242 Part 2: Strategic Actions: Strategy Formulation
opportunity for foreign pork producers to export more pork to China and overcome
potential trade barriers in doing so. The acquisition also helps WH Group to upgrade its
global image, while providing the resources that Smithfield needed. It allows both firms
to expand their market size as well.^15
Firms such as Netflix, Carrefour, and WH Group understand that effectively man-
aging different consumer tastes and practices linked to cultural values or traditions in
different markets is challenging. Nonetheless, they accept this challenge because of the
potential to enhance the firms’ size and performance. Other firms accept the challenge
of successfully implementing an international strategy largely because of limited growth
opportunities in their domestic market. This appears to be at least partly the case for
major competitors Coca-Cola and PepsiCo, firms that have not been able to generate
significant growth in their U.S. domestic and North American markets for some time.
Indeed, most of these firms’ growth is occurring in international markets. An interna-
tional market’s overall size also has the potential to affect the degree of benefit a firm
can accrue as a result of using an international strategy. In general, larger international
markets offer higher potential returns and pose less risk for the firm choosing to invest in
those markets. Also related is the strength of the science base of the international markets
in which a firm may compete. This is important because scientific knowledge and human
capital are needed to facilitate efforts to more effectively sell and/or produce products that
create value for customers.^16Economies of Scale and Learning
By expanding the number of markets in which they compete, firms may be able to enjoy
economies of scale, particularly in manufacturing operations. More broadly, firms able to
make continual process improvements enhance their ability to reduce costs while, hope-
fully, increasing the value their products create for customers. For example, rivals Airbus
SAS and Boeing have multiple manufacturing facilities and outsource some activities to
firms located throughout the world, partly for the purpose of developing economies of
scale as a source of being able to create value for customers.
Economies of scale are critical in a number of settings in addition to the airline
manufacturing industry. Automobile manufacturers certainly seek economies of scale
as a benefit of their international strategies. Ford Motor Company employs 224,000
people worldwide and operates in six global regions: North America, Central and
South America, Europe, Middle East, Africa, and Asia Pacific. Ford is planning on
increasing sales in each region, especially in Asia.^17 Overall, Ford seeks to increase
the annual number of products it sells outside of North America, for example, it
increased its market share in Europe in 2014. Demonstrating the use of this interna-
tional strategy is the fact that Ford is now run as a single global business developing
cars and trucks that can be built and sold throughout the world.^18 Firms may also
be able to exploit core competencies in international markets through resource and
knowledge sharing between units and network partners across country borders.^19 By
sharing resources and knowledge in this manner, firms can learn how to create syn-
ergy, which in turn can help each firm learn how to produce higher quality products
at a lower cost.
Operating in multiple international markets also provides firms with new learning
opportunities,^20 perhaps even in terms of research and development (R&D) activities.
Increasing the firm’s R&D ability can contribute to its efforts to enhance innovation,
which is critical to both short- and long-term success. However, research results sug-
gest that to take advantage of international R&D investments, firms need to already
have a strong R&D system in place to absorb knowledge resulting from effective
R&D activities.^21