Answer: Daniels and Radebaugh have given four reasons why companies engage in international business. They emphasized that a company operating internationally should consider its mission, its objectives and strategy. The four reasons are:
1. To Expand Sales:
Companies’ sales are dependent on the consumers’ interest in their products or services and the consumers’ willingness and ability to buy them. The number of people and the amount of their purchasing power are greater for the world as a whole than for a single country, so companies may increase their sales by reaching international markets. Increased sales are a major motive for a company’s expansion into international business. Many of the world’s largest companies like BASF, Electrolux, Gillete, Nestle, Philips and Sony derive more than half of their sales from outside their home country. However, smaller companies may also depend on foreign sales.
2. Acquire Resources:
Manufacturers and distributors also look for products, services and components produced in foreign countries. They also peep for foreign capital, technologies, and information that they can use at home country. Sometimes, they do this to reduce their costs. Sometimes, a company operates abroad to acquire something not readily available in its home country. Acquiring resources may enable to company to improve its product quality and differentiate itself from competitors and potentially increasing market share and profits. Although a company may initially use domestic resources to expand abroad, once the foreign operations are in place, the foreign earnings may then serve as resources for domestic operations.
3. Diversify Sources of Sales and Supplies: To minimize swings in sales and profits, company may search for foreign markets to take advantage of recessions and expansions. Sales decrease in a country that is in a recession and increase in such a country that is expanding economically. By obtaining supplies of the same product or component from different countries, companies may be able to avoid the full impact of price fluctuations in any one country.
4. Minimize Competitive risk: Many companies enter into international business to counter advantages competitors might gain in foreign markets that could hurt them domestically.
Companies’ sales are dependent on the consumers’ interest in their products or services and the consumers’ willingness and ability to buy them. The number of people and the amount of their purchasing power are greater for the world as a whole than for a single country, so companies may increase their sales by reaching international markets. Increased sales are a major motive for a company’s expansion into international business. Many of the world’s largest companies like BASF, Electrolux, Gillete, Nestle, Philips and Sony derive more than half of their sales from outside their home country. However, smaller companies may also depend on foreign sales.
2. Acquire Resources:
Manufacturers and distributors also look for products, services and components produced in foreign countries. They also peep for foreign capital, technologies, and information that they can use at home country. Sometimes, they do this to reduce their costs. Sometimes, a company operates abroad to acquire something not readily available in its home country. Acquiring resources may enable to company to improve its product quality and differentiate itself from competitors and potentially increasing market share and profits. Although a company may initially use domestic resources to expand abroad, once the foreign operations are in place, the foreign earnings may then serve as resources for domestic operations.
3. Diversify Sources of Sales and Supplies: To minimize swings in sales and profits, company may search for foreign markets to take advantage of recessions and expansions. Sales decrease in a country that is in a recession and increase in such a country that is expanding economically. By obtaining supplies of the same product or component from different countries, companies may be able to avoid the full impact of price fluctuations in any one country.
4. Minimize Competitive risk: Many companies enter into international business to counter advantages competitors might gain in foreign markets that could hurt them domestically.
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