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Motives of Internationalization of Firms Motives of Internationalization of Firms The factors which motivate or provoke firms to go international may be broadly

divided into two groups: (1 !ull factors (" !ush factors

(1 !ull Factors: Those factors or forces which attract the foreign firms to do business in Foreign market are come under this categories# $uch attraction include% broadly% the relative profitability & growth prospects# These are also called !roactive reasons# The followings are important !ull Factors : (a !rofit 'dvantage : I( could be more profitable than the domestic# (ut if not profitable than Total !rofit would be increase & thus it become again profitable# (b )rowth opportunities: * To increase sales * To increase market share of the firms (" !ush Factors: It refers to the compulsion of the domestic market such as saturation of the market% which prompt companies to internationalize# These reasons are also called +eactive reasons# The followings are important push

factors: (a ,ompetition: Increase competition in domestic market is one of the main cause & conse-uences of globalization# (b .omestic market constraints: * $urplus production in home market * .ecline the demand of the domestic product in the home market * $mall domestic market in size or limited home market * To take the benefit of economies of scale by producing mass production (c !olitical $tability /s# !olitical Instability

's the business environment became more turbulent% sophisticated and competition grew stiffer% businesses needed to be more proactive% creative and more open to the realities of the global trend of occurrences# The motive behind every success minded company is to cut cost as low as possible and ma0imize profit in all of it transactions and operations# Therefore% to achieve business ob1ectives% maintain cardinal values of the company and e-ually deliver values for customers2 money% it then behooves on the company to plan strategically how it would cope with the many business challenges in ensuring that it wins a significant share of the target market# )oing international is an effective way of staying afloat of the 3business waters2# International business has been defined in various ways and by different authors# The online business dictionary defined it as 4The economic system of e0changing goods and services% conducted between individuals and businesses in multiple countries# .oole &5owe ("661% 71 also defined it as 4the performance of business activities that direct flow of a company4s goods and services to consumers and users in more than one nation for a profit2# )oing by the definitions of international marketing% this simply means the process of taking goods and services to people outside the location of the company that produced it# 8ne can

however conclude that for the purpose of achieving business goals in the implementation of marketing mi0% two levels are involved# 't its simplest level% international marketing involves the firm in making one or more marketing mi0 decisions across national boundaries# 't its most comple0 level% it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe# !rof# .uncan% a 9$' based lecturer in his lecture delivered to the students of International business student at the $avonia 9niversity of 'pplied $ciences :uopio% Finland (Feb#"66; stated clearly some of the important factors that are responsible for companies and businesses going international# The factors are as follows: 1# "# 7# <# =# ># ?# A# To build brand image $ales growth 'ccess to scarce resources 5everage core competences +espond to competition Too small home market @0ternal initiatives to spread the product To diversify sources of sales and supply

Furthermore% the Indiana state 9niversity% 9$' (online source#1=#67#6; grouped the reasons for companies embarking on international trade into two broad categoriesB !roactive and reactive reasons# PROACTIVE REASONS:

@conomics of scales International markets +esources access and cost savings#


International competition +egulations and restrictions ,ustomer demands

!onsse oy1% (Finnish company the market leader in the forest machine industry could not have achieved such a great success by limiting its dealings within the shore of Finland# The ponsse company did well by acting proactively to e0tend the company2s marketing strategy to concern the target markets and this they achieved by going international# Why Com anies !et involve" in International #$siness There are < ma1or operating ob1ectives that may cause companies to develop International (usiness 1 To e0pand sales " To ac-uire resources 7 To diversify sources of sales < To diversify sources of supplies Chich% if you do D7 and D< leads to o Minimizing competitive risk Overall !eneral reasons for International #$siness !ro%th There are many many reasons why international business has grew enourmously in the 1;;6Es and the first decade of F": G but essentially these reasons can e0plained due to < main influences

Te&hnolo!y o increasing use of technology in manufacturing o increasing use of technology in the process of consuming products o increasing use of technology in delivering products o transportation technology% packaging technology etc#

'overnment trade policies liberalized (made less restrictive o recognition that trade increases standard of living o access to more products enhances lifestyles o trade increases technological opportunites o trade increases chance more people in the society can make money .evelopment of instit$tions to s$ ort and facilitate International (usiness o like the TC8% IMF% 8@,. etc Increased )lobal Com etition