Question

The primary reasons that companies opt to expand into foreign markets are to Select one: a. gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base. b. boost returns on investment, broaden their product lines, avoid tariffs and trade restrictions, and escape dealing with strong labor unions. c. grow sales faster than the industry average, reduce the competitive threats from rivals, and open up more opportunities to enter into strategic alliances. d. raise the entry barriers for industry newcomers, neutralize the bargaining power of important suppliers, grow sales faster, and increase the number of loyal customers e. avoid having to employ an export strategy, avoid the threat of cross-market subsidization from rivals, and enable the use of a global strategy instead of a multidomestic strategy

Answer 1

Answer:

C

Explanation:

All the answers have benefits to companies looking to expand globally, but in terms of the 'primary reasons' option C makes the most practical sense.   Let's look at the other choices first:

A:  Right in believing companies can access more customers overseas, but initially their costs will increase as the company will have to set new offices, hire people and/or build partnerships.  Business risk does go up but so does the number of opportunities.

B:  The ROI will not be a primary reason, but is of course part of th general thinking.  Many companies are not thinking of setting up new R & D offices gobally to start with that may produce new product lines.  Usually if companies are looking at new product lines they would first consider M & A.  They may avoid some tariffs and trade restrictions, but they may also be presented with new trade hurdles to naviagte in the process.  The labour regulations is a consideration for some companies looking to reduce their costs.  

D: There are easier ways to reduce the entry barriers - through product enhancements, marketing and pricing.   Sales, yes but more loyal customers can't be guaranteed just by adding locations.

E:  Yes on the export strategy, but that implies the company is able to outlay huge costs on setting up a self sufficient subsiduary to begin with - not their first move.  On cross-market subsidization from rivals, its a plus in this sense but again not their primary objective.  The global strategy is valid but a general motivation rather than encompassing the specific primary drivers behind a move overseas.

Ok, with C:  Growing sales is an obvious place for companies to start and having muliple markets to build customer base is going to make the company more immune to competition.  Strategic alliances in overseas markets are often key to making a successful market entry as such relationships are fairly straightforward to set up, reciprocal and both partners benefit from the low cost and high opportunity of capitalising on the tacit strengths and knowledge of the incumbent market partner instantly.  Whereas trying to build your new market team from scratch can take time.