Under what circumstances is it advantageous for a company competing in foreign markets to disperse certain value chain activities across many countries?
What will be an ideal response?
In some instances, dispersing activities across locations is more advantageous than concentrating them. Buyer-related activities-such as distribution, marketing, and after-sale service-usually must take place close to buyers. This means physically locating the capability to perform such activities in every country or region where a firm has major customers. Many companies distribute their products from multiple locations to shorten delivery times to customers. In addition, dispersing activities helps hedge against the risks of fluctuating exchange rates, supply interruptions (due to strikes, natural disasters, or transportation delays), and adverse political developments. Such risks are usually greater when activities are concentrated in a single location. Even though global firms have strong reason to disperse buyer-related activities to many international locations, such activities as materials procurement, parts manufacture, finished-goods assembly, technology research, and new product development can frequently be decoupled from buyer locations and performed wherever advantage lies. Capital can be raised wherever it is available on the best terms.
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