International Business

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International Business
Chapter 7
Talk It Over
The Product Life Cycle Theory suggests that firms go through different stages in the development of their output. Products pass through an introductory phase, followed by growth, maturity and then decline phases. The length of time, during which a product remains in certain stages, is a function of a variety of factors. Vernon’s view is that companies undertake foreign direct investment at particular stages in the life cycle of a product they have pioneered. Many companies launch old products in new markets. They invest in other advanced countries when local demand in those countries grows large enough to support local production. As a result in the early stage FDI is local market oriented. They subsequently shift production to developing countries when product standardization and market saturation give rise to price competition and cost pressures. Investment in developing countries, where labor costs are lower is seen as the best way to reduce costs. Thus, FDI in the latter phase of the product cycle will be export oriented, motivated predominantly by cheap labor considerations. In the decline stage of PLC, the product innovating country becomes the net importer of the products. However, PLC theory fails to explain why it is profitable for a firm to undertake FDI at such times, rather than continuing to export from its home base and rather than licensing a foreign company to produce its product. Vernon’s theory is applicable for some products but it is not applicable for the vertically integrated MNEs. Some critics say that sometimes entrepreneurs purchase foreign assets prior to actually launching the products.

Chapter 8
Global Trade Deficit in Food Safety
They would be against and would probably lose business if they did not comply. I agree that stronger food measures should be put into place.…...

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