When a firm adopts an internalisation approach to international trade, it is attempting to gain advantage by:

Question

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By replicating its domestic operation in the overseas market, the firm is internalizing the production processes, management and control mechanisms. This enables the firm to have greater control over the foreign operations, reducing the risk of losing valuable information and expertise, and protecting their intellectual property. It also allows the firm to take advantage of economies of scale, as well as use its existing resources and assets, such as distribution networks, production facilities, and know-how, to penetrate foreign markets.

When a Firm Adopts an Internalisation Approach to International Trade