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What is international strategy An international strategy is a strategy through which the firm sells its goods or services outside its domestic market Hill 378 One of the primary reasons for implementing an international strategy as opposed to a strategy focused on the domestic market is that international markets yield potential new opportunities Raymond Vernon captured the classic rationale for international diversification Vernon 191 He suggested that typically a firm discovers an innovation in its home-country market especially in an advanced economy such as that of the United States Some demand for the product may then develop in other countries and exports are provided by domestic operations Increased demand in foreign countries justifies direct foreign investment in production capacity abroad especially because foreign competitors also organize to meet increasing demand As the product becomes standardized the firm may rationalize its operations by moving production to a region with low manufacturing costs Vernon 203 Vernon therefore suggests that firms pursue international diversification to extend a products life cycle Firms can derive four basic benefits from using international strategies increased market size greater returns on major capital investments or on investments in new products and processes greater economies of scale scope or learning and a competitive advantage through location for example access to low-cost labor critical resources or customers Hill 381 Increased Market Size Firms can expand the size of their potential market by moving into international markets As part of its expansion efforts Whirlpool learned how to be successful in emerging markets In India the firm conducted 14 months of research on local tastes and values The company also provided incentives to Indian retailers to stock its products and its uses local contractors to collect payment and deliver appliances throughout India Since implementing this strategy in 1996 Whirlpools sales in India had grown 80 by 2001 The ability to market its appliances overseas is important to Whirlpool because US demand is forecast to stay flat through
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