Why do firms go international

Being in a new country can also give you access to several great opportunities. More than that: your authority grows exponentially when you start selling abroad.

Last but not least, risk diversification is another essential reason why companies expand into international markets. Companies very often chase this goal when they are based in countries with high political and economical instability.

Because there are a lot of uncertainties related to their market, it is safer to tackle other countries and as a result minimize the impact in case something goes wrong.

This strategy allows companies to be more stable and therefore afford risks that were not possible before. However, if you want to set up an effective internationalization strategy, it is crucial to prioritize one or two of these goals. If you are going to a region in which you can charge more for your services, you will very likely have higher operating costs. That is the reason why we provide you with the chance to create an internationalization profile with the Go Global Platform.

By analyzing several aspects of your business, our platform provides you with clear insights on how to start and implement a successful international expansion. This can be one of the most popular reasons why companies go global. Global expansions and a diversified market presence offer your company a way to mitigate long-term risks from the effects of a fluctuating local and global market.

Triumphantly entering new markets overseas allows companies to decrease their dependency on their local market. Another reason why companies go global is so that they can take advantage of foreign markets to introduce unique products and services based on local palates. A poorly performing product in domestic markets may also be offset by introducing it in another country where customer preferences indicate a better reception. Going global gives businesses access to new talent pools and new technology.

These may help bring down production or operational costs, allowing companies to improve their profit margins. Moving divisions to foreign countries is not a new concept. China, India, and other Asian countries have gained a reputation for being economical production places. More affordable talent, material, and labor costs allow businesses to keep manufacturing costs down while still ensuring quality products and business performance.

Entering a new market also allows you to prolong the sales life of an existing product or service. In particular, products that are on a decline locally due to market saturation may be positively received abroad. Instead of spending time and money on new product development, companies can create a new revenue source by finding new consumers for a previously successful product.

Sudden changes within the management, the industry, or the local market are ideal openings for expanding internationally. Mergers, acquisitions, and new office locations, in particular, are opportunities you can capitalize on to move forward internationally. Infographic courtesy of Statista.

Unexpected events also create unique opportunities for global expansion. A prime example is how businesses and consumers across the world increasingly went digital when the pandemic hit. There has been a surge in e-commerce transactions and contactless payments as consumers move to shopping online instead of in person.

Consumers no longer limit themselves to what is locally available. Rather, they are exploring overseas retailers and rewarding businesses that responded to the increased demand for global payments support.

One of the most common and most telling reasons why companies go global is the existence of measurable demand. Companies that do not expand their operations to international markets after seeing significant demand for their products and services miss out on highly lucrative opportunities. According to the U. For many companies, international expansion offers a chance to conquer new territories and reach more of these consumers, thus increasing sales.

For example, U. For instance, companies with international operations can offset negative growth in one market by operating successfully in another. Companies also can utilize international markets to introduce unique products and services, which can help maintain a positive revenue stream.

Coca-Cola is an example of a company that diversifies through global operations. Slow Growth of Domestic Market, 4. Suppliers follow their Customers Internationally, 5. Competitive Pressures, 6. Attractive Cost Structures Globally, 7. Growth Rate and Potential, 8. Compete Successfully in Domestic Market. Traditionally many companies have stayed focused in their domestic markets and have refrained from competing globally.

They know their domestic markets better and understand that they have to make fundamental changes in the way they work to be able to compete globally. Image Courtesy : venturebeat. But increasingly companies are choosing or are being forced to sell their products in markets other than their domestic markets.

It has become imperative for most companies to compete in foreign markets. Domestic markets are saturated and there is pressure to raise sales and profits. Most companies have very ambitious sales and profit targets. If such figures have to be realized, companies have to move out of their domestic markets. Domestic markets are small. Companies which have ambitions to become big will have to look for bigger markets outside their boundaries. Domestic markets are growing slowly.

Most companies are no longer content to grow incrementally. If such companies have to achieve high growth rates, they have to obtain some of their sales from international markets. In some industries like advertising, customers want their suppliers to have international presence so that suppliers can contribute in most of the markets where the buyer is operating.