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Internationalization Strategy Essay

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The integration of the world economy is offering many possibilities for corporations to expand globally and more gradually than ever. The importance of cost minimization and the existence of global trans-ocean supply chains gave the opportunity to manufacturing firms to outsource value- creating activities to distant locations that offer huge advantages, as Frankel (2000) indicated. These advantages, according to Kumar (2001), arise from a combination of cost and value advantage. Part of internationalization strategies that firms tend to follow is outsourcing their manufacturing activities to locations where costs are reduced compared to western countries and economies of the world. This process allows for a less path-dependent approach through …show more content…

This fact, as Buckley (1983) described, can occur within a firm and will continue until the cost of further internalization outweighs the benefits. Additionally, internalization can focus on vertical integration, by bringing new operations and activities that were before carried out by intermediate markets that are currently not productive to the highest level. According to Ruzzier et. al. (2006) “market internalization is a process of information gathering and assessment, through which management determines the best foreign expansion approach”. This analysis is supported by Creazza, Dallari & Melacini (2010) which argue that technical progress, liberalization of markets and the diffusion of global production systems are creating new opportunities and challenges for industrialized countries as well as for the global market …show more content…

But what is offshoring? According to Venkatraman (2004), “it is the creative and careful leveraging of new and available pools of skilled labor and exploiting the power of communication technologies to create new sources of competitive advantage”. Similar to Venkatraman (2004), the BNET Business Dictionary defines offshoring as “the relocation of business processes to foreign countries to take advantage of a supply of skilled but relatively cheap labour”. Both authors focus on the supply of relatively cheap labor, no matter their expertise and

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