Question

Analyze the reasons why a company that wants to survive must expand internationally. Discuss the factors that should be taken into consideration for this expansion

Answer 1

Operating in an international context is an imperative for any business. A Company cannot only for growth go global but to survive needs to be open to international operations. international expansion provides the opportunity for new sales and profits. In some cases, it may even be the situation that profitability is so poor in the home market that international expansion may be the only opportunity for profits. It also gives a global brand recognition which firms the roots of the company and ensures that it wont liquidate so easily. It also opens scope for innovations as a company can utilise the international resources for expanding production line which might not be possible in home market. A company with wider market base have more chances of long term survival as compared to other companies.

Factors to be considered before expansion

From company point of view

• Look at the factors underpinning there success in domestic market

 understand the competitive market, identify competitors and what kind of value they bring and benchmark their own performance relative to those

 figure out the route to market, learn the distribution channels and the ways that companies actually connect with their customers in the foreign market  

Factors related to country to be explored

 Population size, density and distribution

 Political issues

 country membership of trade groups, the barriers to entry into the nation and the ability to export not just good from the nation but profits back to the home country

 Financial and tax issues: Taxes imposed, the banking and financial structures, insurance, legal ownership of assets like factories, ownership of intellectual property like patents and brands

 Nature of economic activity

 Methods of distribution, e.g. small shops or supermarkets, roads and transport infrastructure and investment

 Telecommunications and the availability of the internet

 Culture and language

 Education and training: levels, apprenticeships, higher levels of education

 Religious and ethical issues: these are important and must be respected

 Marketing and communications: how to promote the product? what media available? at what cost?

In choosing a country, it is often appropriate to begin by collecting basic country comparative data on such topics as:

 Growth in national wealth, measured both as total wealth (GPD) and also as wealth per head of the population

 Balance of payments data

 Price inflation and impact on currency

 Unemployment rate

 Export and import trade statistics

 Growth of money supply

 Areas and levels of economic activity

 Basic political and economic stability

Considering the factors and entering the new market make it a more successful.move.