining why firms decide to pursue an internationalization strategy. The first group concerns the market, because of: market and competition globalization, following customers abroad, saturated domestic market, exploiting the differences between countries and regions (cultural, administrative, geographic, macro factors, especially technology). The second group consists in exploiting the advantages of strategic capacities and resources, including: globalization advantage, advantages of firms’ resources particularly in international markets, and for strengthening their position and market power. The third group of internationalization reasons concerns economic benefits, such as achieving the economy of scope, reducing risks, and offsetting profits between markets.

In the internationalization strategy, firms need to choose the right type of market entry. The advantages and disadvantages of different entry modes in foreign investments are summarized in the table below:

Table 1: Advantages and disadvantages of different entry modes in foreign investments

9 thoughts on “Diversification strategy of developing international markets

  1. zoritoler imol says:

    Can I just say what a relief to seek out someone who actually knows what theyre talking about on the internet. You definitely know how one can deliver an issue to light and make it important. Extra people must read this and perceive this facet of the story. I cant consider youre no more well-liked because you positively have the gift.

  2. gralion torile says:

    What¦s Going down i’m new to this, I stumbled upon this I have found It absolutely helpful and it has aided me out loads. I am hoping to give a contribution & assist different users like its aided me. Good job.

  3. Europa Road says:

    Excellent site. Lots of useful info here. I am sending it to some pals ans additionally sharing in delicious. And certainly, thank you for your sweat!

  4. zoritoler imol says:

    Excellent weblog right here! Also your website loads up fast! What host are you using? Can I get your associate link in your host? I wish my site loaded up as fast as yours lol

  5. see it here says:

    F*ckin’ awesome things here. I’m very satisfied to look your article. Thank you a lot and i am looking forward to contact you. Will you please drop me a e-mail?

  6. Israel night club says:

    I was pretty pleased to discover this page. I want to to thank you for ones time for this fantastic read!! I definitely enjoyed every part of it and i also have you saved as a favorite to check out new things in your web site.

Leave a Reply

Your email address will not be published.