International Business: Entering Foreign Markets Strategically

To compete successfully in foreign markets, the Entrepreneur should decide on a global strategy in order to optimise production value. Micheal Porter's pinned down the concept of generic strategies, by suggesting that a company either strives to have (1) a low cost strategy focusing on lowered production and other related costs, or (2) a differentiation strategy increasing the attractiveness of products by providing a broader, well differentiated product range.


For most entrepreneurs, the ultimate goal is to maximise their business' long-term profitability. Expanding to foreign markets holds the key to this maximisation in two ways:

  • The entrepreneur needs to identify and focus on value-creating activities
  • The entrepreneur should locate productive facilities in foreign locations where costs are lowest.

These are fundamental considerations in order to be able to identify new markets and the development of effective strategies for business growth.


A business' value chain consists out of a series of value-creation activities which includes: Production, Marketing and Sales, Materials Management, Research and Development, Human Resources, Information Systems and the company's infrastructure. For the Entrepreneur to be able to analyse his business ability to reduce cost or create value, he must focus on the value chain activities. In order to realize location economies, separate activities should be assigned to specific foreign locations where they can be executed cost efficiently and effectively.


The Entrepreneur can optimise location economies by dispersing individual value creation activities to those locations around the globe where they can be performed most efficiently and effectively. By assigning a value creation activity to foreign locations, the Entrepreneur can lower the cost of value creation (low cost strategy) or differentiate its product/service from its competitors (differentiation strategy).