INTERNATIONAL BUSINESSCreated byInternational BusinessMajor Reasons why Companies Engage in International BusinessWith the advancement in technology and infrastructure world has become a global village and reaching distances is a matter of few hours. With the world becoming global, the business scenario is no longer similar to business concepts and strategies 50 year ago. Now, the competition is going tough and to keep in pace with the developments, businesses are forced to re-think strategies and expand their horizons. A race for going international and expanding business in other countries is a consequence of technology advancement and growing competition.
More and more companies now want to engage in International Business. Here are some reasons why companies engage in International Business. The hard fact of any business is that it is run to make money for the owners by supplying services or products matching to the customer’s requirements1 (Prof. W. Tim G). In times of stiff competition it is important for a company to earn profits if it wants to be in the business by finding new sources of revenue and profitability. International business is one of the sources to2:Expand SalesAcquiring Technical ProficiencyAcquire ResourcesDiversify sources of Sales and suppliesMinimizing competitive risksExpand Sales-In the increasing global society, it is difficult for a company to depend on domestic sales only.
Also, expanding business outside domestic market implies offsetting seasonal fluctuations in domestic market and more sales and more profitability. This is the main motive behind any businessAcquiring Technical proficiency- By going international, companies also tend to increase their technical proficiency by diversifying in to markets with greater expertise in certain technology areas. Acquire Resources- Expanding internationally implies broadening the horizons and acquiring more resources.
Acquiring more resources leads to growth of company. Diversify sources of Sales and supplies- Companies prefer to engage in international business do expand their sources of sales and supplies. In a domestic market, a company has limited sources, but when it goes international, it has large market to cater to. By diversifying internationally, a company gets an opportunity to market its products and services to international customers. At the same time, it gets an opportunity to diversify its sources of supplies. Minimizing competitive resources- By diversifying in international market, companies minimize the risk of loosing domestic customers who themselves are looking upto foreign markets for supply of goods and services.
Secondly, domestic market is a limited market with lot of competition from the rival companies. In international business, the business opportunities are wide and thus the threat from rival competitors is minimized3.(Asim Khan). Three Management OrientationsThe three management orientation or attitudes are4 (Jowleong): Production concept- The production concept of international business focuses on maximizing the mass production and distribution efficiency in an international market. The Pros-This management orientation works perfectly when the demand is greater then supply. The Cons- This orientation can be disadvantageous when mass production affects the quality of products or service. Product Concept- The companies focusing on this concept believes in making their product best as compared to the rival products.