The flight of firms : the decision process behind localization abroad
Background and problem:The industry of today is changing and many firms chose to internationalize due to the increased price competition. It is often cheaper to produce in a low cost country and sometimes it can be strategic to produce there in order to gain market shares.Purpose:The purpose of this thesis is to study the decision proc-ess when manufacturing firms choose to locate production abroad.Theoretical framework:Decisions have different grade of rationality and complexity. To make a decision to establish abroad is a complicated decision, which often involves many people, requires time and information in order to avoid uncertainty. The people involved in the process need to be able to both gather and use the information in order to do as good decision as possible. Many factors affect the decision concerning foreign establishment, the most occurring are low costs, better market structure and the growth potential in the area of interest.Empirical findings:ABA Group, Balton AB, ITAB Shop Concept and Stilexo Industry AB are the four firms in which the decision process is investigated. They have all experienced increasing competition in the more globalized market, which has forced them to establish abroad in order to survive.Analysis and final discussion:For all firms investigated, the decision to establish abroad was influenced by availability of information and time, the people involved and their ability to use the information. All these factors are affected by uncertainties, from which the firms not completely can protect themselves. To do as good decision as possible the firms need to be careful and consider all factors that influence the outcome.
School:Högskolan i Jönköping
Source Type:Master's Thesis
Keywords:decision process localization foreign production internationalization
Date of Publication:06/08/2005