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Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Internationalization is essential in the modern world. Internationalization process model was developed in the 1970s to describe how firms expand abroad. This model presents that internationalization is a gradual process what takes place in incremental stages over a long period of time(Cavusgil, Knight,Riesenberger ??) The process of Internationalization can be also described as “the process of increasing involvement in international operations”(Welch and Luostarinen, 1988,p.36). in spite of the many motives of companies to internationalize and the advantages which they can achieved, there are many barriers that the company must overcome for successful internationalization.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

2. Reasons

Strategic motive plays an important role in the selection of entry mode in a foreign market Today, many companies take the step to establish themselves abroad. Small- and medium sized enterprises (SME) play a key role in economic development, and the companies play an important factor in employment. On the other hand huge European and US firms such as Wal-Mart, Carrefour or even Royal Ahold are internationalizing rapidly in terms of high number of local competiton and saturated markets (Incandela et al., 1999). From mid 1990 these companies are motivated by the opportunities such as growing middle class weakness of local retailers and highly growth rates.

 

 

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There are many reasons for companies to engage in the internationalization process. The factors which motivate or provoke firms as well as individuals to go international may be broadly divided into push factors known as reactive and pull factors known as proactive motivations. Firms with proactive motivations go international because they want to be on global market. However firms with reactive motivations which have to go international. Push factors include adverse trends in the domestic market that compel firms to explore opportunities beyond national boarders. At that point i can mention Google which is is a multinational public corporation invested in Internet search, cloud computing, and advertising technologies.. It si definitely a proactive motivation which pushes Google to go international. Google was a service already made from his conception to go international. If it did not went abroad, their competitors will have came up on this market. At that point Google will lose potential profit. Google is physically present in 33 countries around the world with 68 offices.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

. Reactive motives are also defined at stemming from influences from the external environment such as declining domestic sales, competitive pressure. These factors are also profit advantage, tax benefit, growing competition at home. Pull factors are fadorable conditions in foreign markets that make international expansion attractive. Examples include situations where companies will to enter markets that have fewer competitors etc. Many enterprises have multiple motives for their internationalization , however, one motive is usually the primary and the rest are secondary motives (Albaum, 2005,70)

Why companies have to grow? Why they have to go abroad? The main purpose of business is to make money for the people who own the business. Lets have a look at specific examples of reasons for internationalisation of firms. The major proactive motivation for international business is profit advantage and higher margins. In these days for many goods and services , market growth is sluggish or flat. In order to increase profits management may either look to increase sales volume by selling abroad or to reduce product cost’ by producing overseas. Competition is often intense, forcing firms to go abroad. Most domestic organisations may be underserved or not served at all. At that point less competition , joint with strong market demand, leads to higher margins and profits. Good example is American Standard and Toto( from Japan), bathroom fixture manufacturers have found a more competitive environment in developing countries such as Mexico, Vietnam or Indonesia.

Of course, the expectation of higher profit may not occur right away. The profitability perceived when planning to go international is often different than in reality Initial profitability may be quite low, particularly in international start-up operations.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Unique products or technological advantage can be another important reason which push firms to go abroad. Gain new ideas about products , services, and business methods. International markets are characterized by tough competitors and customers , whose obviously have various needs. The experience of doing business abroad helps firms acquire new knowledge for improving organisations through effectiveness and efficiency. For example inventory techniques such as production leveling also known as production smoothing refined by Toyota were adopted by other manufacturers from all over the world. Again we need to look at the gap between perception and reality. Even if firms offer unique products or services they certainly can provide a competitive edge. The length of time when the product is unique depends on technology but also creativity of the competitiors. The competitive edge was often the only motive which marked the firm as asole supplier to foreign markets. In these days this type of advantage has changed because of competing technologies and the patent protection.

Firms seek opportunities for growth through market diversification. Big numbers of large and small companies obtain more than 50 % of their sales from abroad. These are Gillette, Siemens, Sony, and Biogen. When the diversify into overseas markets, firms can generate sales and profit opportunities which cannot be matched in their country. Internationalization can also extend when the life length of goods have reached maturity at home. For example automatic teller machine (ATM). In 1967, John Shepherd-Barron invented and installed an ATM in a Barclays Bank in London. Don Wetzel invented an American made ATM in 1968. The machines were also adopted in Japan. When the growth of ATMs began to slow in these countries they were introduced in the rest of the world. Today there are more than 1.5 million ATMs worldwide(Cavusgil, Knight, Riesenberger,???)

Firms sometimes go abroad to develop economies of scale in sourcing, production, marketing, and R&D.(Economies of scale definition) For example in the production of a complex item such as a motor car. The production process involves many different complex stages. Therefore to produce a car you should split up the process and have workers specialise in producing a certain part. Specialisation requires less training of workers and a more efficient production process. However, if you have several distinct production processes it is most efficient to have a large output. At that point by expanding internationally, the number of firms’ customers is greater. Therefore the volume of products increases. In other words, the greater the volume of production, the lower the total cost. The Boston Consulting Group has shown that the doubling of output can reduce production costs up to 30%(Czinkota, Ronkainen, 1999). In 2006 the monopoly of the Royal Mail was ended by TNT which was opened up to competition. The TNTs’ dominant position was developed through organic growth with annual turnover of 750 million.

In the modern business environment characterized by increasing trend to globalization, many firms are expanding their business operations beyond their domestic boundaries. Many firms are continually in search for new business opportunities which they belief can be achieved by venturing into foreign markets. A foreign market offers the firm opportunity for growth and increase of sales by capturing new markets and customers. In order to take up and explore opportunities offered by foreign markets, firms needs to invest substantial resources, both in time and money as well as human capital in planning and driving operations.

Before moving in to expand resources in the expansion strategy, it is always necessary that the firm has properly assessed the potential offered by the new market. The size and opportunities offered by the new markets should be capable of justifying the resources and efforts to be used up in expanding to that particular market. In addition, expansion into a foreign territory always presents added challenges to the firm not present in the domestic market. A success story by a similar firm operating in that foreign environment does not mean the firm or other firms entering the market will be capable of achieving similar success. Like in the domestic market, operating in a foreign market requires excellent understanding of the new market environment (Dibb and Simkin, 2004, pg 218). For instance, different countries have different cultural dimensions which affect behavior of both firm and the consumers and ultimately determine success of the firm in that territory. Understanding of the foreign market environment must also be supplemented by effective organizational and marketing strategies (Thorelli and Cavusgil, 1990 pg 558). To ensure success in the modern global market, firms must develop analytic competence to assess foreign market opportunities, environmental competence to understand the marketing environment, and functional competence to devise effective strategies to operate and manage the market.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

The importance of experience as an international retailer in international markets and experience of the use of alternative entry modes prior to committing to franchising emerged very strongly from the case study findings as an important motivating factor for choosing franchising. While both Companies A and E initially became international retail franchisors due to opportunistic approaches from prospective partners, the other four companies had all experimented with a variety of methods of market entry during their history as international retailers.

