LUBS Lecture 4: Internationalization Process

1 (c) Devinney, 2014

International Business


(c) Devinney, 2014 4



However, the LDR implies that returns will peak and decline (in the best of all possible worlds). Why?

•  Demand is not infinite •  Market expansion will normally quickly discover the ‘best’ markets

(those with the most aligned ‘fit’ between what you do and what they want); hence, expansion moves you into less well aligned markets leading to:

•  Lower willingness to pay for your product/services •  Additional complexity costs of managing mis-alignment •  Natural adaptation of the product/service to get it aligned to the newer

markets—leading to an upswing in investment requirements •  Encroachment by new competitors and related market operators

•  The more successful you are the more likely imitators will enter the market and not have to pay your fixed setup costs (hence lowering margins—something you might not be willing to do given you believe in covering your initial investment)

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(c) Devinney, 2014

(c) Devinney, 2014


LUBS Lecture 4: Internationalization Process

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