International Opportunities” Please respond to the following:
Determine why, given the advantages of international diversification, some firms choose not to expand internationally. Provide specific examples to support your response.
International diversification is advantageous in many ways, but some firms choose not to expand due to complexities and risks that come with global diversification. Economic risks may lead to loss of investments as depicted in Argentina’s devaluation of the peso and subsequent failure of its economy. Also, political risk makes it difficult for firms to use this strategy. As such, political uncertainty such as the possible reintegration of North and South Korea may pose challenges to the businesses.
As firms attempt to internationalize, they may be tempted to locate their facilities where business regulation laws are lax. Discuss the advantages and potential risks of such an approach, using specific examples to support your response.
Internationalization strategy may take the form of firms setting up facilities in countries that have favorable regulations. Firms may gain advantages in that they can save money in terms of tax and fees that it takes to get started. Thus, this can translate to higher profitability in the company. However, this may pose dangers to such firms. The business regulations and laws can be different from one state to another, and thus may affect one or multiple aspects of the business. For instance, the legal environment in the United States may not be same as that of countries such as China or Bulgaria.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic Management (Concepts and Cases) (10th Edition ed.). Mason, OH: South-Western- Cengage Learning.
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