Essay: Analyzing International Business Theories and Strategies

This essay addresses three key questions in international business. Firstly, it differentiates between Porter's Diamond Theory, which emphasizes competitive advantages based on country-specific factors, and the International Product Cycle Theory, which focuses on product innovation in developed nations and subsequent market expansion. The essay argues for the contemporary relevance of Porter's Diamond Theory due to its applicability in attracting investment and facilitating exports. Secondly, the essay examines the advantages and disadvantages of acquisitions as a market entry strategy, highlighting the benefits of expanding market reach and the drawbacks of cultural differences and financial burdens. Finally, it discusses how firms can secure payments from foreign buyers, recommending the use of a letter of credit as a reliable and legally sound method to mitigate payment risks. The essay provides a comprehensive overview of these crucial concepts and strategies in the realm of international business.

Essay Questions

Contents
Difference between porter’s diamond theory and international product cycle theory............................3
Advantages and disadvantages of acquisition........................................................................................3
How can firm gain assurance on receiving payment from foreign buyer?.............................................4
References.............................................................................................................................................5

Difference between porter’s diamond theory and international product
cycle theory
Porter’s diamond theory concentrates on competitive advantages which countries gain
because of certain factors. On the other hand, international product cycle theory argues that
only developed nations can innovate new products. When their offerings get more demand
then they enter in another developed economy by opening local production; export is only
option for less developed economies. Another difference between both theories is role of
government. In porter’s model, government play crucial role in helping domestic firms so
they can get competitive advantage over companies of other nation. But, role of government
is not significant in later theory.
Porter’s diamond theory is more relevant in present day because every government is
trying to attract more investment in their state (Bakan and Doğan, 2012). Many companies
are testing their innovative products in developing markets because it provides them a model
which they can use, if it is successful, in developed economies. Most countries want to
increase their export as it assures more benefits to government and local companies also.
Advantages and disadvantages of acquisition
When an organisation buys another company of same or some different sector then it
is known as acquisition. Below are advantages and disadvantages:
Advantages
Acquisition allow an organisation to expand it market without spending time in
creating customer base. When they hire running firm then they also get access to their
existing and potential clients. Middle American Corporation will not face problem of brand
visibility if they will buy companies in foreign market as an entry mode. In terms of
expenditure, they may have to spend millions to enter in international market but with system
acquisition they can save huge amount (Almor, Tarba and Margalit, 2014 ).
Disadvantages
One of the major problems which Middle American Corporation can face after
acquisition is difference in culture and values. It may create new hurdles and become reason
of failed acquisition. This may cost both, money & time and it will also affect their goodwill

in a negative way. Some acquisition may cost huge sum to the enterprise. It will increase
burden of debt on them in long run.
How can firm gain assurance on receiving payment from foreign
buyer?
Letter of credit is a document which states that importer will have to pay exporter
according to the terms and conditions that are present in the letter (Zhang, 2012). Gateway
Corporation can make this letter before sealing the deal as it is a legal document and it can be
present in courts as an evidence. Import & Export regulations in every country differ but
Letter of credit is a commonly used versatile and secure document. In order to make the letter
more secure, Gateway Corporation can include the clause of irrevocable i.e. changes in deal
cannot happen without acceptance of both sides. This will dilute power of foreign buyer
because they cannot make any addition without consent of the company. It is a popular option
and already millions of firms are using it so Gateway Corporation does not have to worry
about its reliability.

References
Bakan, I. and Doğan, İ.F., 2012. Competitiveness of the industries based on the Porter’s
diamond model: An empirical study. International Journal of Research and Reviews in
Applied Sciences. 11(3). pp.441-455.
Almor, T., Tarba, S.Y. and Margalit, A., 2014. Maturing, technology-based, born-global
companies: Surviving through mergers and acquisitions. Management International
Review.54(4). pp.421-444.
Zhang, Y., 2012. Documentary letter of credit fraud risk management. Journal of Financial
Crime.