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Investing overseas can help a firm protect its domestic market in three different ways. The first is to establish foreign
operations in countries where the firm has major clients (Ball et al., 61,
2006). For example, if a U.S. firm has many customers in France, establishing
subsidiaries in France to service those customers will prevent competition by
similar firms in France from acquiring those customers.

This strengthens the U.S. firm because they now have the opportunity to prove that they can
service customers in France as well. This strategy is not very risky because the
domestic firm already has customers in the foreign country. Rather than
attacking the foreign market, the domestic firm is just defending itself from
foreign competitors.

The second way a firm can protect its domestic market by investing overseas is to attack the foreign market in the hopes that
the foreign firm will be so focused on defending its local market that it will
lessen its efforts to gain customers in the domestic firm's market (Dell et al.,
61, 2006).

For example, if Domestic Firm A sells a similar product or service as Foreign Firm B, DFA can begin operations in FFB's country in the
hopes of taking away some of FFB's customers, and causing FFB to focus on
keeping its own share of its domestic market. While FFB is being attacked in its
own country, DFA can work on gaining more of its own domestic market away from
FFB.

This technique is really one of deceptive distraction and is much riskier than the previous example because in this scenario the domestic firm
must spend some resources "distracting" the foreign firm, and some resources on
gaining a larger portion of its domestic market. Both of these tactics must be
done at once if the plan is to succeed.

The final reason that investing overseas can strengthen a firm's domestic market has to do with costs of
production. If a foreign firm can produce the same product at a lower cost than
a domestic firm, and sell that product at a lower price (by exporting it) in the
domestic country, then the domestic firm is at a disadvantage.

One way to become more competitive is to outsource part or all of a firm's production to
the "cheaper" foreign country and continue to resell the product in the domestic
firm's country (Ball et al., 61, 2006). Outsourcing allows the domestic firm to
utilize the lower production costs in the foreign country while remaining
competitive in its domestic market. This strategy is also not very risky because
it is lowering the firm's costs while defending its domestic market against
foreign competition. Rather than spending more of its resources, the aim of this
technique is to reduce costs and gain resources.

Although considered controversial, outsourcing continues to be a necessary part of staying
competitive in today's globalized world. Two leading countries in the market for
less expensive, quality labor are China and India. However, less expensive labor
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