Why Firms Decide to Go Global

A firm’s operating costs can also be increased by changes in legislation which can lead them to seek cheaper alternatives elsewhere. For example labour laws will need to be thoroughly scrutinized. Increases in the minimum wage in the UK has contributed to UK firms looking to exploit cheap labour whereby in 2003 companies such as BT took the decision to shift all of their call centres to India (www.bbc.co.uk/news). Another such protection is foreign ownership laws e.g. the Australian “Broadcasting Services Act 1992” does not allow any more than 20% foreign ownership of a broadcasting firm (www.austlii.edu.au). Taxation of foreign firms is also another cost to consider.

In addition, the internationalisation is the strategy to occupy the foreign market step by step. Also, the porter’s competitive advantages theory is to analysis the strategies of global business. They could divide to three strategies: over cost leading, diversity, and market focus strategy (Passemard& Calantone, 2000). The cost leading strategy focus on establish efficient scale production facility and minimize the research and advertising cost. The diversity strategy focus on introduce some unique product in whole industry. But, this strategy will with a high cost price. The focus strategy is attack of a particular customer group or specialist regional market, its purpose to design the service for a particular target. Consequently, the companies need to consider the internal and external factor condition, such as: factor condition, demand condition, related and supporting industries condition, and firm strategy and rivalry. They are called diamond system. This dynamic system gives the company a standard to measure theirs advantage and disadvantage before they enter foreign market. Moreover, the specific advantage in Internationalisation of Production is give companies a new choose for exhausted market (Strange,S. 1992). In an international environment, the companies will face more uncertain and unequal condition than home market, therefore the companies need keep the attention of more factors:

When a firm expands in its existing line of business.This may involve investment of capital or resources for improving the

Imposing barriers is a policy passed by the government to discourage imports from the foreign countries. Since every government has a responsibility to safeguard the wellbeing of its people, it is very importation for government to quickly take care of situations where the country is not necessarily profiting from international trade and take required actions as quickly as possible. Restrictions on overseas companies are tend to protect country’s own interest. There are so many reasons why sovereign government impose barriers. Some reasons are as follows.

8. Governmental regulation. Companies also may face government barriers and heavy restrictions and regulation if they intend to expand into other countries. Therefore, companies must examine governmental—as well as cultural—obstacles in other countries when developing location strategies.

The rapid pace of Globalization has led to a change in the global economy during the past several decades; it is believe that factors such as trade liberalisation, access to cheaper labour and resources, similarity of consumer demand around the world, and advances in technology and communication has widened the market of consumption, investment as well as production on a global scale. These globalization driven factors created new challenges and global competition for businesses around the world thus as a response many companies decided to expand their operation across national borders in order to be competitive. A company that operates their business in at least one country other than its country is called Multinational

As discussed in Chapter 21 of our text book, any company that is looking to expand globally must make five key decisions. A firm must decide if: a) they really want to expand to the international market; b) they

According to Charles W. L. Hill (2016), “International business refers to, any firm that is involved in international trade or investment. With that being said, all a company has to do to be classified as a globally recognised company is export and import products to/or from other countries. Companies decide to go global and enter international markets for various reasons, and these different objectives at the time of entry should produce different strategies, performance goals, and even forms of market participation.

It may also be known as Market Extension. It includes the pursuit of more market segments or geographical regions. With existing products developing new markets, company should focus on different consumer’ demand who has the same kind of product demand in different markets. It can be possible through further market segmentation in order to help identify a new clientele base. It is necessary to adjust the product position, sales methods and promotion. For example, exporting the product to the new countries; changing new product dimensions or packaging way; innovating new distribution channels and the other innovation. Nonetheless, they do not need to change the core technology of the product itself. I would like to give an example; there are some leading cosmetics companies like Dior, Chanel, and Lancôme that have entered into international markets for expansion. And they do not end their steps to continue to expand their brands through new global markets. Certainly, facing the smaller enterprises, it is better to implement this strategy into another market where its product without currently

It may also be known as Market Extension. It includes the pursuit of more market segments or geographical regions. With existing products developing new markets, company should focus on different consumer’ demand who has the same kind of product demand in different markets. It can be possible through further market segmentation in order to help identify a new clientele base. It is necessary to adjust the product position, sales methods and promotion. For example, exporting the product to the new countries; changing new product dimensions or packaging way; innovating new distribution channels and the other innovation. Nonetheless, they do not need to change the core technology of the product itself. I would like to give an example; there are some leading cosmetics companies like Dior, Chanel, and Lancôme that have entered into international markets for expansion. And they do not end their steps to continue to expand their brands through new global markets. Certainly, facing the smaller enterprises, it is better to implement this strategy into another market where its product without currently

From a firm’s perspective, tariffs, subsidies, quotas, VERs and LCRs all have the same effect of raising the firm’s costs above the level that could be achieved without trade barriers. Hill (2011) argues that the higher costs resulting from the trade barriers do not necessarily translate into a competitive disadvantage provided they are applied (by a country imposing them) to all similar products by other foreign firms. He further notes that when trade barriers are targeted at a particular nation’s exports, then this places the firm from that nation at a competitive disadvantage compared to other foreign firms. In this case the firm has two options. The first option is to move production into the country imposing the trade barriers and the second is to move production activities into countries whose exports are not targeted. The choice of which strategic option to take is a management decision requiring a high level of skill.

According to a global strategic business development expert, Mona Pearl (2011), the chances for global expansion are unlimited, and the potential for exponential growth is persuasive. Regardless of size or company structure, organizations which take a proactive, strategic approach to understand both risks and costs will stay one step ahead from competitors and get the benefits of a successful globalization origination. To create successful global business strategy plan, the company has to ask its customers the right questions at the right time to the right people. Start with strategy, understand the culture, and identify competitive edge are three keys to successful globalization. First, the company should start with strategy not tactics. The company must begin with developing a long term action plan which is connect to company vision, mission, and activities. The company must use the benefit from corporate strengths while identifying chances in desirable and compatible markets. It is important to understand the people and their culture, and examine each market, before answer any tactical questions. Because of lack of international experiences, most managers move toward by using what they are comfortable with, or its calls tactics (Mona, 2011). As Mona (2011) advised, “Tactics is an actions in a vacuum without a well-conceived conceptual framework” (p.214). Tactics would lead to bad assumption in market choice, because of the lack of strategic direction. For example, Latin

Global market forces involves pressures and opportunities created by the foreign companies and customers .Overseas business sometimes is a defensive mechanism to defend domestic markets .Another reason for expansion is because of the increased opportunities in emerging markets and the facilities provided by information technology and internet.

Well known companies like Nike, Microsoft, Sony, Shell Group are just some of the big companies that went global and expanded their trading around the world, they are large businesses that operate internationally in many countries. Development of worldwide integration urges companies to reach out international markets and interact with foreign customers. Businesses focus on fulfilling the demand of the market by its products or services, besides their target is increasing profit, in order achieve these goals they favor to expand their work in a foreign market. Other reasons to internationalize their business may be to become

For any company going out for the foreign market is because of any one out of globalization, reducing tariff all over the world, to increase the market share, saturation of the local market, for getting the economies of scale of production, to use their excess capacity and use the resources where it is available at law cost.