International Business Strategy assignment Term Paper

International Business Strategy assignment - Term Paper Example As a result, the Turkish market realized a 35% decline in domestic demand for household appliances. At this juncture, the company is forced to revise its strategic potentiality in promoting its key goal of international expansion. This case study will explore Arcelik’s principal motives for international expansion. It will also evaluate different tactics that would assist the firm to achieve this aim. Principal motives for international expansion The major international growth motive that drives Arcelik is its intention to achieve economies of large scale operation. While sales increase, there would be a proportional increase in profitability also. In order to increase total sales volume, it is necessary for the firm to deal with large scale production processes that would in turn assist the firm to cut down various expenditures. When the company involves in large volume production, it is forced to purchase raw materials in bulk quantities which would aid the firm to earn the benefits of more cash and trade discounts. This strategy would also enable the company to take advantages of transportation costs and warehouse charges. Efficient use of capital equipment and employment of specialized labor are other objectives that lead Arcelik Home Appliances to set international expansion as the key aim. ... It is obvious that international expansion directly contributes to international identity or brand reputation in the global market. When the firm earns a good market stature, it assists them to raise cheaper credits at the time of contingencies. Since large business houses leveraged with stable and potential financial sources and other special reserves, creditors generally believe that these business entities have the potential to repay the money even in the times of difficulties. Therefore, banks and other financial institutions are willing to provide them credit facilities at cheaper rates without having much legal procedure. However, the international expansion and thereby low cost of credit would benefit Arcelik to reduce cost of production. Presently, Arcelik is highly dependant on the volatile local market; it will certainly impede the further economic growth of the organization. Hence, access to international market is Arcelik’s primary motive for international expansio n. Since Arcelik deals with household appliances, it would get prospective markets anywhere across the globe. Anyhow, America and Europe will be the most prospective markets for Arcelik as they are considered as the focal points of world’s trading. Ghemawat (2008) reflects that Turkish government eliminated tariffs on imports of household appliances from the European Community in 1996. This liberalization policy intensified imports from Europe and it severely affected Arcelik’s domestic market demand. It also drives them to enter international market. In 1970s and 1980s, the firm acquired technologies from General Electric and Bosch-Siemens; but these companies imposed many restrictions on Arcelik. By the end of 1990s, Arcelik developed its own appliance designs and hence it wished to