Submitted To:

Prof. Dr. Mohammad Ahsan Ullah

Professor, Department of Management Studies
Comilla University

Submitted By - Group Details:

Id.No Name Presentation Term paper

Marks Marks
11605014 Md.Hasan
11605019 Sabru Hossain
11605028 Farzana Akter (GroupLeader)
11605029 Abu Shium Akanda
11605034 Esrat Emrose Emma
11605062 Jakiya Parvin Bethi
11605063 Anindita Sinha

Date of Submission: 10th April 2021

 Table of Contents
1. 1.Expansion Strategy...................................................................................................................2
1.2. What Is An Expansion Strategy? & Why is it Important?......................................................2
1.3. Components for Developing a Successful Business expansion Strategy..................................3
1.4. How to Overcome the Challenges of Developing a Business expansion Strategy?..................5
2.1. Types of expansion strategy.....................................................................................................5
2.2. Expansion through Concentration...........................................................................................6
2.3. Expansion through Diversification...........................................................................................8
2.3.1. Different Types of Diversification Strategy.............................................................................8
2.3.2. Why do companies diversify?..................................................................................................9
2.3.3. The Risks of Diversification Strategy....................................................................................10
2.4. Expansion through Integration..............................................................................................10
2.5. Expansion through Cooperation............................................................................................12
2.5.1. Merger:..................................................................................................................................13
2.5.2. Takeover:...............................................................................................................................13
2.5.3. Joint Venture:........................................................................................................................16
2.5.4. Strategic Alliances:................................................................................................................17
2.6. Expansion through Internationalization................................................................................18
References.....................................................................................................................................20
1. 1.Expansion Strategy

Definition: The Expansion Strategy is adopted by an organization when it attempts to

achieve a high growth as compared to its past achievements. In other words, when a firm
aims to grow considerably by broadening the scope of one of its business operations in the
perspective of customer groups, customer functions and technology alternatives, either
individually or jointly, then it follows the Expansion Strategy. [ CITATION bus16 \l 1033 ]

1.2. What Is An Expansion Strategy? & Why is it Important?

A business or a company follows the expansion strategy when it wants to achieve a certain
high growth level compared to the previous performance. When a company plans to achieve
a certain growth level, it employs methods like increasing its business operations to target a
more significant customer market and technological tools. The goal and reason behind the
business expansion strategies may vary from business to business. It could be increasing the
social benefits, increasing the market share, achieving economies of scale, prestige, and
higher profit. Only those businesses follow the expansion strategy whose managers and
supervisors are ambitious. They’re willing to take risks and grow. [ CITATION Sha21 \l 1033 ]

Instead, an expansion strategy addresses how a company is going to evolve to meet the
challenges of today and in the future. An Expansion strategy gives the company purpose, and
it answers questions about the long-term plans. An expansion strategy usually starts by
identifying and accessing opportunities within business market. They go beyond the
company’s business and marketing plans, which detail how a person going to meet specific
business targets. Expansion strategies are important because they keep company working
towards goals that go beyond what’s happening in the market today. They keep both leaders
and employees focused and aligned, and they compel a businessman to think long-term. Bad
decisions often happen when a businessman makes decisions based on today, instead of an
emerging tomorrow.
1.3. Components for Developing a Successful Business expansion Strategy

Developing expansion strategy demands coordination among a cross-functional group of

stakeholders; it can’t be just a few people in a room with a whiteboard. Everyone involved
should understand what they’re working towards and why, as well as what they’re expected
to bring to the process. To be successful in strategy, a businessman needs to consider what
will significantly impact business growth. Let’s take a look at a few:

1. Value Propositions and Business expansion Steps

For a company to expand, it needs to increase its reach with existing target customers and
acquire new ones. To do this, the company must design a value proposition that clearly states
what it does and why customers need it. Then it must create an expansion strategy that
provides the steps (i.e. expansion moves) the company is going to make to take new things to
market.