Globalization is not simply a trend: it’s now a necessity for companies to remain competitive in their space. For companies that want to pursue international expansion, there are many opportunities to take advantage of. These include gaining access to new markets, growing teams, and increasing revenue.

Companies of all sizes should be aware of the business benefits of globalization. And these are the top five reasons companies should be thinking about going global.

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1. Establish New Revenue Streams
According to a recent report, 45% of middle market companies make more than half of their revenue overseas. If your business is doing well domestically, you’re already a step ahead to succeed globally. With a new customer base, you can identify and create unique opportunities in local markets for your business to fill in the gaps. Just be sure to consider the cultural factors before expanding into a new market.

2. Gain a Competitive Advantage
Thinking globally is becoming less of an option and more of a requirement when it comes to outpacing the competition. In fact, 56% of middle market companies include international expansion into their growth strategies. Taking your business international presents growth opportunities by expanding options for talent, customers, and creating cost-savings for imports and manufacturing.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

3. Access a Global Talent Pool
Whether you run a startup or a 50-year-old enterprise, finding skilled workers who can help drive your company is crucial. Expanding globally gives your company the opportunity to access high-quality talent from around the world. Hiring global employees can provide unique insights into local cultural norms. Additionally, many workers from emerging markets may be less expensive than workers from Western countries.

4. Find New Global Customers
When you have been in a local market for a while, it can be tough to find new customers. They are used to your product and your competitors, and new sales can be a battle hard-fought.

An international expansion opens new doors and gives you access to a whole new set of customers who have never seen your product or service before. But sourcing global talent can be an overwhelming task, even for seasoned internal recruiters. A global talent acquisition partner can help alleviate some of these challenges.

5. Utilize Government Incentives
Many countries around the world offer incentives for companies looking to expand their operations internationally, as it brings new business to their countries. One common incentive is lowered taxes after deductions. Because of this, many U.S. businesses take the opportunity to expand overseas in order to lower their overall income tax rates.

Include International Expansion in Your Strategy
The reasons above are five great benefits that your business could experience when you think global and expand internationally. Once your team is aligned on your global initiatives, you are ready to start developing a strategic plan.

Be sure to incorporate the overall vision for your business in your global expansion strategy, and address the goals you want to achieve by expanding into each new foreign market. Working with a partner like Velocity Global that provides an International PEO solution can help you streamline the process and expand overseas today.

Company B has operated owned stores in the US and Europe since 1950s, but their internationalization strategy is now dominated by franchising. Two key factors are responsible for this. Firstly, in the early-mid 1980s Company B converted its existing general wholesale exporting business in the Middle East to a more formalized, controlled business by converting it to franchising. The second strategic move occurred in the early 1990s when, as a result of the firm carrying out a strategic review of its international business, it formalised its international operations into a predominantly international retail franchise driven business. As the head of the international division comments:

—-we looked at the business which was still a very scattergun approach and we looked at it to try to formalise it . . . and a form of franchising was developed.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

A similar pattern is evident in the case of Company C which has also experimented with a variety of entry modes such as acquisition, joint ventures, franchising and organic growth during its international retailing history. Franchising became a part of the retailer’s international strategy in the early 1980s when, as a result of a review of its export business which comprised of about 90 accounts worldwide, the company “weeded out most of the smaller ones and converted the big, more serious ones to franchising”. In terms of its diverse entry mode experience, Company C also operated a network of owned stores in Canada, the US and Europe but over the past decade it has been involved in a process of disposing of all of them, the owned store route proving too costly. As the head of the international franchise group notes:

—- tested in the fires of adversity we are now a little bit clearer about why we want to franchise.

While the subsidiary businesses had become loss making, the franchising business has always been profitable and as the firm moves forward internationally, it will do so on a franchising basis.

Company D has also employed various entry methods during its international retail history including a large owned store business with one brand in Germany and another in Holland, as well as franchises and concessions in Europe and the Middle East. Like Company B above, in the mid-1990s it had evolved to a point in its international development whereby a strategic review took place. Many owned stores in Europe were closed due to lack of profitability and it was decided that as the firm goes forward its internationalization strategy would be carried out “on a more consistent basis and through the franchise route”. The international retail experience of Company F is also chequered with a variety of entry methods being employed. A period of restructuring during the recession at the beginning of 1990s, saw the company take the strategic decision to focus on the UK as opposed to the international market. However, the company had seven-year contracts with some franchise partners in Spain which they could not break. As the decade progressed they were approached by a prospective Middle Eastern franchise partner in 1997 which re-ignited their interest in international retailing. Like Company D, apart from a licensing arrangement in South Africa which was entered into due to high import duties, the retailer’s internationalization strategy is now firmly based, where possible, on entering markets through the franchise route.

Company evolution and the temporal nature of international retailing are highlighted here. Additionally, these findings add weight to those of Petersen and Welch (2000) with regard to changing from other entry modes to franchising over time.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

 

 

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Availability of financial resources: While many of the case companies have employed a variety of entry modes in the past, all have evolved to the point whereby franchising is the main method through which they will internationalise their businesses in the foreseeable future. Partly as a result of their negative financial experiences with alternative entry modes, along with the competitive nature of the UK fashion retail market which demands considerable financial resources, the attractive financial implications of employing franchising loom large for the case companies. These fashion retailers are motivated to employ franchising in international markets as it offers them international expansion potential with limited financial commitment and exposure.

As the head of international franchising for Company C highlights:

….there is one big factor that makes us want to franchise and that is you don’t tie up the capital – we tie up someone else’s capital.

The business development director for Company D also insists that they do not want to be investing any capital overseas and as such franchising offers the company a successful method of international expansion without having “the responsibility of managing lots of assets in different territories”. Responses from Company F concur with this point of view, highlighting the very competitive nature of the UK fashion retail market. The firm’s commercial director for international operations comments that:

We spend �80-100 million on our UK stores. We invest the capital that is available to us into the UK business. We couldn’t afford to invest that money internationally or take it away from the UK.

