The Volkswagen company
The Volkswagen company has its roots in Germany. However, the company has lasted for many years and has its products all over the globe. To ensure that the firm provides a better customer experience as well as a more extensive customer base, Volkswagen had to expand its territories and create a branch in North America. This was vital as there would be lesser budgets on exports as well as in production due to the affordable availability of raw materials in the new territory. Nonetheless, there were to be other factors to take into account such as competition from other car companies, licensing as well as location for the premises. For the firm to put all these factors into consideration they had to do a quick internalization and consider the pros and cons of investing in America. The OLI (Ownership, Location, Internalization) paradigm is a vital tool before any foreign direct investments are done. After such assessments that is when Volkswagen invested in an assembly plant that came to reduce costs of production for the company and increase sales in the new territory.
Before any steps to expand their production to North America, the Volkswagen company had to consider how they would be granted licensing to operate in a new region as a solo company that it is or would it have to merger with smaller or sometimes bigger firms. Most likely, the best ideal would be solo production that would ensure full ownership of the company. Once granted, the cost of licensing would be considered since it was a foreign company. Furthermore, licensing would not be a priority since North America being a liberal country does allow licensing of foreign companies provided they follow the stipulated laws that come with the license. Once ownership was assured the next step would be to find a location.
A location advantage ensured that the firm got the best out of the geographical landscape it settled in. If there was not a location advantage, then it would not be wise to expand from Germany and make a branch in North America. Chattanooga, Tennessee is a relatively huge town that attracts the labour needed in the assembly plant while equally providing a market to the rest of North America due to the proximity to the higher population density in North America that is in the Eastern side. Also, the town is a great site to build an assembly plant due to the proximity of the needed raw materials required as the firm ensures on site extraction of its aluminum. Therefore, it was a wise strategy as the firm entered a large market base and it was an excellent idea to expand to North America.
Finally, the last and most important aspect is Internalization. The firm ensures that all other elements of production are possible without seeking assistance from foreign based companies. Such include, marketing, hiring, and even production. If it is possible to utilize foreign companies due to their knowledge of the local market, then it is advantageous to have such take over some bit of the production. Internalization ensures that Volkswagen does not stress while approaching foreign market and its activities are kept afloat throughout the expansion period and thus foreign markets are efficiently reached.