Minimum efficient scale is an explanation for the use of alliances as a foreign-entry tactic.

Question

Quizplus · Accepted Answer

Minimum efficient scale (MES) refers to the lowest output level at which a firm can produce its products at the lowest possible cost. To reach the MES, firms may need to achieve economies of scale through increased production volume or specialization. However, entering a foreign market alone may not allow a firm to reach the MES due to various reasons such as lack of local knowledge, limited resources, and regulatory barriers. Hence, forming alliances with local companies may help the firm to achieve economies of scale and reach MES more efficiently, making alliances a suitable foreign-entry tactic.

Minimum Efficient Scale Is an Explanation for the Use of Alliances