Question

. What are the factors that can draw companies into the international area? Expand with detail explanation for each of the factors.

Answer 1

In the recent years, many countries have eliminated barriers for trade with other countries. They have implemented various policies which encourages foreign investments. Many companies too have started doing business in multiple countries. International business poses challenges too along with the benefits its provides. Many factors influence the international business such as relationships between the home country and the foreign country, the socioeconomic, financial, economic, legal, political and cultural conditions of the foreign country.

There are many forces which influence the decisions taken by a company. The forces which are leading international firms to globalization of sourcing, production and marketing are:

• With the advancements in technology, share of information, ideas and knowledge has become very easy. One cannot communicate with other in any part of the world, In the recent years, internet has also penetrated deeply. Now customers can get information about companies, sellers across the world and they have many options to choose from. Companies too are trying to reach these customers through online marketing.
• When the number of competitors increase in the home country, a particular industry might get saturated. Then firms try to enter into countries with good potential to increase their revenues
• When a big company enters into new markets, other companies associated with it would also try to enter the new market to ensure that they benefit from it and not other competitors. For example, if a car manufacturing company has entered a new country, the company supplying raw materials to it in its home country might also decide to enter this new country.
• Costs is one major factor for companies going global. Production might be cheaper in few countries because of the local government subsidies, cheap labor, etc. Companies try to set up their production plants in such countries. Raw materials might be cheap in one country. Then companies would try to import raw materials from that country.