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The OLI Paradigm
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Using the OLI paradigm, discuss the probable explanations for Ford’s decision to invest in factories in Mexico to manufacture cars that are sold in the U.S.
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International Finance: The OLI Paradigm
The OLI paradigm bases its focus on the ability of the firm to operate efficiently in the international markets. This stems from a number of focus areas where the company has a competitive advantage that is transferrable across markets. Such focus areas include ownership advantages, where they have a competitive advantage in the home market, location advantage, where the firm is attracted by various characteristics and locations in the international market, and internationalization advantages where the firm seeks to take control of the value chain in its industry.
Taking the case of the Ford Motor Company, their decision to invest in factories in Mexico to manufacture vehicles sold in the US is explained using the OLI paradigm discussed above. For a start, the Ford Motor Company has a competitive advantage at home, and it seeks to export this as a growth strategy to areas where they may not be the dominant player……
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