Question

The Corporate Planning Department of a US company is considering an international expansion strategy. What factors should this firm’s managers consider when determining the degree of international involvement that would be appropriate

Answer 1

While making an international expansion decision, the firm's managers should consider following factors.

(i) size of market the company wants to cater to. Bigger is the market size, greater will be the involvement. For market with huge potential the company can consider opening a fully owned subsidiary or work out strategic partnerships.Exports or franchising would be good if market is small but growing.

(Ii) company's understanding of the target market and the cultural similarities between the home nation and the target market.

(iii) Favourable conditions which might help the company to establish its presence and strategic position. These advantage s can be in form of economic policies, ease of doing business, low cost of operations and other specific strategic advantages.

(iv) Assessment of potential risks which a business might encounter. The risks can be in firm of political instability,natural disasters, armed conflicts, lawlessness or uncertain policies of the local government towards foreign businesses.

(v) Nature of the product and its long term demand scenario in the market chosen.