WHY COMPANIES GO INTERNATIONAL?

Prof. A.K. Sengupta Former Dean, Indian Institute of Foreign Trade
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growth etc.WHY COMPANIES GO INTERNATIONAL? Two Factors: Pull factors : Push Factors Pull factors: Proactive reasons – forces of attraction – pulls the business to foreign markets – profit. Push factors: Reactive reasons – compulsion of domestic market prompts companies to internationalize – saturation etc. 2 . Profit Motive: •International business – profitable than domestic market – investment in low cost locations.

•Scale economies – Need to enter foreign market in addition to domestic market – Korea – economic size plants Competition •Competition – driving force behind internationalization – A protected market motivates domestic sales •Economic liberalization in 1991 increased competition from foreign firms as well as domestic firms – many Indian companies going international.Growth Opportunities •Economic growth in many foreign countries strong attraction. 3 . Domestic Market Constraints •Market for product tends to saturate or decline (happens frequently in advanced countries) – Transfer of technology to developing countries.

Obligations: •Foreign exchange needed to finance imports. debt etc. •Governments of many countries offer incentives to foreign investors. 4 . •Companies are subject to specific export obligations – export house. payment of royalty. EOUs.Government Policies and Regulations Incentives: •Incentives offered by government to export and invest in foreign countries.

5 . •Foreign exchange earning may enable company to import capital goods.Spin off Benefits •International business may help companies to improve domestic business – Helps to improve image of the company. technology. Strategic Vision Systematic and growing internationalization of many companies is essentially a part of their policy.

Policies & Regulations Spreading Risk Competition in Domestic market Spreading R&D Cost Marketing Opportunities Due to life Cycle Access to Imported inputs Uniqueness of Product or services 6 .Reasons for Entering International Markets Strategic Vision Spin .off benefits Growth Profitability Economies of scale Why Should a Firm Enter International Markets? Govt.

Venture Export House Export Review Modify Set new target Allocate Resources *Product *Arrange Resources 7 .Process of International Marketing Commitment to Export Analyse Internal Factors -Product -Resources International Market Involvement Market Identification & targeting Entry mode selection Marketing Mix *Product *Price *Distribution *Promotion Set Targets External Factors Decide on -Market Environment -Competitive Profile Implement Organise Department Subsidiary Jt.

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