ABSTRACT

This chapter argues that an international diversification strategy represents a special case of a more general diversification strategy. It reviews some of the motivations that induce a firm to internationalize its activities, and systematically compare those motivations with the rationales for diversification. The chapter describes the forces for global integration and co-ordination or local differentiation and responsiveness and relates them to a firm's related or unrelated diversification goals. It discusses the four alternative strategies developed by Prahalad and Doz and Bartlett and Ghoshal and compares them with the value creating strategies. The motivations for international diversification further are based on two fundamental mechanisms that provide the basis of any MNE's corporate advantage: exploiting differences in sourcing and market potential across countries and exploiting synergies through economies of scale and scope. Internationalization may also reflect a search for new markets for the firm's products and services.