2. Brand Relevance and Customer Experience

Even the most recognized brands in the world started from scratch at some point. So how did
they become some of the biggest names in the market? By building relevance with customers
and delivering a distinctive and integrated customer experience. Building a brand is much
more than a logo and a color palette (although those things are important for brand
recognition). Brand should be recognized by its values and by how customers experience the
brand both of which should be highlighted in a company’s expansion strategy.

Olive Garden was already an industry leader who looking for a new way to achieve
relevance with both their current customers and new ones. What was the key? The key were
Breadsticks and family. The development of Breadstick Nation saw the brand’s success surge
as it launched new breadstick products and experiences. And with a strategic focus on family,
a new customer experience for children was created both in the restaurant and online.

3. Thinking Long Term Business expansion

Being focused solely on the present and making snap decisions about the future is never a
good idea. Business organization needs to invest time and energy in thinking about where the
world is going and what it means for the organization's customers, partners, employees, etc.
The expansion strategy will help a person to make good decisions for the future of his/her
business, even though it might seem uncomfortable to place bets when even the present
seems uncertain.

4. Expanding into the New – Markets, Categories, Customer Segments

The company’s core business needs to be solid before it will make big expansion moves.
However, outlining longer-term goals will help a businessman to determine the steps that
need to take and measure the progress along the way. Think of it like a road map. Quick wins
and small successes can be mile markers guiding the company towards the long-term goal of
expanding into other markets, categories and/or segments.

Furrion is a brand that was a leader in the manufacture of audiovisual equipment, appliances
and power solutions for specialty vehicles, luxury RVs, yachts and consumer industries. With
this strength behind them, they were focused on entering the home appliance market. Prophet
worked with Furrion to identify the brand purpose principles that would capture growth in
this new market, including a new visual identity, which was unveiled with great success.

5. Growing at a Pace that Can Handle

We’ve all seen it before, and we’ll see it again – companies that grow too fast and then fail
because they can’t keep up. An expansion strategy will help to develop at the right pace for
organization. The last thing a businessman wants to do is overextend him to secure short-term
gains that will eventually put too much strain on his business and his people. It can be hard to
make trade-offs, sometimes sacrificing the exciting for the sensible, but it is sometimes
necessary for the overall health of the company. This doesn’t mean one shouldn’t take risks,
but in order to take the risks a businessman needs to make sense in context of the big picture.
1.4. How to Overcome the Challenges of Developing a Business expansion
Strategy?

Developing an expansion strategy is demanding and time-consuming because it is a bespoke

process. That said, some of the most common challenges in developing an expansion strategy
are:
1. Opportunity and impact
2. Defining the target customer segment(s), their needs and their pain points
3. Evaluating the projected impact of the strategic growth moves that a company wants to
make
4. Understanding the feasibility of the business growth moves (i.e. time, capabilities,
resources)
5. Alignment and prioritization
6. Aligning leadership around a narrow set of well-defined goals
7. Involving the right people and managing stakeholder expectations
8. Setting priorities and sequencing growth moves in a timeframe that makes sense
9. Not approaching it as a one-time task, instead of a continuous journey
10. And most importantly Not thinking big enough about what business you want to be in

Before a businessman embarks on creating his business expansion strategy he should

consider how he is going to tackle these challenges. [ CITATION Ros21 \l 1033 ]

2.1. Types of expansion strategy

Here are the five types of expansion strategies that businesses and companies use, and they’re
as follows;
2.2. Expansion through Concentration

Expansion through concentration is the grand level strategy, and it requires an investment of
a plethora of capital and resources in a specific product line. It’s to satisfy the needs of the
target market with the specific verified technology. In other words, when a business or a
company invests its capital and resources into one or more product lines and businesses, the
purpose is to satisfy the needs and wishes of customers.[ CITATION Sha21 \l 1033 ]

Concentration involves expansion within the existing line of business. Concentration

expansion strategy involves safeguarding the present position and expanding in the current
product-market space to achieve growth targets. Such an approach is very useful for
enterprises that have not fully exploited the opportunities existing in their current products-
market domain. A firm selecting an intensification strategy concentrates on its primary line of
business and looks for ways to meet its growth objectives by increasing its size of operations
in its primary business. Intensive expansion of a firm can be accomplished in three ways,
namely, market penetration, market development and product development. Concentration
strategy is followed when adequate growth opportunities exist in the firm’s current products-
market space. [ CITATION www214 \l 1033 ] However, businesses and companies employ
concentration strategy by any of the following methods;

