INSTRUCTIONS: Please RESPOND to this answer from the Point of view as a student. Use credible sources and respond as if you are a manager of a marketing agency. Tell this student what your marketing agency would think of each of these answers from a Management perspective in about 4-5 paragraphs:
In hopes of bolstering growth and gaining competitive advantage, firms often seek to expand beyond domestic borders. The opportunities to capture clients & consumers in new markets, to secure geographic advantage, and to diversify risk, are all intriguing to firms seeking to improve their business by expanding internationally (Kokemuller, n.d., n.p.). Carpenter & Sanders (2008) have identified four key factors in international expansion: economies of scale and scope, location, multipoint competition, and learning. I will briefly explain the logic supporting why international expansion is not prudent for my firm at this point in their life cycle, particularly with respect to economies of scale and scope. One can understand how the reasoning also warrants dismissal of further analyses with respect to the key factors of multipoint competition as well as learning. An argument can be made that the only key factor that is attractive for my firm to expand internationally is location, but just as the other factors do not support international expansion, the location factor also does not.
The key factor of economies of scale and scope is to take advantage of economies of scale, and to translate that scale into operating efficiency. Economies of scale are defined as “the cost advantage that arises with increased output of a product” (Investopedia.com, n.d., n.p.). The commercial real estate firm I work for would not be able to take advantage of economies of scale in expanding abroad simply due to their concentration of resources in few locations. Expanding abroad would fragment the business. “…If these resources and activities are concentrated in a few locations, they can become isolated from key market, which may lead to delayed responses, to market changes” (Carpenter & Sanders, 2008, p. 208). Similar to the concept of economies of scale, economies of global scope is an “economic theory stating that the average total cost of production decreases as a result of increasing the number of different goods produced” (Investopedia.com, n.d., n.p.). Just as my firm would not be able to take advantage of economies of scale, they would also not be able to take advantage of economies of global scope.
As I have mentioned before, the three most important factors contributing to success in real estate are location, location, and location. Thus, investing and developing abroad could surely yield competitive advantage to commercial real estate firms, but not the one I work for. My company is small and localized, and the logical expansion would be to do so domestically before internationally. Prior to investing abroad a firm must delineate a strategy exemplifying the connection between resources, capabilities, and locations.
Carpenter, M., Sanders, Wm. (2008). Strategic Management: A Dynamic Perspective. Upper Saddle River, N.J: Prentice Hall.
Investopedia.com. (N.d.). Economies of Scale. Retrieved November 10, 2016, from
Investopedia.com. (N.d.). Economies of Scope. Retrieved November 10, 2016, from http://www.investopedia.com/terms/e/economiesofscope.asp
Kokemuller, N. (N.d.). Why Do Businesses Operate Internationally? Retrieved November 9, 2016, from http://smallbusiness.chron.com/businesses-operate-…