Definition and incentives
International strategy can be defined as a strategy use by firms to market their goods or services outside home market. There are a number of incentives that entices a firm to utilize international strategy. These incentives are; extended life cycle of the firm’s product, use of the readily available scarce resources, globalization, and emerging markets like China (Hitt, Ireland, & Hoskisson, 2013 p 230). Firms accrue three benefits when it engages international strategy namely; expansion of the potential market size especially in emerging markets such as China, economies of scale and reduction in costs.
Categories of international strategies
There are two basic categories of international strategy that firms use; the business-level international strategy and corporate-level strategy (Hitt, Ireland, & Hoskisson, 2013 p 233). For instance, Toyota employs the international business-level strategy in China and where it keeps adjusting the strategy to meet the customers’ needs. The essence for doing this is because a firm based in a country endowed with national competitive advantages is not assured of success as it implements its preferred international business-level strategy. Corporate-level strategy can be categories into three, multi-domestic strategy, global strategy and competitive strategy.
Mode of entry and risks
Firms can choose to enter the international markets via five modes, namely, exporting, licensing, strategic alliances, acquisitions and new wholly owned subsidiary (Hitt, Ireland, & Hoskisson, 2013 p 242). Licensing mode entry is the one identified to be used by the U.S. cigarette firms to penetrate into the Chinese broad cigarette markets. Despite the benefits of international strategy, there are also some risks such as political risks and economic risks. Chinese firms are known to pose a security risk to foreign firms as most of them purchase firms that possess key natural resources or those with intellectual property.
Work cited
Hitt, Michael A, R D. Ireland, and Robert E. Hoskisson. Strategic Management: Competitiveness & Globalization. Mason, OH: South-Western Cengage Learning, 2013. Print.