1. Product Development

Product development involves creating new products to serve existing markets. King Gillette,
an American businessman whose family hailed from France, pioneered the safety razor that
bears his family name.
His company’s more recent innovations in the razor market include Trac II (the first two-bald
razor), Altra (first razor with a pivoting head), Sensor (first razor with spring-loaded blades),
Mach 3 (first three-blade razor), and Fusion (first six-blade razor). Is the ten-blade razor
coming soon?

2. Market Development

Market development involves taking existing products and trying to sell them within new
markets. Starbucks engages in market development by selling their beans and bottled drinks
in grocery stores. Apple engages in market development by allowing customers in Starbucks
stores to connect directly to iTunes store and Starbucks Now Playing content. Customers are
offered a free download to get them to visit iTunes—and to perhaps purchase more songs.

3. Market Penetration Strategy

Market penetration involves trying to gain additional share of a firm’s existing markets using
existing products—often by relying on extensive advertising. Perhaps the most famous
example of two close rivals simultaneously attempting market penetration is the “cola wars”
where Coca-Cola and PepsiCo fight for share in the soft drink market. Pepsi’s blind taste test
in 1975 called the Pepsi Challenge is one of the more famous attacks in this ongoing battle.
[ CITATION ope21 \l 1033 ]
Businesses and companies utilize concentration strategy because they’re already familiar with
the field and product niche. They don’t have to make any structural changes in the company.
It is because they already know their business. The reason the concentration strategy is risky
is due to the over-dependence on one industry. If the country’s economy falls, it would
drastically impact your business. Some businesses have made a plethora of investments in
one sector. Any latest technological development would make their product obsolete.
[ CITATION Sha21 \l 1033 ]
2.3. Expansion through Diversification

Through diversification, expansion is when a company changes its business type by either
entering into the new market or launching the new product. Businesses and companies
follow the diversification strategy during the economic recession period. Diversification
strategy, as we already know, is a business growth strategy identified by a company
developing new products in new markets. That definition tells us what diversification strategy
is, but it doesn’t provide any valuable insight into why it’s an ideal business growth strategy
for some companies or how it’s implemented.

2.3.1. Different Types of Diversification Strategy

In the world of business, there’s no “one strategy fits all” solution for growth. Diversification
can present itself in a variety of different forms depending on the direction a business wishes
to move in, and can either be related or unrelated to the current business offering. The
purpose of a business diversification strategy is to recover the company’s losses by making a
profit from the other business. The economy and market have affected its profits and
earnings. The diversification strategy has two main types;

1. Concentric Diversification

Concentric diversification occurs when a company enters a new market with a new product
that is technologically similar to their current products and therefore is able to gain some
advantage by leveraging things like industry experience, technical know-how, and sometimes
even manufacturing processes already in place.
Concentric diversification can be beneficial if sales are declining for one product, as loss in
revenue can be offset by a rise in sales from other products. An example of concentric
diversification would be a computer manufacturer who diversified from clunky desktop PCs
into laptop production. This would allow them to immediately take advantage of the new
wave of computer users who demanded more portable solutions.

2. Conglomerate Diversification

When a company expands into other businesses regardless of their relevancy or irrelevancy to
its core niche, we call it conglomerate diversification. In other words, conglomerate
diversification is when a company acquires other business or product / service (relevant or
irrelevant) to increase its product / service portfolio. If you’re looking to diversify into
completely new markets with unrelated products to reach brand new customer bases, this is
known as conglomerate diversification. The term conglomerate refers to a single corporate
group operating multiple business entities within entirely different industries. The parent
company that owns all of the individual entities is known as a conglomerate, and it became
one by successfully implementing a conglomerate diversification strategy.