As a result of the competitive nature of fashion retailing in the domestic market, internationalization through franchising is particularly attractive financially for Company F. For all the case companies, the financial advantages of franchising whereby the franchisee bares the majority of the financial burden for the overseas venture has proven to be particularly motivational in the decision to choose franchising as their dominant method of international expansion.

Presence of a franchise able retail brand:
One of the major factors which have motivated these fashion retailers to franchise successfully internationally is the presence of a strong retail brand or brands which are attractive to franchise partners.
Retailers with strong retail brand offers should find them much easier to replicate and, therefore, franchise compared to companies which possess weaker brand offerings.

The importance of the brand to successful international retail franchising is emphasised by the head of international franchising in Company C:

Basically the whole thing about being a franchise is the fact that you have a brand to sell. I think it is about leveraging that brand at minimum cost of capital to the company at the same time so as not to damage the brand.

Moore (2000) categorises international fashion retailers into product specialist fashion retailers, fashion designer retailers, general merchandise retailers and general fashion retailers. The companies employed in this study fall into the latter two categories. Companies A and C are general merchandise retailers and the remaining four companies are general fashion retailers. In terms of how well defined the case companies retail brand offers are, all four general fashion retailers possess well defined brands in the domestic market. Interestingly, however, during the period of the empirical study the retail brand offers of both the general merchandise retailers had become much less defined in the domestic market.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Concerning the positioning of the brands in the market, Companies A, C, D and F all operate middle market high street fashion brands and want to be placed internationally where the centres of population are so that they can generate a critical masswith regard to a store network. Company F’s brand credibility is fundamental to the business and is the “complete non-negotiable part of the deal”. CompanyA’s brand, on the other hand, ismuch less defined and within its international franchise division there is the acknowledgement that they “don’t really know whatwe want the brand to be overseas . . . I don’t think, at the moment, our brand is particularly strong enough to advertise for partners”.

While Company C has also encountered problems with its staid brand in the domestic market this situation, however, had become a challenge for the international franchise business some years before as they were ‘competing with the Zaras and Mangos of this world’ in international markets long before they entered the UK market.

The response of the international franchise business was to make changes to the retail brand offer in terms of store design and global marketing and advertising in order to remain profitable and attractive to franchisees.

Companies B and E, on the other hand, both operate at the premium end of fashion retailing, but they are not fashion designers. Company E with its limited international presence recognises the importance of the brand to its ability to franchise internationally, particularly since its international franchise ventures arose from opportunistic approaches from what one informant calls “fans of the brand”. In the case of Company B, which sees itself as an international retail brand and not just a UK-based retailer with international operations, “the brand is the most universally important thing . . . The international power of the brand, that is the key”.

Notably, those firms that have franchised their brand successfully abroad, all emphasised that control of the brand is crucial to international franchising success. Therefore, the third organisational factor which motivates the case company fashion retailers to operate internationally through franchising is the possession of a defined retail brand offer.

Company restructuring:
Company restructuring and retrenchment is also evident from the case study data as influencing the move to franchising among these case firms. Companies A, B, D, and F all went through some form of strategic review in the early-mid 1990s, the results of which saw Company A move from product franchising to business format franchising, Companies B and D focusing their internationalization strategies on franchising and away from owned store businesses and Company F withdrawing from international operations to focus on the domestic UK market. The latter firm, however, could not withdraw from the international arena entirely as it had seven-year contracts with several franchise partners and could not break the contracts.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

However, it was not until it was approached by a prospective partner in 1997 that it contemplated further internationalization. For Company C, its strategic review in 2000-2001 came much later than the other case firms. Owing to predominantly domestic competitive pressures, all overseas owned stores were sold with the firm realising that, going forward, franchising is the best way for it to retail internationally.

What is clear from this point is that the retail sector, and fashion retailing in particular, is dynamic and constantly evolving with strategy emerging over time. It is also clear that the factors motivating the case firms to choose franchising as an entry method in international markets cannot be viewed in isolation. Within the explanation of the impact of company restructuring us also encounter international retail experience and competitive domestic pressures which further emphasises the dynamic nature of strategy formation and evolution.

Influence of key managers:
The fifth and final organisational factor to emerge from the case study data as motivating fashion retailers to employ franchising to enter international markets is the influence of key managers. The key managers responsible for the international franchise operations of the case firms are all very driven very experienced people who have very definite views on why franchising is the best method to internationalize their businesses. While a combination of all the other motivating factors highlighted in this paper has led these individuals to these conclusions on franchising, the importance of their influence on maintaining and driving international franchise strategy should not be underestimated. Many managers were appointed around the times of strategic rethinks within the firms at the beginning and the mid-1990s, the results of which saw firms moving away from multi-modal methods of market entry to focusing on franchising as their dominant market entry method going forward. This finding corroborates previous international retail franchise research by Quinn (1998b) who also found that key decision makers within the natural cosmetics company he investigated were favourably disposed towards internationalization before the opportunistic approach from a third party occurred which resulted in the firm’s first overseas franchise store. The following section now focuses on the external environmental factors which motivate the international fashion retailers in this study to employ franchising as their main method of entering international markets.

External environmental factors
Opportunistic approaches. Apart from Company E, all of the case study firms have evolved to a point in their international development whereby they have become strategic international franchisors. Notably, however, this was not always the case as Company A also began franchising and Company F re-entered the international arena both as a result of opportunistic approaches by prospective partners. In terms of partner choice Company A was very haphazard in its approach:

I don’t think we thought very carefully because the strategy then was if he has a big bag of money we will go with him, if he has a medium sized bag of money we might go with him but if he has a small bag of money we won’t go with him. In that way we grew the business to about 35 stores until the mid-1990s . . .Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Eventually the company realised that, such opportunism was only sustainable in the short-term. They employed a business development manager which resulted in a more strategic, business format franchising approach as opposed to product franchising approach to their international franchise business. Nonetheless, the initial motivating factor for Companies A and E was an opportunistic approach from a franchise partner.

Company E remains reactive to opportunistic approaches. With a very well-defined brand offer, the firm finds that: . . . the people who approach us and want a franchise have been fans of the brand for a long time, so they have always been [Company E’s] customers and they want to take it to their country.

