International Business Examination - Essay Example

First stage In the first stage, the emphasis is on research and development that is focused on new product development. The firm is able to maintain its leverage in the market due to high demand for the product which has relatively few competitions. The stage is also marked by high profitability which gives further thrust to technology and processes. But the new product has smaller domestic market. The first stage is inherently linked to strategic initiatives of the firm which are used to exploit its competitive advantage to progress to the next level.

Second stage The second stage of product’s life cycle is process of maturing which leads to competition because other firms compete on variations of the product putting downward pressure on the prices. This necessitates the innovating firm to expand globally and focus on technology and intense marketing to maintain its niche market position. The phase also highlights growth of the firm with higher emphasis on internationalization in order to gain leverage by shifting production to new location in other countries with low production cost and increase profit.

The near standardisation of product results in established technologies, low focus on R&D and growing domestic and export market. FDI emerges as attractive option mainly for two reasons: to ease out price pressure from the domestic market; and to overcome the barriers of import in foreign countries and lower production cost (Krugman & Obstfeld, 2009). Moreover, the stage is also relevant because it provides opportunities for firms to expand their market internationally and create new avenues of growth.

Third stage In this phase, the product is matured and completely standardised and there is intense competition. With market saturation, the production is moved to overseas production sites with low production cost so that finished goods can be re-imported from these locations for home market with higher profit margin. Some scholars believe that the maturity of the product accelerates R&D to infuse it with greater value added service so that it can serve the changing needs of the customers as new product (Leinwand & Mainardi, 2010).

This is interesting because it promotes the concept of recycling of products and product cycles to constantly improve and improvise market. Thus, firms can maintain their niche position through constant innovation and growth in new market and existing market. 1(b) In the 21st century, the model provides a realistic description of firm internationalization. The stage approach is supported by various scholars who believe that sequential progression in the stages of product life cycle creates linkages for internationalization of firms (Li, 2007; Johanson & Vahlne, 1990).

The virtual economy, liberalization of market and most importantly, the inter-dependence of resources promote expansion of market and serve as major imperative for internationalization of firm. The innovative firm in the developed country first serves domestic market and gradually expands to other developing nations to serve local markets to leverage increasing competition. Later emerging markets provide them with locations that are cost effective in terms of production and become attractive.

Most importantly, in the 21st