1. Identify the push and pull factors that encourage the organization to go international.

There are numerous forces that shape any organization or business when it comes to going

global. Reasons for venturing to overseas markets are vast but can be adequately explained

through the Push and Pull Theory which suggests that there are two forces influencing a business

at any given time, these are namely push and pull factors. Simply put, this theory seeks to

explain why businesses are pulled towards an international market and are pushed out of their

home market. Be they political, economic and cultural, push factors are the forces that drives a

company to look into new markets whilst pull factors are the forces that lure a company to enter

a new market. When it comes to companies going international, push factors have more to do

with a company`s excess capacity, a saturation of the domestic markets, risk diversification,

economic difficulties in domestic markets, and the ending of a product life cycle in the existing

market. Pull factors however include factors such as ambition, the appeal of a larger market, the

economies of scale, sales increase, extending the product life cycle and exploiting a competitive

advantage. This essay therefore not only seeks to identify the push and pull factors that

encourage the organization to go international but also strives to decode these respective forces.

One of the main reason for a firm going global lies in the lure of the internationalization of

export (Bel et al 2003). This means that companies often choose to go international usually

because of a demand for their products both domestic and foreign markets. Scholars have

generally concurred that the sheer growth potential accompanying a company’s

internationalization or its corresponding market opportunities fostered by the relative economies

of scale is arguably the prime reason for a company to expand to new markets. Economies of

scale are reductions in unit production costs resulting from large-scale operations. According to

Bel this view adheres to the notion of casting one’s nets wider to reap more of one’s efforts
bearing in mind that the substantially improved productive output in many industries has made it

necessary to have a foreign market, in addition to the domestic market, so as to take advantage of

scale economies.

Another reason to why companies expand to the international scene could be because the

domestic market is already saturated and therefore they need to find new markets to continue

their growth (Hines & Bruce, 2007). This is one of the key push factors. In previous years going

international was more of a preference rather than a must, since domestic markets were relatively

condensed, however, today if companies are to survive the continuously shrinking domestic

market searching for new markets is not a question. According to Hawthorn, this is the reason to

all of the multinational companies in the world of the modern era. In his view, the market for a

number of products tends to saturate or decline over time in advanced countries. This often

happens when the market potential has been almost fully tapped. For example, the fall in the

construction rate implies contraction of market for several construction products and or services.

In such an instance, businesses undertake international operations in order to expand sales,

acquire resources from foreign countries, or diversify their activities to discover the lucrative

opportunities in other countries.

More so, one of the most commonly considered pull factors when a company is deciding to go

international is in the lure of having a competitive advantage. There might be intense

competition in the home market but little in certain foreign countries. A protected market does

not normally motivate companies to seek business outside the home market. It is especially

important for the growth of firms to expand to markets where they have a significant competitive

advantage, with particular attention to the location of production and sales. Many businesses
choose to move their production facilities to countries where the labour costs are cheap so as to

reduce business and production costs, which naturally result in a competitive advantage.

Additionally, economic conditions prevalent in countries have both a push and pull effect on a

company’s decision to go global. Instead companies look at where in the world there are best

possibilities for their concepts and products. The latest trend is to establish in low-cost countries

in for example Asia that also usually means cheap labor costs. Higher growth rate of GDP of

China, India, South Korea, Singapore, Malaysia, Thailand, Brazil and Mexico and some of the

developing countries has also been one of the significant factors for countries venturing into

those areas.

The relative ease of internationalizing is also one of the key pull factors driving companies to go

global today. Technology has made the distance between countries smaller, consequently this has

catapulted globalization which in turn has allowed businesses to forge a presence in foreign

markets, thus keeping at par with the competition. In coherence with this view, (Laine & Kock,

2000) argue that strides in technology have made it easier for companies to expand on global

markets, and globalization has been an important force for today’s world’s economy. Firms have

moved abroad in order to reap large profits. The development of information technology has

bought different countries closer and has encouraged firms to move abroad with the minimum of

difficulties. Therefore expanding on the global market is one way to grow and stand out since it

reaches out to new customers and new market. Thus the ease of going global is one of the pull

factors that may inspire companies to go international.

In conclusion, it emerges from the foregoing essay that, whilst reasons for an organization to go

international are vast, these reasons adhere to two distinct nature of forces, namely pull and push

factors. The pull forces are proactive which pull the business to foreign markets. The push forces

on the other hand are reactive forces which promote the companies to go international. As

demonstrated above, pull factors include but aren’t limited to ambitions, the appeal of a larger

market, the economies of scale, and sales increase amongst others. Whereas push factors consist

of factors such as a company`s excess capacity, a saturation of the domestic markets, risk

diversification, and economic difficulties in domestic markets. In aggregate, these push and pull

forces are what encourage and sometimes even determine whether an organization goes

international or otherwise. And as suggested by Alexander (1997) emphasize however the fact

that these factors do not exist by themselves, but are mutually inclusive in pushing a company

globally.
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