INTERNATIONAL EXPANSION
INTERNATIONAL EXPANSION
An organization can “go
international” by crossing domestic borders as it employs any of the strategies
discussed above. International expansion involves establishing significant
market interests and operations outside a company’s home country. Foreign
markets provide additional sales opportunities for a firm that may be constrained
by the relatively small size of its domestic market and also reduces the firm’s
dependence on a single national market. Firms expand globally to seek opportunity
to earn a return on large investments such as plant and capital equipment or
research and development, or enhance market share and achieve scale economies, and
also to enjoy advantages of locations. Other motives for international
expansion include extending the product life cycle, securing key resources and
using low-cost labour. However, to mold their firms into truly global
companies, managers must develop global mind-sets. Traditional means of
operating with little cultural diversity and without global competition are no
longer effective firms (Kedia and Mukherji, 1999).
International expansion
is fraught with various risks such as, political risks (e.g. instability of
host nations) and economic risks (e.g. fluctuations in the value of the country’s
currency). International expansions increases coordination and distribution costs,
and managing a global enterprise entails problems of overcoming trade barriers,
logistics costs, cultural diversity, etc.