Case companies B, C and D would see themselves much more as strategic than reactive franchisors. However, as with Companies A and F this is a position to which they have evolved in their international franchise development. As with the other case companies they are approached by prospective franchise partners on an ongoing basis and from time to time would respond but their international country and partner choice process is predominantly strategic in nature. Company B’s director of international operations confirms this view saying that:

We would have a relative amount [of opportunistic approaches] in relation to the brand. If the brand is hot then you will get lots of people and vice versa . . . There is some opportunistic activity but I would say we are more proactive.

Company D’s business development director intimates the same theme:

I would say we are proactive where we want to be but we don’t say no to people who approach us with commercial opportunities.

As such, the case firms exhibit one of the key motivating factors evident from the general international franchising literature but until now has not been explored in any detail in relation to the retail sector, that is opportunistic approaches from third parties prove to be central to the decision to franchise internationally. This will be explored later in the discussion section.

Local market complexities
For Company D, the reality of the complexity of the international retail marketplace which has been gained through experience of international operations has been one of the major factors that has motivated the firm to internationalize through franchising and move away from owned store or organic routes. By employing franchising the company can benefit from franchisees’ knowledge of local market conditions. The major lesson Company D learned from its experience of owning overseas stores is that they “don’t understand the local market properly because we are based in London not Amsterdam or Madrid”. This has led them to the conclusion that:

We don’t understand the property laws. Getting on top of UK laws is difficult enough never mind overseas ones. Store dynamics are different in different countries . . . Your mindset is not right to operate in those markets on your own.

The franchisor brings its brand(s) and retail experience to the franchise relationship and the franchisee brings, among other things, finance and local market knowledge. As the same respondent comments:

. . . the marriage of our brand experience and our knowledge of how those brands operate with the franchisee’s local market knowledge is the perfect way to capitalise on our brands overseas.

This view is also borne out by the vast majority of other case companies. While the financial advantages remain the over-ridingly important factor influencing Company A to franchise, they are also acutely aware of the complexities of operating internationally; commenting that franchising is “basically a set of complementary skills”. For Company B, the local market complexity issues are fundamental to the advantages it finds in franchising:

. . . The advantage of doing business through franchising is that we are finding somebody local in a country where we do not operate and where . . . we do not want to make any financial or personnel commitments . . . They will give you expertise in local issues, language and so on in countries where it would be difficult for you to operate yourself . . .

As Company F’s commercial director for international operations also comments “we never profess to be retail experts outside the UK, which is why we always look for a partner”.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Domestic competitive pressures:
Given the highly competitive nature of the UK retail market and the fashion sector in particular, it is not surprising that case companies also highlighted domestic competitive pressures as a factor which influenced their choice of franchising in international markets. To an extent Company A’s move to business format franchising was a direct response to the impact the firm’s lack of control of its brand in international markets was having on its domestic operation.

Company F acknowledges that its large domestic network of stores requires constant investment to keep it competitive, spending �80-100 million on domestic store maintenance and upgrades annually. Employing franchising, therefore, allows the firm to remain competitive domestically and also build an international network of stores.

The same is the case for Company D whose business development director believes that, as a result of the competitive nature of the UK fashion market, the firm should not be spending any money overseas. Consequently, this has a very motivational influence on the decision to employ franchising in international markets. As highlighted earlier in this paper, Company C had a very substantial international network of owned stores until this was disposed of in 2001. While the pressures of public ownership and the appointment of a new chief executive can be identified as reasons for the sell-off and the retailer’s subsequent dependence on international retail franchising, arguably the biggest factor was the firm’s poor domestic situation.

A related point here is the impact the UK stock market has on these retailers’ performance and choice of entry mode. Companies A, B, C, D and F are all public limited companies and as such are under pressure to produce returns for shareholders.

The UK stockmarket is notoriously short-termist and, as many UK retailers found throughout 1980s and 1990s, securing returns on owned store businesses overseas, whether that be through organic growth or acquisition, takes considerable time. Therefore, it is highly likely that boards of directors and the stock market have become very risk averse towards owned store internationalization and would much prefer to see UK retailers internationalising through a financially attractive and relatively risk free method such as franchising.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Availability of potential franchise partners:
The final factor deemed to have a motivational impact on the choice of franchising by these fashion retailers is the availability of suitable franchise partners. All the other factors highlighted make franchising a very attractive method of international operation but, without suitable available franchise partners, entering a market will not take place. Some of these firms have found this to be the case particularly in Eastern Europe following the fall of the communist regime. Given the lack of retail expertise and infrastructure in these post-communist countries as a result of the state centralised retail system, when firms tried to enter the market through franchising in many cases they discovered that finding a suitable partner was very difficult. For example, Company F was very keen to enter Poland in the late 1990s but could not find a partner. Eventually they received an enquiry through the internet and took the risk with that partner and opened up a store. On the basis of that opportunistic approach Company F now operates a successful network of stores in Poland. Therefore, while all the other factors may be in place, the reality of the marketplace and its impact on the availability of franchise partners may make entering through franchising difficult.

Discussion of findings
Aspects of certain studies from the international retail franchise domain such as Quinn (1998b) and Petersen and Welch (2000) offer some insights into why retailers franchise internationally. Quinn (1998b) notes that it is possible that a retailer will use non-franchising modes during initial or early stages of internationalization and only later employ franchising when the brand name and concept has been developed. This is also borne out in the Petersen and Welch (2000) study with one of the fashion retailers in their study, In Wear, employing exporting and owned stores before embarking on a franchise strategy in international markets. This company also indicates that it expects to emphasise franchising more strongly in the future as its retail base, brands and knowledge of international retail operations in foreign markets become more firmly established (Petersen and Welch, 2000). Interestingly, the other fashion retailer in the Petersen and Welch (2000) study, Carli Gry, also entered international markets through the owned store route in 1985 before it opened its first international franchise store in 1994. Petersen and Welch (2000) acknowledge that it is difficult to generalise about reasons for the adoption of franchising. Often, they contend:

. . . in cases where international franchising use has been preceded by other forms of international experience and networks there is likely to be a background of relevant international experience and networks upon which to draw, even though franchising represents a new area of activity (Petersen and Welch, 2000, p. 481).Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Such findings are similar to those found in the cases of Companies B, C, D and F which all employed a variety of entry modes earlier in their internationalization history before reaching a point where the retail brand offer was suitably developed to be franchisable.

