Chapter 8: International Strategy 241adoption of technologies such as the Internet and mobile applications permits greater
integration of trade, capital, culture, and labor. For instance, Vietnam is experiencing
a “mobile revolution.” In 2015, over 40 percent of the population has smartphones and
access to the Internet, compared to 12 percent ten years ago. This is driving $4 billion in
e-commerce business in 2015 versus $700 million in 2012.^7 In this sense, technologies
are the foundation for efforts to bind together disparate markets and operations across
the world. International strategy also makes it possible for firms to use technologies to
organize their operations into a seamless whole.^8
The potential of large demand for goods and services from people in emerging mar-
kets such as China and India is another strong incentive for firms to use an interna-
tional strategy.^9 This is the case for French-based Carrefour S.A. This firm is the world’s
second-largest retailer (behind only Walmart) and the largest retailer in Europe. Carrefour
operates five main grocery store formats—hypermarkets, supermarkets, cash & carry,
hypercash stores, and convenience stores. The firm also sells products online.^10 In some
areas of the world, Carrefour performed poorly and in 2014. For example, it withdrew
from India as did another large U.K. retailer, Tesco. One observer concluded that “both
Carrefour and Tesco have been withdrawing from non-core international markets where
they cannot see long-term returns. Both had neglected their core domestic operations
and saw sales at home suffer.”^11 Both companies have been attempting to fine tune their
business models in both domestic and international locations.
Even though India differs from Western countries in many respects, such as culture,
politics, and the precepts of its economic system, it offers a huge potential market, and
the government is becoming more supportive of foreign direct investment.^12 Differences
among Chinese, Indian, and Western-style economies and cultures make the successful
use of an international strategy challenging. As such, firms seeking to meet customer
demands in emerging markets must learn how to manage an array of political and
economic risks, which we discuss later in the chapter.^13
We’ve now discussed incentives that influence firms to use international strategies.
Firms derive three basic benefits by successfully using international strategies:- increased market size
- increased economies of scale and learning
- development of a competitive advantage through location (e.g., access to low-cost
labor, critical resources, or customers).
These benefits will be examined here in terms of both their costs (e.g., higher coor-
dination expenses and limited access to knowledge about host country political
influences)^14 and their challenges.
8-1b Three Basic Benefits of International Strategy
As noted, effectively using one or more international strategies can result in three
basic benefits for the firm. These benefits facilitate the firm’s effort to achieve strategic
competitiveness (see Figure 8.1) when using an international strategy.
Increased Market Size
Firms can expand the size of their potential market—sometimes dramatically—by using
an international strategy to establish stronger positions in markets outside their domes-
tic market. As noted, access to additional consumers is a key reason Carrefour sees
international markets such as China as a major source of growth.
China’s WH Group (formerly known as Shuanghui International) acquired the
U.S. based, Smithfield Foods, Inc., a large pork producer in the U.S. Pork consumption
accounts for more than 60 percent of the total meat consumption in China creating an