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Essay / Research Paper Abstract
This 4 page paper looks at the way in which firms may be seen as testing the robustness of their competitive advantage when undertaking international expansion. The paper looks at how and why this may occur and considers some real world examples where firms have demonstrated, or failed to demonstrate, the strength of their competitive advantage in the international environment. The bibliography cites 4 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEcaintexp.doc
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Unformatted sample text from the term paper:
advantage over its competitors, an advantage that will help lead to success (Thompson, 2007). As time has gone by, globalization has increased and the barriers to international trade have decreased.
This has changed the marketplace significantly. In this increasingly international environment it may be argued that when firms choose to expand internationally and move into new markets they will be
truly testing their competitive advantage. To consider how competitive advantage is tested it is first necessary to define what is meant by competitive advantage. When looking at competitive
advantages of firms there are two sources; cost and differentiation. Cost advantage is where a firm is able to keep its cost down so that its production processes are lower
than their competitors (Porter, 1985). This does not equate to a low price strategy often firms with a cost advantage will follow middle market pricing strategy; the low cost of
production results in a superior profit margin which may then be used to support the sales and operations by the firm (Thompson, 2007). Cost advantage is often supported by economies
of scope and/or scale (Nellis and Parker, 2006). Differentiation is when the company "provides something unique that is valuable to buyers beyond simply offering a low price" (Porter, 1985; 120).
The premium that the product, or service, can command as a result of this differentiating characteristic should be greater than the cost of providing that source of differentiation. Differentiation may
be a material difference or features, or even simply perception as a result of branding (Thompson, 2007). When competing in the home market, where a firm has evolved and
developed there is a limited amount of competition. There may always be a risk of new entrants, especially firms that have been established in foreign markets who may expand. However,
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