ALLOCATING AMONG LOCATIONS

3 COMPLEMENTARY STRATEGIES FOR INTERNATIONAL EXPANSION

Alternative gradual commitments
Geographic diversification versus concentration
Reinvestment versus harvesting

ALTERNATIVE GRADUAL COMMITMENTS

 Going first to countries with characteristics similar to those of their home countries
 Having experienced intermediaries handle operations for them
 Operating in formats requiring commitment of fewer resources abroad
 Moving initially to one or a few, rather than many, foreign countries

USUAL PATTERN OF
INTERNATIONALIZATION
GEOGRAPHIC DIVERSIFICATION VERSUS CONCENTRATION
Diversification Strategy

- Company moves rapidly into many foreign markets, and gradually increasing its
commitment in each market

Concentration Strategy

- Company moves to one or a few foreign markets until its develops a very strong
involvement and competitive position then move to others.

MAJOR VARIABLES A COMPANY SHOULD CONSIDER WHEN DECIDING WHICH

STRATEGY TO USE

 Growth rate in each market

 Sales stability in each market
 Competitive lead time
 Spillover effects
 Need for Product, Communication and Distribution Adaptation
 Program Control Requirements
 Subsequent Product Diversification

REINVESTMENT AND HARVESTING

Reinvestment decisions

- Involve replacing depreciated assets or adding to the existing stock of capital

Harvesting (divesting)

- Advisable when investment outlook is better in other countries