Question

What are some of the primary reasons a company decides to expand internationally? Identify a company in the news that has recently built a new overseas facility. Which of the three motivations for global expansion described in the chapter do you think best explains the company’s decision? Discuss.

Answer 1

Answer:

Primary reasons a company would decide to expand internationally are as follows:  

• Expanding markets and increasing sales are one of the primary reasons.
• Companies get globalized in order to become a market leader.
• The company may choose to enter into international market in order to diversify a company's product line.
• Markets and investments would be protected by companies once they enter into international market and get engaged in an international business.
• Controlling the expenses is again one of the most important reasons. Company would buy the resources to gain cost advantage.
• For example, the company which is located in Canada gets most of their resources from China; the company would look forward to get situated near China.
• Another reason would be, to get protected from their competitors or to gain advantage over them; the company would decide to expand internationally.

The three motivational factors that induce a company to go global are as follows:

• Economies of Scale — The advantage that a company gain through mass production to achieve the lowest possible production cost per unit.
• Economies of scope — The advantage that a firm gains by producing different varieties of products and services and at different regions.
• Low-Cost Production Factors — It is an opportunity to purchase the resources at the lower possible cost.

Jaguar Land Rover decided to manufacture cars outside the UK for the first time. In recent years, it has rapidly expanded in its home UK and the company is planning to go to Brazil and implement the strategies that they had implemented in India.

Jaguar Land Rover moves to other countries to gain the opportunity of producing at a lower price and to gain economies of scale.