240 Part 2: Strategic Actions: Strategy Formulation
a leading international mining corporation. Operating as a global organization, the firm
has 71,000 employees across six continents to include Australia, North America, South
America, Europe, Asia, and Africa. Rio Tinto uses its capabilities of technology and inno-
vation (see first incentive noted above), exploration, marketing, and operational pro-
cesses to identify, extract, and market mineral resources throughout the world.^6 In other
industries where labor costs account for a significant portion of a company’s expenses,
firms may choose to establish facilities in other countries to gain access to less expen-
sive labor. Clothing and electronics manufacturers are examples of firms pursuing an
international strategy for this reason.
Increased pressure to integrate operations on a global scale is another factor influ-
encing firms to pursue an international strategy. As nations industrialize, the demand for
some products and commodities appears to become more similar. This borderless demand
for globally branded products may be due to growing similarities in lifestyle in developed
nations. Increases in global communications also facilitate the ability of people in different
countries to visualize and model lifestyles in other cultures. In an increasing number of
industries, technology drives globalization because the economies of scale necessary to
reduce costs to the lowest level often require an investment greater than that needed to
meet domestic market demand. Moreover, in emerging markets, the increasingly rapidFigure 8.2 Incentives and Basic Benefits of International StrategyIncentives
Basic
BenefitsExtend a
product’s life
cycleGain easier
access to raw
materialsEconomies of
scale and
learningOpportunities to
integrate
operations on a
global scaleOpportunities to
better use rapidly
developing
technologiesGain access to
consumers in
emerging marketsLocation
advantagesIncreased
market
size