News Details


WHY COMPANIES WANT TO ENGAGE IN INTERNATIONAL BUSINESS?

WHY COMPANIES WANT TO ENGAGE IN INTERNATIONAL BUSINESS? International Business consists of trade of goods, services, technology, capital and/or knowledge at a global level it is one of the things that has emerged to be a huge advantage to the semi-developed or the developing nations. International business basically involves cross-border transactions of goods and services between two or more countries. Economic resources include capital, skills, and people for the purpose of the international production of physical goods and services such as finance, banking, insurance, and construction. International business is also known as globalization, globalization began with the capitalist society where traders starting going to different countries in order to make more profit out of the good and services that they provided. To conduct business overseas, multinational companies need to separate national markets into one global marketplace. There are two main factors that underline the trend of greater globalization. The first can be seen as the eliminating barriers to make cross-border trade easier and the second is technological change like development in communication, information processing, and transportation technologies. One of the major issue hindering the global businesses are that there are growing protests against it day by day and hence, there is an urgent need to tackle this issue before the very stakeholders in these businesses start to lose out. There is an active role for governments of each country in global businesses as they are the ones who set the rules for engagement with other countries. Therefore, along with the lines of what the Supreme Court in India has done which is to throw open the question about pricing of resources and how they must be managed. International business has its many advantages and benefits for a Production or manufacturing company, its easy to find cheaper labor and raw material in developing countries and that is one of the major reason huge companies invest in countries like India. With local markets being saturated, many companies think of expansion via international business. TOP REASON WHY COMPANIES ENGAGE IN INTERNATIONAL BUSINESS TO EXPAND THEIR SALES: The first and foremost reason for any multinational to set up industries in different countries would be because they like to expand their sales and acquire newer markets so that they can record impressive growth rates for the company. Considering the fact that the developing countries and with the huge impact of globalization the consumers of developing countries would aspire to live western lifestyles, it is natural that the western companies would like to target this need and hence, expand their markets even further. Moreover, with declining sales in one region, the western companies hope to recoup the losses by expanding into other markets.   TO EXPAND THE MARKET: Everyone wants to expand their market share and so they are able to sell more and more products and reach more audience. The importance of International business lies in the fact that you get a new market to enter and to expand in which is also a crucial fact and sometimes may not work as planned and can also lead the company into huge losses. No matter what was your position in the old market, the new market acts as a new playing field for any company in which they can either make huge profits out of it or lose all that they had. TO ACQUIRE RESOURCES: This is one of the most important reasons for companies to expand internationally. Many developing and new emerging countries have large deposits of minerals, metals, and land for agricultural production which is why the western multinationals eye markets of the developing countries in order to get access to the resources. This is the reason why many international businesses operate in Africa and South Asia where they can find humungous deposits of minerals and metals that are attractive for the profits that these multinationals can make. Many emerging markets and developing countries do not have the expertise or the resources needed to tap their reserves of these minerals and metals. NON-AVAILABLITY OF PRODUCT IN THE MARKET: A major advantage the company can have is that the product it produces is not available in the international market this makes the company and the product more in demand and can expand their services to the targeted audience. The firm, therefore, has a “production advantage” which it can use for maximum benefit. As a result, it is one of the benefits of the International business that the firm can establish a monopoly or a duopoly in the target market. MINIMIZING RISK: Businesses expand internationally to offset the risks of stagnating growth in their home country as well as in other countries where they are operating and setting up their industries. Firms exist to make profits and grow their bottom line, it is natural for them to expand internationally into countries that have better growth rates than their home country. Further, by operating in a basket of countries they are able to manage political, economic, and societal risks better than just by operating in their home country. As they vary from country to country, it makes sense to spread risk across countries and diversify the portfolio rather than placing all eggs in one basket. PRODUCT DIFFERENTIATION: If the products are differentiated and the differentiation is possible only in one’s own country, then a company should definitely expand to International markets, this not only opens them to other consumers but also makes them a single producing company for a single product. Furthermore, if a company is capable of product design, implementation as well as establishing new products and services, then this company has various benefits of International business already available to them they just need to take the risk of expanding and hoping for the best results. Expanding to international market sounds logical only if you can differentiate your products from existing market products and if you know your products can hold more value in other countries. GROWTH OF DEMAND IN OTHER MARKET: When South Africa belonged to the primitives and native tribes, there was no business being conducted there neither we could see any growth in the social welfare structures. However, with globalization, we can see the growth and development of Ghana and Nigeria as well as other African cities. The growth of these cities and flourishing commerce is another proof of the importance of International business and how multinationals change the future of developing nations. CAPACITY OF PRODUCTION: One reason for large companies to look towards international business is to utilize the excess production capacity of their manufacturing plants in other countries and gain more profit. Companies like Ultratech, Blue Star, Garment manufacturers, Chocolate manufacturers have huge production capacity. When you have such huge production potential, utilizing that potential becomes important. As a result, many companies take the benefits of International business by utilizing their manufacturing potential and starting the sale of their brand in International markets. ECONOMIES OF SCALE: When we are talking of operations and growth, one factor which helps the profitability of the company to a great extent is Economies of scale. With the business growing and you increasing your fixed costs, the concept of economies of scale sets in. Basically, the fixed cost goes down when the manufacturing goes up from the same assets. This benefits the company because the company gets a cost advantage over competitors and it also improves its own scale of operations. PURCHASING POWER: The last reason and one of the more Important one of doing International business is the purchasing power rising in targeted markets. The best example of this is Dubai which as a country has grown exponentially in the last several years and today is a huge tourist market.


Admission Enquiry Form


X
// Clear the error message when the user types a correct email // Validate the email