Question

"International Opportunities" Please respond to the following: • Determine why, given the advantages of international diversification, some firms choose not to expand internationally. Provide specific examples to support your response.. • As firms attempt to internationalize, they may be tempted to locate their facilities where business regulation laws are lax. Discuss the advantages and potential risks of such an approach, using specific examples to support your response.

Answer 1

There is a very huge cost associated with the expansion of business operations internationally. Apart from the payments of office space, production units, compensations of manpower, there are a number of other fees which also have to be paid by the organizations in order to start the business in the new location or international location. Apart from these fees, the insurance fees are also quite high for those organizations which are mainly located on the outside of the host country. All these things add up the total cost of performing the business in other courtiers and thus the firms find it very difficult to expand internationally.

With international business and operations, most of the organizations tend to locate their units in those locations where they have to pay lesser fees, charges and taxes with fewer regulations. This is mainly due to increased profitability of the business operations in these locations. There are many other advantages of this such as low cost of production and it can help the company to have the competitive advantage over the competitors. But there are also a number of economic risks such as variation in the exchange rates of currencies, loss of investments due to political risks, government instability, civil war, war with other countries and strict government regulations