In a short essay, discuss how transportation, trade restrictions, domestic capacity, and country-of-origin affect companies' decisions about modes of operating internationally

What will be an ideal response?

a. Transportation: When companies add the cost of transportation to product costs, some products become impractical to ship over great distances. Companies that make these products, such as soft drinks, must produce abroad if they are to sell abroad.
b. Trade restrictions: Governments restrict imports. Thus, companies may find they must produce in a foreign country if they are to sell there.
c. Domestic capacity: As long as companies have sufficient domestic capacity, they are more likely to serve foreign markets through exports. However, if they need to construct additional capacity, they are likely to consider putting that capacity abroad to save on transportation costs.
d. Country-of-origin effects: Government-imposed legal measures are not the only trade barriers to otherwise competitive goods. Consumer desires also may dictate limitations. Consumers may prefer to buy goods produced in their own country rather than another. Or, they may believe that goods from a given country are superior, and therefore prefer those countries' products. They may also fear that service and replacement parts for imported products will be difficult to obtain.