Only Company A with its general merchandise fashion business is the exception to this as it began franchising without a well-defined brand before eventually evolving to business format franchising. Company E has also not employed other methods of entry into international markets other than franchising but it could be argued that unlike the other case companies it did not begin internationalization until it had already developed a well-defined retail brand offer in the domestic market. Moreover, it could also be argued that as a privately owned company it is under less pressure to increase shareholder wealth through internationalization than the other case companies.

Petersen and Welch’s (2000) conclusions are also supported by the decisions of Companies B and C to convert existing wholesaling/exporting businesses to franchise operations. Quinn (1998b) notes that while the international franchise literature suggests that a domestic franchise base is essential to the successful development of international franchising there are cases where companies use franchising internationally regardless of the home market situation. The case companies involved in this study confirm his observations with none franchising domestically.

The broader international franchising literature provides two conceptual frameworks which analyse the motivations for the international franchise decision (Welch, 1990; Eroglu, 1992). Some fundamental points need to be reiterated at this juncture which differentiate the research presented in this paper from that reported in these two studies.

Firstly, both Welch (1990) and Eroglu (1992) examine why a domestic franchisor would take the decision to internationalise its already operational franchise business.The current research notably revealed factors that influence international fashion retailers to internationalise through the franchise route, however, none of the case companies franchise domestically with all the case firms operating in the UKmarket through owned stores and concessions. A further difference is that the current research refers to internationalization from the UK, whereas Australia is the market of origin in Welch’s (1990) study and theUS the domesticmarket in Eroglu’s (1992) contribution.Moreover, the current work refers to international retailers only, whereas both Welch and Eroglu’s studies are not sector specific. Nonetheless, it is felt that comparing the findings of the current work to that of Welch (1990) and Eroglu (1992) can be insightful. Welch (1990) identifies two factors that directly influence the international franchise decision, that is, fortuitous franchisee interest and domestic saturation. Both these issues were also identified in the current work as influencing the international retail franchise decision though they are termed “opportunistic approaches” and “domestic competitive pressures” in the discussion above. Welch (1989) also found that in the case of Australian franchisors, the approach by an interested foreign party was the most important catalyst mentioned in starting the move to international operations.

As in the findings presented here, Welch (1990) also finds that in most cases international entry through franchising develops over time as a result of a combination of factors. He notes that experience of franchising influences the decision to internationalise whereas experience in international retailing influenced the case companies in the current study. As in the case of the current work, Welch (1990) also found that the possession of a unique concept to franchise also influenced the internationalization decision.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Eroglu’s (1992) conceptual model of the determinants of franchise internationalization has many similarities with the findings of the current work. He also delineates the influencing factors into organisational and environmental factors with operating experience and influence of topmanagement being the organisational factors he identifies which are also found in the case of the fashion retailers in the current work. Domestic competitive pressures, as highlighted byWelch (1990) andHoffman and Preble (1993), are also found in Eroglu’s study to influence the decision to internationalise a franchising system. Therefore, while some similarities are found between the current work’s findings and the general international franchising literature, there are also differences in influencing factors. This is likely to be as a result of the fact that the current work reveals factors that influence retail firms which do not franchise domestically to do so internationally, whereas previous international franchising research investigates why an existing domestic franchise business would be internationalised. Also, the current findings refer to the retailing sector only, whereas these previous studies are not sector specific.

In terms of theoretical development, resource allocation theory and agency theory are the two most commonly employed explanations for franchising in domestic markets (Oxenfeldt and Kelly, 1969; Ozanne and Hunt, 1971; Caves and Murphy, 1976; Rubin, 1978; Mathewson and Winter, 1985; Brickley and Dark, 1987). The theoretical development of international franchising is much less advanced with only agency theory being offered to date as a possible explanation for international retail franchising (Doherty, 1999; Doherty and Quinn, 1999). Certainly the current study’s indings with regard to the importance of local market complexity in choosing franchising as a method of market entry further highlights the importance of information asymmetry in the agency relationship as emphasised by Doherty (1999) and Doherty and Quinn (1999). However, while resource allocation theory has not been applied in any depth to the internationalization of retail franchising current findings relating to the availability of financial resources as a motivating factor for choosing franchising as an international entry method would suggest that there is potential for the application of the resource scarcity argument in this context. Future research should aim to build on these findings and bring the application of this theoretical material further than the current work permits.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Conclusions and directions for future research
In conclusion, this paper has investigated the factors that motivate UK-based international retail firms to franchise their operations in international markets. Given the lack of research on this topic hitherto, and the ability of qualitative research to develop understanding of under-researched phenomena, a case study design was employed and the study framed within an interpretive research paradigm. Through such qualitative enquiry a range of both organisational and environmental factors is found to motivate the choice of franchising as the main international entry method for these fashion retailers. Some companies such as A and E were initially motivated to franchise as a result of an opportunistic approach from a prospective partner, mirroring findings from the mainstream international franchising literature (Abell, 1991). For the other four case companies, having employed a variety of entry modes during their history as international fashion retailers, basing their internationalization strategy on the franchising mode of operations is a point in their individual company development to which they have all evolved. The financial advantages of franchising as opposed to other methods of internationalization are shown to be significant in their decision. Costly owned store operations which failed (Companies C, D and F) not only impacted on these companies themselves but also acted as a warning to other case companies. Experience of retailing in the international environment, therefore, motivated firms to base their internationalization strategy on the franchise mode of operation as they move forward.

Many of the case companies, apart from Company E, were involved in strategic reviews and restructuring during the early and mid-1990s and out of these reviews franchising emerged as the entry mode of choice. Two factors are at play here, firstly the recession in the UK which hit the retail sector hard and, secondly, and probably more relevantly, all of the case firms had been active in the international arena for a reasonable period of time and a review of strategy at this time was simply a point of company development and evolution. Crucially, for the case companies, the presence of a franchisable brand makes business format franchising a reality in international markets. The control and support of this brand is an area of research which requires further development in the literature. Finally, because all the case companies are experienced retailers they are very aware of the complexities of operating in international markets. Franchising offers a practical way of overcoming these complexities.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

In summary, both organisational and environmental factors are found to motivate international fashion retailers to employ franchising as a means of international expansion. The current work contributes to previous research in a variety of ways. Firstly, by employing a qualitative methodology the in-depth findings presented here add to the growing body of qualitative research on international retailing (Moore et al., 2004), international retail franchising (Quinn, 1999; Sparks, 2000) and international services franchising (Altiney, 2004). A key outcome of this qualitative work is that it highlights the evolutionary and dynamic nature of international retailing. While the paper elucidates factors that motivate retailers to franchise internationally, it is clear that the emergence of franchising has occurred over time as a result of the combination of these factors. The current research also supports earlier work by Dawson (1994) which claimed that internationalization through franchising was particularly suited to fashion retailers. Given the numbers of retailers internationalizing through franchising (Retail Intelligence, 2001) investigating the factors which motivate them to enter foreign markets using this method is fundamental to future research in this area.

