Occasionally, a firm will set up an operation in the home country of a major competitor with the idea of

keeping the competitor so occupied defending that market that it will have less energy to compete in
the firms home countryExport processing zone

A government designated zone in which workers are permitted to import parts and materials without
playing import duties as long as these imported items are then exported once they have been processed
or assembledIn bond plants

Production facilities un mexico that temporarily import raw materials, components, or parts duty free to
be manufactured, processed, or assembled with less expensive local labor, after which the finished or
semifinished product is exported

Changung the method of going abroad from exporting to overseas production is often necessary to
protect foreign markets. The management of a firm supplying a profitable overseas market by exporting
may begin to note some ominous signs that this market is being threatened

The importers may have sufficient local currency but may be facing delays in buyinh foreign exchange
from the governments central bank. The credit manager in the exporting firm by checking with his or her
bank and other exporters, learns that his condition is becoming endemic a reliable sign that the country
is facing a lack of foreign wxchanges. Experience exporters know that import and foreign exchanges
controls are in the offing and that there is a good chance of losing the market, especially if they sell
customer products. In times of foreign exchange scarcity, governments will invariably give priority to the
importation of raw material and capital goods

Lack of foreign exchange is not the only reason a company might change from exporting to
manufacturing in a market. For instance, while a firm may enjoy a growing export business and prompt
payments, it still may be forced to set up a plant in the market. It may be that its competitors have also
noticed their export volumes will support local production

A number of organization of petroleum exporting countries nations have invested in refining and
marketing outlets, such as filling stations and heating oil distributors, to guarantee a market for their
crude oil at more favorable pricesWhen a government sees that local industry is threatened by imports,
it nay erect import barries to stop or reduce them. Even threats to do this can be sufficient to induce the
exporter to invest kn production facilities in the importing country.

Few developed nations possess sufficient domestic supplies of raw materials. To ensure a continuous
supply, manufacturers in the industrializes countries are being forced to invest primarily in the
developing nations, where most new deposits are being discovered. A reason often cited by foreigm
firms for investing in the united states is the acquisition of technology and management know how
Many companies have chosen geographic diversification as a means of maintaining stable sales and
earnings when the domestic economy or their industry goes into a slump

The faster growth mentioned previously helps fulfill managements desire for expansion. Stockholders
and financial analysts also expect firms to continue to grow, and those companies operating only in the
domestic maeket have found it increasingly difficult to sustain that expectation
Once a company has determined from an analysis such as the preceding that it needs or wants to enter
into international markets, it must then address what means to use in order to enter these markets. All
of the means for supplying for eight markets may be subsumed in just two activities

1. Exporting to a foreign market and 2. Manufacturing in it

While this linear relationship still holds, changes in the world environment that affect trade and foreign
investment are occuring

1. Governments generally have liberalized the flows of capital, technology, people and goods

2. Improvements in information technology enable managers to direct company activities in diverse

areas over long distances. As a result, global competition has increased, forcing companies to strive for
better quality and lower cost products. To reduce cost, they have moved some production activities to
lower cost countries and through acquisition and mergers have increased company size to achieve
economies of scale

Recognize that globalization of an international firm occurs over at least seven dimensions and that a
company can be partially global in some dimensions and completely global in others .

There are at least 7 dimensions along which management can globalize 1. Product 2. Markets 3.
Promotion 4. Where value is added to the product 5. Competitive strategy 6. Use of non home country
personnel 7. Extent of global ownership in the firm