Professional Documents
Culture Documents
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aransportation Costs:
Costs:
Increase in transportation costs makes trading impractical
Low cost, high volume / weight, dangerous / hazardous
goods
Lack of domestic capacity:
capacity: Lack of spare capacity at home
country plants leads to FDI.
However availability of spare capacity at home plants
usually leads to exporting rather than Foreign Direct
Investment, due to its being considered competitive in
spite of high transportation costs ± due to marginal
cost pricing basis. (arading generally precedes FDI).
Companies want a better indication that they can sell
sufficient quantities before committing resources for
local production.
Learning about foreign operating environment by
exporting before investing in production facilities.
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In small-
small-scale process technology, country by
country production usually reduces unit landed
costs - since transportation is minimized. e.g.
Food Products
However in large scale process technology (Using high
fixed cost capital input), large scale production of
standardized product (Undifferentiated from competitors)
and exportation usually reduces unit landed costs by
spreading fixed costs over more units of output ± Ball
bearings, Alumina, Semiconductors
Plant size must be considered in relation to the market
size being served ± including nearby/other markets being
served.
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× è
÷ :
:
Alter product to suit local tastes
Compelled by local government to use local raw materials,
aest marketing may be difficult conduct from long distance.
ahe more the product has to be altered to suit the foreign
market, more likely it is to shift production abroad.
×
:
: be Indian buy Indian, Swadeshi Movement,
boycott of some foreign goods, incentives to buy local ggods
× è
V
:: Related to a country.
×
: Many consumers may not prefer to buy
:
some goods from abroad to minimize the risk of non/delayed
delivery - due to political problems, strikes etc.
Some consumers may not buy the goods fearing the non
availability of service and / OR spare parts.
Inventory cost may be high in case of imported goods;
impossible to implement JIa manufacturing systems.
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Disadvantages
Higher risk of work stoppages
Record keeping
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No desired company available
Acquisition will carry past problems
Harder to finance
movernment restriction (MRaP / other reasons)