International businessDiscuss how the role of foreign subsidiaries in production can be enhanced over time as they accumulate knowledge

5 Answers

belarafon's profile pic

belarafon | (Level 2) Educator Emeritus

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Knowledge of local markets is essential for advertising. Accepted ads in one country may be offensive or even banned in others; I recall a joke ad that used terrorist imagery that was very controversial in the United States, and I believe it cost the company sales even though they were not responsible for the ad itself. You have to know what is appropriate for each culture, and how to appeal to their unique cultural norms and tastes. An ad that plays on American exceptionalism won't play very well in China.

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accessteacher | High School Teacher | (Level 3) Distinguished Educator

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Knowledge of local markets is of course the biggest value of working with foreign subsidiaries. As you work together and build up a relationship, of course the foreign subsidiary is going to learn more and more about your product and the need or demand for that product in its own context. This will help you as they can shape that product in accordance with customer needs and demands.

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litteacher8 | High School Teacher | (Level 3) Distinguished Educator

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The longer you work with subsidiaries, the more knowledgeable and comfortable everyone will become over time. You may also start to develop economies of scale as you develop more production potential, assuming you are a manufacturing company.
readerofbooks's profile pic

readerofbooks | College Teacher | (Level 2) Educator Emeritus

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To work with foreign subsidiaries can be a benefit if you plan to either work in that country to sell in that country. They know the local businesses better and in many parts of the world what is most important are relationships. Hence, by working with subsidiaries, you can gain this advantage and all can benefit. Finally, as you work with them more, there can be insightful discoveries and innovations.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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As a foreign subsidiary gains knowledge of your firm's production methods, it can become more and more autonomous.  As it becomes more autonomous, it can enhance your firm's prospects.  This is because the foreign subsidiary will have a better understanding of the market in that country.  The local knowledge, combined with improved knowledge of the firm's ways, will make the foreign subsidiary more valuable.