An example of conglomerate diversification would be Tata group, which was founded in

1868 and diversified from its humble beginnings as a hotel company into a global
multinational encompassing 100 individual companies. It now employs 706,000 people
across a variety of sectors such as chemicals, steel, automotive, engineering,
telecommunications, information systems, and consumables. [ CITATION www215 \l 1033 ]

2.3.2. Why do companies diversify?

First and foremost, companies diversify to achieve greater profitability. Diversification is

used by businesses to help them expand into markets and industries that they haven’t
currently explored. This is achieved by adding new products, services, or features that will
appeal to the customers in these new markets. By expanding their reach and appeal,
businesses are able to explore new avenues for sales, and in turn, have the potential to vastly
increase their profits. In addition to achieving higher profitability, companies choose to
diversify for a variety of other reasons. For instance, diversification can also allow a company
to minimize the risk of an industry downturn, it can boost brand image, and it can also be
used as a defense mechanism to protect a company from strong competition.
2.3.3. The Risks of Diversification Strategy

Unlike market penetration strategy, diversification strategy is considered high risk not only
because of the inherent risks associated with developing new products, but also because of
the business’s lack of experience working within the new market. When a company chooses
to diversify, they knowingly put themselves in a position of great uncertainty. Additionally,
diversification often requires significant expansion of human and financial resources, which
can sometimes have a detrimental effect on the allocation of resources in the core industries.
For these reasons, it is recommended that a company should only pursue a diversification
strategy when the current product or current market no longer offers opportunities for further
growth. It’s critical for companies to thoroughly evaluate the risks and assess the likelihood
of achieving a profitable outcome before deciding to pursue diversification.

2.4. Expansion through Integration

Through integration, expansion is when you combine / join various current operations of the
company without changing the target customer market. Businesses and companies use a
value chain system for integration. The value chain is the process of related activities that a
company performs, from the raw materials procurement to the finished good. The company
increases or decreases the number of steps in the value chain system and develops the product
to satisfy customers ’needs.

The expansion through integration has two main types;

(a) Integration at the same level or stage of business in the same industry i.e. horizontal
integration.
(b) Integration of different levels/stages of business in the same industry i.e. vertical
integration with backward and forward linkages.
(a) Horizontal Integration:

When two or more firms dealing in similar lines of activity combine together then horizontal
integration takes place. Many companies expand by creating other firms in their same line of
business. A firm is said to follow horizontal integration if it acquires or starts another firm
that produce the same type of products with similar production process/marketing practices.
The reasons for horizontal integration are as follows:

1. Elimination or reduction in intensity of competition.

2. Putting an end to practice of price cutting.

3. Achieve economies of scale in production.

4. Common pool of resources for research and development.

5. Use of common distribution channels and uniform brand name.

6. Fixation of common price.

7. Effective management of capacity imbalances.

8. Common advertising and sales promotion.

9. Making common purchases at low prices.

10. Reduction in overall cost of operations per unit.

11. Greater leverage to deal with the customers and suppliers.

The horizontal integration will increase the monopolistic tendency in the market. Less
number of players in the industry will lead to collusion to reap abnormal profits by setting
price of finished products at higher level than the market determined price.

(b) Vertical Integration:

A vertical integration refers to the integration of firms in successive stages in the same
industry. The integration of different levels/stages of the industry is known as vertical
integration. Vertical integration may be either backward integration or forward
integration.
I. Backward Integration:

In case of backward integration, it extends to the suppliers of raw materials. A vertical

integration is one in which the company expands backwards by diversification into supplying
raw materials. This allows for smooth flow of production, reduced inventory, reduction in
operating costs, increase in economies of scale, elimination of bottlenecks, lower buying cost
of materials etc. It is a diversification engaged at different stages of production cycle within
the same industry. Firms adopting this strategy can have a regular and uninterrupted supply
of raw materials components and other inputs and the quality is also assured.