The paper contributes to international management research by highlighting the importance of understanding the motivating factors which influence one significant economic sector to choose franchising in international markets. Understanding these issues provides insights into how managers approach the internationalization process and entry method choice decision process. Such understanding is valuable to both international managers and international management research given the influence choosing the most appropriate entry method has on the success of an international venture.

In terms of future research, investigating the management of franchise systems by international retail firms is very much worthy of future research consideration. Research into the implementation and subsequent operation of international retail franchising investigating issues such as control, support and the partner selection process amongst others should be actively encouraged. Further, in-depth research these strategic and operational issues would not only inform the academic development of international franchising for the retail service sector but would also provide practical insights for retailers considering moving into international markets through the franchising mode of operation. While retail specific, such research would also provide insights for the service sector in general, the specifics of which have only tentatively been addressed in the international franchise literature.

The international marketplace offers a world of business opportunities for all types of companies, either large or SME (Small and Medium Enterprises). The goals could be either to sell or source products worldwide. Not only can you tap into a world marketplace of 7 billion people, but according to academic research, companies that do international business grow faster, fail less and become more competitive than companies that don’t. Management needs to have a desire and commitment to develop and build business in international markets as a guarantee of company survival.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

However, a few of the more wide spread reasons to internationalize are the following:

1. INCREASE SALES AND PROFITS
If your business is succeeding in your domestic market, expanding globally will likely improve overall revenue. Economic growth rates in Europe, USA and Japan are very low compared to the large and new emerging markets. In Europe live around 300 million people as well as in the USA. Only in China and India, we can approach more than 2.4 billion potential consumers. This suggests customers are global and that if your company looks beyond the shores of the domestic market, you have some real upside potential. If your company has a unique product or technological advantage not available to international competitors then this advantage should result in major business success abroad. Sales in foreign markets can also be at a higher price (an margin) than in the domestic market. Many imported products are paid as premium products and brands. Therefore, more sales in foreign markets, generally brings more profits.

2. SHORT AND LONG TERM SECURITY
Your business will be less vulnerable to periodic fluctuations and downturns in the Spanish or European economy and marketplace. Generally speaking, the Eurozone is a large, mature market with intense competition from domestic and foreign competitors. During these years of deep economic recession, exports were the solution for many Spanish companies. Thanks to these sales to foreign markets many companies could keep and also improve their production capacity, employment and financial structure.

3. INCREASE INNOVATION AND MANAGEMENT LEARNING
Extending your customer base internationally can help you finance new product development, learning from competitive markets and competitors, and get use to work with very demanding and sophisticated customers. A company can benefit so much from participating in a tough and competitive market and that its own product design and marketing would improve and enable it to perform better around the world.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

comercio-exteriorIn most sectors, participation in the “lead market” would be a prerequisite for qualifying as a global leader or global brand, even if profits in that market were low. Lead markets include: United States for software and IT, Japan for consumer electronics, Italy and France for fashion, Germany for automobiles and so on.

It should be noted that if a company is to maximize learning from a lead market, it should probably participate with its own subsidiary.

Learning indirectly, via a local distributor or partner, is obviously less effective and will contribute less to the company’s development as a global player.

 

BUY   HERE

 

4. ECONOMIES OF SCALE
Exporting is an excellent way to expand your business with products that are more widely accepted around the world. In many manufacturing industries, for example, internationalization can help companies achieve greater scales of economy, especially for companies from smaller domestic markets. In other cases, a company may seek to exploit a unique and differentiating advantage (intellectual property), such as a brand, service model, or patented product. The emphasis should be on “more of the same,” with relatively little adjustment to local markets, which would undermine scale economies

5. COMPETITIVE STRIKE
Market entry can prompt not by the positive characteristics of the country identified in a market assessment project, but as a reaction to a competitors’ moves. A common scenario is market entry as a follower move, where a company enters the market because a major competitor has done so. This is obviously driven by the belief that the competitor would gain a significant advantage if it were allowed to operate alone in that market. Another frequent scenario is “offense as defense”, in which a company enters the home market of a competitor usually in retaliation for an earlier entry into its own domestic market. In this case, the objective is also to force the competitor to allocate increased resources to an intensified level of competition.

JUST SOME FINAL THOUGHTS AS A SUMMARY
Above are some of the good reasons to go global, among other many that a company can have: following local customers, extended product life cycle, searching for raw materials or other inputs, delocalization in order to reduce production costs, saturation of the local market, etc.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

A strategic decision once the company decides to internationalize will be the approach to entering the international market. Different circumstances will be prevalent in different markets and for different companies. In all cases it is strongly advised to undertake serious thought and much preparation. Research foreign property and understand the customer culture of your overseas operations. This analysis and research will provide the company with the adequate information to make sound entry decisions and to implement a sound marketing mix strategy in the new international scenario.

The move to venture into a foreign market by a firm is not a decision that is taken subconsciously but rather one behind some motivating factors. These factors can either be good or bad ones depending on whether the firm is pursuing new opportunities in new markets or alternative markets. Forces motivating the firm to seek foreign markets can be classified into two. These are; 1) those pulling the firm to pursue exciting opportunities in foreign markets or the market pull motivations and 2) those factors pushing the firm to seek alternative opportunities or markets to safeguard its business interests or the market push motivations (Doole and Lowe, 2008, pg 364; Bruce, Moore and Birtwistle, 2004, pg 9).

Market pull motivations refer to those exciting characteristics exhibited by the foreign markets that make the business environment favorable. These motivations are therefore associated with the identified foreign market rather than the firms own competitive advantages or domestic market conditions. According to Campbell and Craig (2005, pg 321), countries with attractive and better conditions for doing business attracts foreign investments much easier than other countries.

