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International Business - Essay Example

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International diversification maintains many advantages and disadvantages that will either hinder productive business growth and profitability or cause problems in attempting to recapture the diversification costs and labour. This essay describes the benefits and hindrances accoridng to the discussion. …
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International Business
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International Business

This essay describes these benefits and hindrances, referring to further case studies as justification for the arguments provided. The advantages of diversification There are many risks of servicing only a singular market with one product or service that has been attributed to placing all of a firm’s proverbial eggs in a single basket (Thompson, Strickland and Gamble 2013). Virtually every product or service offered by a corporation has an established life cycle, moving from a growth phase to an eventual decline along the life cycle model in which sales and demand begin to decline. The life cycle of the product is determined by a number of factors, including consumer behaviour changes, innovative product releases by competition that outperforms, competitive pricing instances that drive price-sensitive buyers to rival firms, or even new market entrants that increase choice and lower switching costs for consumers to defect to a rival brand. Whatever the case driving life cycle, corporations must be keenly and proactively aware of the ability of their singular product or service in sustaining long-run profit growth. Because of the risks of a stagnating local market, businesses achieve advantages by diversifying the business into a new international market. The most significant advantage is that diversification allows the business to spread risks (Thompson et al. 2013). Risk occurs through a variety of drivers, both internally-related and externally-driven. For a business operating in a single market with a lone product, any changes to demand can impact revenue growth and even complicate many of the value chain elements that support business, including human resources, supply chain and procurement, as...
As illustrated by the essay, there are many risks of servicing only a singular market with one product or service that has been attributed to placing all of a firm’s proverbial eggs in a single basket. Virtually every product or service offered by a corporation has an established life cycle, moving from a growth phase to an eventual decline along the life cycle model in which sales and demand begin to decline. The life cycle of the product is determined by a number of factors, including consumer behaviour changes, innovative product releases by competition that outperforms, competitive pricing instances that drive price-sensitive buyers to rival firms, or even new market entrants that increase choice and lower switching costs for consumers to defect to a rival brand.
This paper makes a conclusion that there are actually more advantages than disadvantages in selecting a diversification strategy. Revenue increases, better cash flow position, and cost reduction in a variety of support divisions along the value chain are the most prominent of these advantages. Inclusive in advantages are better scope of control, more efficient and cost-acknowledging logistics opportunities, and even currency valuation in favour of the diversified corporation. The described disadvantages of unsubstantial cross-cultural knowledge of the foreign market, high control and power of buying markets, and disruptive innovation threats would tend to offset advantages when these situations occur in the new international market. Despite the disadvantages, the long-run benefits of diversification supersede the potential hindrances of seeking this strategy for growth. ... Read More
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