II. Forward Integration:

It is a case of down-stream integration extends to those businesses that sell eventually to the
consumer. The purpose of such diversification is to attain lower distribution costs, assured
supplies to the market, increasing or creating barriers to entry for potential competitors. The
firm expands forward in the direction of the ultimate consumer. For example- a cement
manufacturing company undertakes the civil construction activity; it will be a case of
diversification with forward linkage. With forward integration, firms can acquire greater
control over sales, distribution channels, prices, and can improve its competitive position
through differentiation and customer support.[ CITATION www214 \l 1033 ]

2.5. Expansion through Cooperation

When a company agrees with the competitor brand to perform business operations together
and compete with each other simultaneously. The expansion through cooperation has the
following types, and they’re as follows;
2.5.1. Merger:

A merger refers to a combination of two or more companies into a single company. This
combination may be either through absorption or consolidation. Merger is said to occur when
two or more companies combine into one company. Merger is defined as ‘a transaction
involving two or more companies in the exchange of securities and only one company
survives.’ When the shareholders of more than one company, usually two, decides to pool the
resources of the companies under a common entity it is called ‘merger’. If as a result of a
merger, a new company comes into existence it is called as ‘amalgamation’. As a result of a
merger, one company survives and others lose their independent entity, it is called
‘absorption’.

Motives for Merger:

The merger activities are as a result of following factors and strategies, which are classified
under three heads:

 Strategic motives,
 Financial motives, and
 Organizational motives.

2.5.2. Takeover:

A takeover generally involves the acquisition of a certain block of equity capital of a

company which enables the acquirer to exercise control over the affairs of the company. The
main objective of takeover bid is to obtain legal control of the company. The company
takeover remains in existence as a separate entity unless a merger takes place. Thus, a
takeover is different from merger in that under a takeover, the company taken over maintains
its separate entity, while under a merger both the companies merge to form single corporate
entity and at least one of the companies loses its identity. The element of willingness on the
part of the buyer and seller distinguishes an acquisition from a takeover. If there exists
willingness of the company being acquired, it is known as ‘acquisition’. If the willingness is
absent, it is known as ‘takeover’. Takeover may be defined as ‘a transaction or series of
transactions whereby an individual or group of individuals or company acquires control over
the management of the company by acquiring equity shares carrying majority voting power’.
Takeover is an acquisition of shares carrying voting rights in a company with a view to
gaining control over the assets and management of the company. In theory, the acquirer must
buy more than 50% of the paid-up equity of the acquired company to enjoy complete control.
But in practice, however effective control maybe exercised with a smaller shareholding,
because the remaining shareholders scattered and ill-organized are not likely to challenge the
control of acquirer. Sometimes the acquirer may have tacit support of the financial
institutions, banks, mutual funds, having sizable holding in the company’s capital. The main
objective of a takeover bid is to obtain legal control of the company. In takeover, the seller
management is an unwilling partner and the purchaser will generally resort to acquire
controlling interest in shares with very little advance information to the company which is
being bought. Where the company is closely held by small group of shareholders, the
controlling interest is obtained by purchasing the shares of other shareholders. Where the
company is widely held i.e. in case of listed company, the shares are generally traded in the
stock market; the purchaser will acquire shares in the open market. Takeover is a general
phenomenon all over the globe and companies whose stock prices are quoted less and who
are having latent potential for growth. The takeovers are subject to the regulations contained
in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Takeover is a
business strategy of acquiring control over the management of Target Company – either
directly or indirectly. The motive of acquirer is to gain control over the board of directors of
the target company for synergy in decision-making. The eagle eyes of raiders are on the
lookout for cash rich and high growth rate companies with low equity stake of promoters.

Kinds of Takeover:

The ways in which controlling interest can be attained are discussed below:

A. Friendly Takeovers:

In a friendly takeover, the acquirer will purchase the controlling shares after thorough
negotiations and agreement with the seller. The consideration is decided by having friendly
negotiations. The takeover bid is finalized with the consent of majority shareholders of the
target company. This form of purchase is also called as ‘consent takeover’. In a friendly
takeover, the acquirer first approaches the promoters/management of the target company for
negotiating and acquiring shares. Friendly takeover is for mutual advantage of acquirer and
acquired companies.
B. Hostile Takeovers:

A person seeking control over a company, purchases the required number of shares from non-
controlling shareholders in the open market. This method normally involves purchasing of
small holding of small shareholders over a period of time at various places. As a strategy the
purchaser keeps his identity a secret. These takeovers are also referred to as violent takeovers.
The hostile takeover is against the wishes to the target company management. Acquirer
makes a direct offer to the shareholders of the target company without the prior consent of the
existing promoter/management.