Conducive business environment will be determined by the countries political, legal and economic environments. Politically and economically stable countries are much more desirable to invest in due to their relatively low risks. Other factors that are also likely to make a country attractive for foreign investment include the availability of resources, better technology, low labor costs and population. However, massive populations do not always imply attractive business environments (Boone and Kurtz, 1992, pg 85). In addition, foreign firms prefer destinations which are not much culturally distant from their domestic countries. As such, firms will tend to be attracted to foreign markets that exhibit similar cultural environments. Firms entering foreign markets as a result of these motivations are mostly pursuing growth strategies.

Market push motivations
Market push motivations on the other hand are those pushing the firm to seek alternative markets as the conditions in the domestic market become hostile (Campbell & Craig, 2005, pg 320). Factors that may lead the domestic market be unfavorable pushing firms to seek alternative markets include a saturated or declining market, limited market size, rivalry, tough regulatory environment, end of a product lifecycle and high production costs (Etemad, 2004, pg 231; Dawson, 2003, pg 12; Albaum,1994, pg 37; Alexander, 1997, pg 16). In addition, a firm may pursue a foreign market to follow suit its rival competitor for fear of losing out or rival attaining a competitive advantage (Newman and Cullen, 2002, pg 452; Hollensen, 2007, pg 38). Firms seeking foreign markets due to these factors are often pursuing defensive strategies to safeguard their sales and market share.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Understanding foreign markets
International and host country economic environment
In the modern global economy, countries are abandoning their earlier restrictive and protectionist closed economies to open up to international trade. International pressures and technology are seeing even the more reluctant countries open up to foreign businesses and agree to free trade. Although there is yet to be achieved completely free trade globally, there have been increased integration and formation of regional trade blocs and arrangements. These trading blocs include the European Union and the European Free Trade Association in Europe; North American Free Trade agreement (NAFTA), Common Market of the South (MERCOSUR), The Andean Community, Central American Common Market and others for American region; Association of Southeast Asian Nations and Asia Pacific Economic Cooperation for Asian region; Common Market for East and Central Africa (COMESA) and others for Africa. There are also agreements such as the African, Caribbean and Pacific nations Lome convention that grants 70 member nations access to the EU markets. All these arrangements and agreements have implications for international business.

Apart from the international economic environment, there is also the host country business environment (Rajagopal, 2007, pg 114). These will comprise of economic policies being adapted by the host country such as taxation policies, fiscal and monetary policies which will affect the countries business environment. There are also micro factors such as industry size, completion, income and behavior patterns. The host country’s economic environment will determine interest rates, exchange rates, inflation and pricing of the firms product which affects competitiveness and hence success in the foreign market.

Socio-cultural environment
Culture refers to the learned and shared patterns of behavior, interactions and includes beliefs, values, norms, language, religion, institutions and other consequences of human work and thought. Operating in a foreign market environment demands the firm’s knowledge of the impact of cultural differences between the host country and domestic country (Peter and Donnelly, 2004, pg 191). Culture affects the behavior of persons and as such their consumption habits. The awareness and knowledge of foreign market culture holds the key to increased competencies and success in the new market.

Some of the components of culture that the firm needs to have increased awareness of include religion and language. Religious beliefs do affect consumption habits such as dressing modes as well as shopping habits. Hindus, Muslims and Christians will have differing beliefs and views on consumption of some specific products. These views will also vary depending on the country in question. Recent examples include illegalizing women wearing trousers by claiming it as indecent and unacceptable dressing behavior in the Muslim dominated Sudan. Language on the other hand affects communication and thus the firm marketing strategies and efforts.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Other factors include education and the family. Education affects both potential customers and shapes potential employees in the foreign environment. Due to cultural factors such as language barrier and other beliefs, the firm cannot rely entirely on expatriates even on less skilled demanding tasks. In addition, the firm does not always have to maintain physical presence and even if it has, expatriates are very costly because of the expenses and special allowances for working abroad. Again, the customers need to feel and embrace the firm as one of their own. Family characteristics also such as gender roles, family structure and size of concern in the firms marketing efforts vary across countries and the firm must be aware of them. All these issue means that the firm has to alter its organizational culture and strategy to suit the market environment characteristics.

Political and legal environment
When a company makes the decision to enter into a foreign country, it does not only have to deal with the domestic political and legal forces but as well as those of the host country where it is seeking entry and those operating internationally. The firm will be concerned about the political and legal forces as well as the policies being taken up by the host government (Paliwoda and Ryans, 2008, pg 211). These forces determine the regulatory environment and as such things like ownership, property rights and enforcement of contracts. In addition, policies touching on international trade and foreign investments such as tariffs and other non tariff barriers and issues like the political stability will be determined by the government of the day. Political development and changes in the domestic country on the other hand will also have a great impact on the firm’s foreign operations. The mix of all these factors means that the firm will have to accommodate differing laws and policies from different countries which may need alteration of corporate strategies.

Assessing Foreign Market Potential
There is always the assumption that market potential can be solely be informed by looking at the population size in a given foreign market and the per capita consumption. However, as Cavusgil, Ghauri and Agarwal (2002, pg 268) point out, these two measures alone are not adequate measures of the foreign market potential. According to them, there are at least seven dimensions to be looked at when assessing market potential in a foreign environment. These measures include market size, market growth rate, market intensity, market consumption capacity, commercial infrastructure, economic freedom and market receptivity (Cavusgil, Ghauri and Agarwal, 2002, pg 268/9, 270).Primary Factors That Motivate Companies To Expand Internationally my nursing homework

According to Cavusgil, Ghauri and Agarwal (2002, pg 268), population is just mere indication of market size and the relative importance of the foreign market to the firm. It is only a rough estimate rather than a total estimate of the potential offered by the market. For a company targeting to enter into a completely new market, the aim is not only to capture a portion of that market but also to grow that market size with time so as to increase profitability. Certain population characteristics and not only numbers must be considered when entering or assessing the market potential of a foreign market. To this note, (Cavusgil, Ghauri and Agarwal, 2002, pg 268) proposes the market consumption capacity as an additional dimension to be considered when looking at the population to determine potential demand. The basis for this measure is the percentage of the total population or size of the middle class. This is the indicator of the consumption base and in most cases it is the target segment of many businesses.

