What are the competitive advantages of international business?

Answer 1

International business can offer several competitive advantages to companies that choose to expand their operations globally. These advantages can vary depending on the industry, market, and specific circumstances, but some common competitive advantages of international business include:

Market Diversification: Expanding internationally allows a company to diversify its customer base, reducing dependence on a single market. This can help mitigate risks associated with economic fluctuations in one country or region.

Economies of Scale: Larger markets often provide opportunities for economies of scale in production and distribution. Increased production volumes can lead to lower per-unit costs, improving a company's competitiveness.

Access to Resources: International expansion can grant access to important resources, such as raw materials, skilled labor, or technological expertise, which may not be readily available in the home market.

Extended Product Lifecycle: A product that has reached maturity in one market may still be in the growth stage or have untapped potential in another, extending its lifecycle and profitability.

Competitive Advantage through Innovation: Entering new markets may stimulate innovation and encourage a company to develop new products or adapt existing ones to meet the needs of different customer segments.

Risk Diversification: Operating in multiple markets can reduce the impact of political, economic, or regulatory risks in any one market. This diversification can help safeguard against unexpected downturns.

Brand Building and Reputation: A global presence can enhance a company's brand image and reputation. Customers may perceive internationally recognized brands as more trustworthy and of higher quality.

Access to Talented Workforce: Some companies expand internationally to tap into a larger pool of skilled workers, which can be especially beneficial in industries requiring specialized skills.

Tax Benefits: Companies can potentially benefit from favorable tax policies in certain countries, reducing their overall tax burden.

Strategic Alliances: International expansion can facilitate the formation of strategic alliances and partnerships with foreign companies, providing access to new markets, technologies, or distribution channels.

Competitive Learning: Engaging in international markets can expose a company to different business practices, market dynamics, and customer preferences, allowing for learning and adaptation that can be applied elsewhere.

Global Supply Chain Optimization: Companies can optimize their supply chains by sourcing materials or components from locations with cost advantages, streamlining production and distribution.

It's important to note that while international business offers various advantages, it also comes with challenges and risks, including cultural differences, regulatory complexities, currency fluctuations, and geopolitical instability. A successful international business strategy requires careful planning, market research, and adaptability to local conditions.

Answer 2

Faster growth: economies that have in the past been open to foreign direct investments have developed at a much quicker pace than those economies closed to such investment e.g. communist Russia

♦ Cheaper imports: this is down to the simple fact that if we reduce the barriers imposed on imports (e.g. tariffs, quota, etc) then the imports will fall in price

♦ New technologies: by having an open economy we can bring in new technology as it happens rather than trying to develop it internally

♦ Spur of foreign competition: foreign competition will encourage domestic producers to increase efficiency. Carbaugh (1998) states that global competitiveness is a bit like Golf, you get better by playing against people who are better than you.

♦ Increase consumer income: multination will bring up average wage levels because if the multinationals were not there the domestic companies would pay less.

♦ Increased investment opportunities: with globalisation companies can move capital to whatever country offers the most attractive investment opportunity. This prevents capital being trapped in domestic economies earning poor returns.