C. Bailout Takeovers:

These forms of takeover are resorted to bailout the sick companies, to allow the company for
rehabilitation as per the schemes approved by the financial institutions. The lead financial
institution will evaluate the bids received for acquisition, the financial position and track
record of the acquirer.

D. Tender Offer:
In a tender offer, one firm offers to buy the outstanding stock of the other firm at a specific
price and communicates this offer in advertisements and mailings to stockholders. By doing
so, it bypasses the incumbent management and board of directors of the target firm.
Consequently, tender offers are used to carry out hostile takeovers. The acquired firm will
continue to exist as long as there are minority stockholders who refuse the tender. From a
practical standpoint, however, most tender offers eventually become mergers, if the acquiring
firm is successful in gaining control of the target firm.

E. Purchase of Assets:
In a purchase of assets, one firm acquires the assets of another, though a formal vote by the
shareholders of the firm being a acquired is still needed.

F. Management Buyout:
In this form, a firm is acquired by its own management or by a group of investors, usually
with a tender offer. After this transaction, the acquired firm can cease to exist as a publicly
traded firm and become a private business. These acquisitions are called ‘management
buyouts’, if managers are involved, and ‘leveraged buyout’, if the funds for the tender offer
come predominantly from debt.
2.5.3. Joint Venture:

All joint ventures are typically characterized by two or more ventures being bound by a
contractual arrangement which establishes joint control. Activities, which have no contractual
arrangements to establish joint control, are not joint ventures. The contractual arrangements
establish joint control over the joint venturers. Such an arrangement ensures that no single
venturer is in a position to unilaterally control the activity. Joint venture may give protective
or participating rights to the parties to the venture. Protective rights merely allow a co-
venturer to protect its interests in the venture in situation where its interests are likely to be
adversely affected. Joint venture is a form of business combination in which two unaffiliated
business firms contribute financial and/or physical assets, as well as personnel, to a new
company formed to engage in some economic activity, such as the production or marketing
of a product. Joint venture can be formed between a domestic company and foreign enterprise
in order to flow the skills and knowledge both the ways. A joint venture by a domestic
company with multinational company can allow the transfer of technology and reaching of
global market. The partners in joint venture will provide risk capital, technology, patent, trade
mark, brand names and allow both the partners to reap benefit to agreed share. Joint ventures
with multinational companies contribute to the expansion of production capacity, transfer of
technology and capital and above all penetrating into global market. Entering into a Joint
venture is a part of strategic business policy to diversity and enters into new markets; acquire
finance, technology, patent and brand names.

Forms of Joint Venture:

Joint ventures take many forms and structures. But it can be broadly categorized into three:

i. Jointly Controlled Operations:

The operation of some joint ventures involves the use of the assets and other resources of the
venturers rather than the establishment of a corporation, partnership or other entity or a
financial structure that is separate from the venturers themselves.

ii. Jointly Cent Rolled Assets:

Some joint ventures involve the joint control, and often the joint ownership, by the venturers
of one or more assets contributed to, or acquired for the purpose of, the joint venture and
dedicated to the purposes of the joint venture.
iii. Jointly Controlled Entities:

A jointly controlled entity is a joint venture, which involves the establishment of a

corporation, partnership or other entity in which each venturer has an interest.

2.5.4. Strategic Alliances:

An ‘alliance’ is defined as associations to further the common interests of the members.