Population characteristics or this market dimension varies from country to country and may make even same size markets differ in attractiveness. For example, although India and China or else the whole of Asian region are known for their massive population, they have not been able to consume as much as is consumed per individual in United States or in Europe. The growing middle class in this region thanks to the blossoming economies is already attracting foreign firms and promising to be the next battle ground for marketers in years to come. Age also although not included in this market dimension plays an important role in terms of determining potential consumption in the future. With estimated 13 to 20 percent of the world population today over 65, the size of the so called grey consumers considered better off financially and hence their propensity to consume will get on increasing in coming years. For instance, the elderly is said to account one of four by 2025 in Japan while currently in the United States there are 4.5 workers for every pensioner a figure estimated to improve to 1.7 by 2030 (Lee and Carter, 2009, pg 5).Primary Factors That Motivate Companies To Expand Internationally my nursing homework

The other factor apart from population to consider is per capita consumption. While this is an important indicator of demand this measure is heavily influenced and dependent on income. As such (Cavusgil, Ghauri and Agarwal, 2002, pg 270) couples per capita consumption with per capita income to proposes another market dimension the market intensity. For instance, employing this market dimension, Cavusgil, Ghauri and Agarwal (2002, pg 265) ranks Hong Kong number 1, Poland 7, Mexico 14 South Africa 13 and India 23 out of 23 emerging markets from all over the continent.

Apart from these factors associated with population and per capita consumption, other factors as identified in the other market dimensions ill also affect market potential. These include the market growth rate as indicated by the trend in industry annual growth, and the market receptivity indicated by the growth and flow of trade from the domestic country to the foreign country under consideration. Other factors used to assess foreign market attractiveness such as infrastructural development and degree of economic freedom will also determine market potential. Infrastructure will affect the market through distribution and communication channels while economic freedom has much to with policies adopted and will include factors operating in the political, legal and economic environments.

Conclusion
In order therefore to ensure success in foreign markets, all these factors must be put into consideration. Per capita consumption and population size though play a role in terms of determining potential demand are too shallow to assess demand when considered alone. There are a lot of risks when operating in foreign markets which can only be disclosed when all the factors are considered. Firms contemplating going foreign must commit to undertake proper research of the market before jumping into establishing operations. Many firms have established foreign operations without doing proper research thereby exaggerating prospects only to be disappointed and probably withdraw operations a few years later. It is only with proper research or knowledge and good strategies that a firm can thrive in a foreign environment

‘TNT employs 10,600 people in the UK & Ireland and operates more than 3,500 vehicles from over 70 locations. TNT Express Services delivers hundreds of thousands of consignments every week – in excess of 50 million items per year.’ (tnt website).Primary Factors That Motivate Companies To Expand Internationally my nursing homework

And finally let me take us closer to managerial urge motive which reflects the desire, drive and enthusiasm of management toward international business activities. The managerial commitment can be simply because managers want to be a part of company which exists on the international market. In this regard managers can often seek information abroad through international travel. Often, however the above reason is general entrepreneurial motivation which leads for growth and market expansion(Czinkota, Ronkainen, 1999,369).

The internationalization process may also be encouraged by the cultural socialization

of the managers. Managers who either were born or have the experience of living or

travelling abroad may be expected to be more internationally minded than other

managers. Prior occupation in exporting companies, or membership in trade and

professional associations, may also reinforce key decision makers’ perceptions and

evaluations of foreign environments.

As I mentioned at the top of the essay aside from proactive motives there are also push motives , primarily characterized as reactive. It refers to the compulsions of domestic market like saturations of market, which prompt companies to internationalize.

The main reactive reason is response to competitive pressure in the home country. Competitors are a relevant factor stimulating process of internationalization. Many governments use preferential tax treatment to encourage exports. Since 1960 the countries had severe competition in their countries. The countries which could not meet the competitions in the home country started entering the market of the developing countries. For example Coca-Cola became international much earlier than Pepsi did. However, Coca-Cola influenced Pepsi to move in the same direction. Moreover, the firm can enhance its competitive positioning by confronting competitors in international markets (Cavusgil, Knight, Riesenberger,???, 18) One example is Caterpillar’s defensive entry into Japan. The major competitors for this firm were Komatsu and Mitsubishi. The company of Komatsu was especially dangerous with their second position EME company worldwide in terms of their scale. To combat this danger Caterpillar decided to capture the Japanese market by joint venture with Mitsubishi.Primary Factors That Motivate Companies To Expand Internationally my nursing homework

Caterpillar Mitsubishi Ltd. started production in 1965, has been renamed Shin Caterpillar Mitsubishi Ltd., and is now the No. 2 maker of construction and mining equipment in Japan.[7]

Overproduction may be considered as a major reactive motivation for international business activities. During the downturns, in the domestic business cycle, foreign markets may present more stable economic environment. If the domestic sales of a good are below expectation the record can be above required levels. The problem with this issue could be, and often is that, international market expansion motivated by overproduction may not represent full management commitment. This issue, therefore may not symbolize a long-term strategic perspective. Firms using this strategy typically are short-term oriented (Czinkota and

Ronkainen 1998).

Excess capacity can be also powerful motivation. Hollensen (2007) argues that excess production capacity arises due to changing demand in the domestic market. If equipment

for production is not fully utilised firms may see expansion into the international

market as an ideal possibility for achieving broader distribution of fixed costs. Alternatively,

if all fixed costs are assigned to domestic production, the firm can penetrate

international markets with a pricing scheme that focuses mainly on variable costs(Czinkota, Ronkainen, 1998,360).

One of the last motivation for international business is saturated markets. This issue has similar effects to that of declining domestic sales. Firms may be pushed to go international because of a small domestic market potential. At that point firms can use the international market to extend the life of their product and their organisation. This sort of behaviour is often specific for industrial products that have small number of customers located over the world. It refers also to producers which produce specialise consumer goods with small domestic markets in many countries. Many US appliance and car manufacturers initially entered international markets  Primary Factors That Motivate Companies To Expand Internationally my nursing homework

because of what they viewed as near-saturated domestic markets. US producers of

asbestos products found the domestic market legally closed to them, but because

some overseas markets had more lenient consumer protection laws they continued to

produce for overseas markets.

And finally a major reactive motivation for firms to go global is that proximity to international customers and ports. This type of motivation can also be named as physical and psychological distance. For example, a Polish firm established near the German border may not even perceive their market activities in this neighbouring country as global marketing. Unlike US firms, most European firms automatically become international marketers simply because their neighbours are so close. Primary Factors That Motivate Companies To Expand Internationally my nursing homework

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