International strategies

1. Increased sales: By expanding into new markets, firms can reach new customers and increase their sales. This can lead to increased profits and a stronger financial position.
2. Reduced costs: By operating in multiple countries, firms can often achieve economies of scale. This means that they can produce goods and services at a lower cost per unit, which can lead to increased profits.
3. Increased innovation: By interacting with different cultures and markets, firms can gain new insights and ideas that can lead to innovation. This can help them to stay ahead of the competition and grow their business.

Determine why, given the advantages of international diversification, some firms choose not to expand internationally. Provide specific examples to support your response. There are a number of reasons why some firms choose not to expand internationally, even though there are many advantages to doing so. Some of the most common reasons include:

• Cost: Expanding into new markets can be expensive. Firms need to invest in research and development, marketing, and other activities in order to be successful in new markets.
• Risk: There is always some risk involved in expanding into new markets. Firms may not be familiar with the local culture or regulations, and they may face competition from established firms.
• Competition: In some industries, the competition is so intense that it is difficult for new firms to gain a foothold. This is especially true in industries where there are high barriers to entry.

For example, the pharmaceutical industry is very competitive. There are many large, established firms that have been operating in the industry for many years. It is difficult for new firms to enter the industry because they need to invest heavily in research and development. They also need to obtain regulatory approval from different countries. As firms attempt to internationalize, they may be tempted to locate facilities where business regulation laws are lax. Discuss the advantages and potential risks of such an approach, using specific examples to support your response. There are both advantages and potential risks to locating facilities in countries with lax business regulation laws. Some of the advantages include:

• Lower costs: Operating in countries with lax business regulation laws can be cheaper. Firms may be able to pay lower wages, avoid environmental regulations, and avoid taxes.
• Less bureaucracy: Countries with lax business regulation laws often have less bureaucracy. This means that firms can start and operate businesses more quickly and easily.
• Access to resources: Countries with lax business regulation laws may have access to resources that are not available in other countries. This can be an advantage for firms that need to access these resources.

However, there are also potential risks to locating facilities in countries with lax business regulation laws. Some of the risks include:

• Corruption: Countries with lax business regulation laws may be more corrupt. This means that firms may have to pay bribes or engage in other unethical behavior in order to operate their businesses.
• Unstable political environment: Countries with lax business regulation laws may have unstable political environments. This means that firms may face political instability, which can make it difficult to operate their businesses.
• Environmental damage: Countries with lax business regulation laws may not have strong environmental regulations. This means that firms may be able to pollute the environment without facing consequences.

For example, the clothing industry has been criticized for locating factories in countries with lax business regulation laws. These factories often pay their workers very low wages and force them to work long hours in unsafe conditions. They may also pollute the environment with chemicals and other pollutants. Ultimately, the decision of whether or not to locate facilities in countries with lax business regulation laws is a complex one. There are both advantages and potential risks to consider.