Internationalization is the process through which companies identify and entering into international markets. A firm may do this alone whereby it sets up subsidiaries by creating new firms or buying an existing firm. Firms may also internationalize through acting with other firms where they come up a strategic alliance with one or more partners either local or international (Wild, J.J. , Wild, K.L. & Han, 2010 p16-17). According to (Morrison, 2009,p17) Carrying out international business will be more difficult for companies like Tommy Hilfiger as compared to carrying out domestic business.
Differences in the nationalities of the countries involved, heterogeneity of customers across the border, varying political systems, varying business practices as well as less mobility of the factors of production are some of the challenges Tommy Hilfiger will face. Tommy Hilfiger has several reasons as to why it should consider going international. By going international, the company will be able to respond to the unsolicited orders from their customers in those markets. The company may also go international so as to absorb overhead costs that they get at home. By going international Tommy Hilfiger will take advantage of both domestic and international economic and political changes.
The company will also be able to tap into the emerging and growing markets both domestic and internationally. The main factor as to why Tommy Hilfiger should go international is of course to make money and as the systems that make up the global economy become more interrelated, Tommy Hilfiger will recognize that there are more and more international business opportunities which make the whole difference between success and failure. Advance transport and communication systems have made it easy for companies to access international customers.
This will be an added advantage for Tommy Hilfiger as it will be able to reach its customers both domestically and internationally. There are many potential customers all over the world that need Tommy Hilfiger products and they have money to spend (Hill, 2009,p12). According to Anderson& Hubert (2006 p, 9-10), there are several ways that Tommy Hilfiger can go international including licensing their patents and trademarks, forming joint ventures, establishing subsidiary companies in the foreign countries, franchising as well as contract manufacturing.
Tommy Hilfiger may use any of the arrangements above at any one time to go international. Each of these arrangements named above have their own unique advantages and disadvantages. As a starter, Tommy Hilfiger may decide to start with exporting to explore new international markets. Exports sales could be done via emails, direct sales or through offices established all over the world. Tommy Hilfiger may also involve itself in indirect exporting that basically involves selling their merchandise to both domestic and foreign intermediaries who trace the specific markets for this company’s products.
According to Anderson& Hubert (2006,p11), Tommy Hilfiger can also establish a healthy presence in the international marketing without having to be involved in any of the exporting services. Tommy Hilfiger may decide to go for international licensing where it gives a foreigner the right to manufacture and distribute its product under Tommy Hilfiger’s trade mark. This can be an appropriate method where the foreign country forbids any other ways of entering the market. Tommy Hilfiger can also go for franchising a method that similar to licensing.
It could also enter the foreign market via a joint venture where Tommy Hilfiger will form a partnership with another firm in the foreign country. Tommy Hilfiger will then give all the needed expertise and the foreign firms will only carry out general marketing and management functions. Entering into this kind of arrangement will reduce Tommy Hilfiger’s risk by the amount of investment made by the foreign country. This arrangement makes it possible for companies with limited capital to expand its activities internationally while providing access to distribution channels of the partner.
Tommy Hilfiger may also go international via setting up its very own manufacturing process in the foreign countries. This arrangement will benefit Tommy Hilfiger in that it will avoid high import taxes gain access to raw materials, make use of the cheap labour and reduce the cost of transportation.