Question

QUESTION 1 : Words: 400 - 450

Briefly explain the importance of international expansion as a viable diversification strategy.

Answer 1

Importance of the international expansion as the viable diversification strategy

International diversity is a strategy in which the sales of goods and services of the firm are expanded globally into different countries and regions into potentially geographic markets. Instead of entering the one market, the firm enters the multiple markets. With the rise in globalization the market capitalism the world contributed to the economic boom and where the key source of value creation and competitive advantage is knowledge. The foreign markets provide an opportunity to increase the revenue base and profitability.

With the increase in time the trade between the nations has increased and which has also led to international expansion as a viable diversification strategy. Trades within the nation is less as compared to the international perspective, they must expand internationally to survive in the competitive market. Diversification helps in the economic growth of the countries and also helps to diversify the revenue stream which helps to increase the investment rate and ultimately increasing cash flows.

· The primary motive of the international expansion includes increasing the size of the potential markets for the goods and services, extending the life cycle of the products, economies of scale should be achieved, optimizing every activity in the value chain

· International diversification helps in reducing the overall risk of the firm through the stabilization of returns.

· The international diversification or expansion strategy focuses on the scope of operations through geographic and product diversification.

· Diversification led to an increase in the return of the firm initially it decreases but as the firm starts to learn to manage the international expansion it ultimately increases the returns.

· The cost incurred by firms pursuing the diversification may have higher expenses, local cultures, trade barriers, and lack of familiarity.