Discuss three reasons for firms seeking new market opportunities. Illustrate
each with an example of a firm that sought a new foreign market for that
particular motive.
Chapter 15
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a. Gain access to new markets or opportunities—The existence of a substantial market motivates many firms to produce offerings at or near customer locations. Local production improves customer service and reduces costs of transporting goods to buyer locations. For example, Intel expects big sales from China where incomes are rising and few Chinese families own a computer.
ReplyDeleteb. Follow key customers—Firms often follow their key customers abroad to preempt other vendors from servicing them. One example is Tradegar Industries, which supplies the plastic that its customer Procter & Gamble uses to manufacture disposable diapers. When P&G built a plant in China, Tradegar management made the decision to establish production there as well.
c. Compete with key rivals in their own markets—Some MNEs may choose to confront current or potential competitors directly, in the competitors' home market. The strategic purpose is to weaken the competitor by forcing it to expend resources to defend its market. For example, in the earth-moving equipment industry, Caterpillar entered a joint venture with Mitsubishi to put pressure on the market share and profitability of Komatsu, their common rival. Expending substantial resources to defend its home market hampered Komatsu's ability to expand its activities abroad.