(Hitt, M. A., Hoskisson, R. E., & Ireland, R. D. 1994)Both international and product diversification plays a significant role for companies in terms of strategic behaviour. Rugman, A. M. (1979, 1981) has defined international diversification as enlargement beyond the regional boarders globally and nations into different locations, or markets of geography, therefore, a firm’s level of international diversification is related to the number of different markets in which it manipulates and their significance to the company (as calibrated, for example, by the percentage of whole sales which are represented by each market). International diversification is increasingly significant for firms since it is based on utilising overseas market opportunities and imperfections through internationalization. In this article I will analyse advantages of being diversification for firms, relationship between diversification and costs and nonlinear relationship between geographic diversification and performance.
2, Advantages of diversification
Buhner, R.(1987) states that international diversification provides prospective market opportunities, which supply organizations the opportunity for growth substantially. Kogut, B. 1985; Kim, C.W. et al., 1989, 1993) there are advantages for markets to be internationalized in terms of economies of scale, scope , and learning, and (Hamel, G. 1991) sharing principal abilities among different business sections and markets of geography. (Bartlett, C.A. and Ghoshal, S. 1989) these advantages can be utilized by companies with strong competitive abilities which are developed at home in international market. (Hymer, S.H. 1976)Hence, it is said that a company involving in international markets highly is, higher will be involvement of tangible and intangible resources, which has expectation... [continues]
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