Strategic alliance is an arrangement or agreement under which two or more firms cooperate
in order to achieve certain commercial objectives. The motives behind strategic alliances are
to reduce cost, technology sharing, product development, market access, availability of
capital, risk sharing etc. The concept of ‘alliance is gaining importance in infrastructure
sectors, more particularly in the areas of power, oil and gas. The basic objective is to
facilitate transfer of technology while implementing large objectives. The resultant benefits
are shared in proportion to the contribution made by each party in achieving the targets. In
strategic alliance, two or more firms that unite to pursue a set of agreed upon goals; remain
independent subsequent to the formation of an alliance. The strategic alliances are generally
in the forms like joint venture, franchising, supply agreement, purchase agreement,
distribution agreement, marketing agreement, management contract, technical service
agreement, licensing of technology/patent/trade mark/design etc. The strategic alliance
agreement contains the terms like capital contribution, infrastructure, decision making,
sharing of risk and return etc. A strategic alliance integrates the synergetic talents of alliance
partners. Mutual understanding and trust are the basic tenets of strategic alliances. For
smooth functioning of an alliance, partners are required to have preset priorities and
expectations from each other. This strategy seeks to enhance the long-term competitive
advantage of the firm by forming alliances with its competitors existing or potential in critical
areas instead of competing with others. In a world of fast changing technologies, changing
tastes and habits of consumers, escalating fixed costs and growing protectionism – strategic
alliance is an essential tool for serving customers. [ CITATION www214 \l 1033 ]
2.6. Expansion through Internationalization

Expansion through internationalization is when a company goes beyond the country’s

national border and market. The reason for internationalization is when the company has
utilized all the opportunities in the domestic market. Now the brand expands into the global
market to exploit opportunities in the international market. International strategy is a type of
expansion strategy that requires firms to market their products or services beyond the
domestic or national market. Firm would have to assess the international environment,
evaluate its own capabilities, and devise appropriate international strategy. An organization
can “go international” by crossing domestic borders international expansion involves
establishing significant market interests and operations outside a company’s home country.
Foreign markets provide additional sales opportunities for a firm that may be constrained by
the relatively small size of its domestic market and also reduces the firm’s dependence on a
single national market.

Firms expand globally to seek opportunity to earn a return on large investments such as plant
and capital equipment or research and development, or enhance market share and achieve
scale economies, and also to enjoy advantages of locations. Other motives for international
expansion include extending the product life cycle, securing key resources and using low-cost
labour. However, to mould their firms into truly global companies, managers must develop
global mind-sets. Traditional means of operating with little cultural diversity and without
global competition are no longer effective firms. International expansion is fraught with
various risks such as, political risks (e.g., instability of host nations) and economic risks (e.g.,
fluctuations in the value of the country’s currency). International expansions increases
coordination and distribution costs, and managing a global enterprise entails problems of
overcoming trade barriers, logistics costs, cultural diversity, etc. There are several methods
for going international. Each method of entering an overseas market has its own advantages
and disadvantages that must be carefully assessed. Different international entry modes
involve a trade-offs between level of risk and the amount of foreign control the organization’s
managers are willing to allow. It is common for a firm to begin with exporting, progress to
licensing, then to franchising finally leading to direct investment. As the firm achieves
success at each stage, it moves to the next. If it experiences problems at any of these stages, it
may not progress further. [ CITATION www214 \l 1033 ]
Businesses and companies perform the following strategies for expansion through
internationalization;

1) Global Strategy: Global strategy is when a company follows the low-cost approach
and offers its product / service to a particular foreign market where lower-cost is
available. The company provides the same low cost manufactured product to the rest
of the world.
2) Multi-domestic Strategy: A multi-domestic strategy is when a company provides a
customized product / service relevant to the foreign market conditions. It’s a costly
strategy because of its research and development cost, market, and manufacturing costs
by following the local markets ’needs in different countries.
3) International Strategy: International strategy is when a company offers its product /
service to those markets where they don’t have access to it. It requires strict controls
over the operations in other countries and offering them the same standard product.
4) Transnational Strategy: A transnational strategy when a company follows the global
system and multi-domestic process at the same time. Here the company offers
customized and low-cost products / services to the local market by following their
environmental conditions.

So, in order to globalize, the firm should assess the international environment first, and then
should evaluate its own capabilities and plan the strategies accordingly to enter into the
foreign markets. [ CITATION Sha21 \l 1033 ]
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