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WHY COMPANIES GO INTERNATIONAL?

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

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Growth Opportunities ‡Economic growth in many foreign countries strong attraction. Domestic Market Constraints ‡Market for product tends to saturate or decline (happens frequently in advanced countries) ± Transfer of technology to developing countries. ‡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.
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Government Policies and Regulations Incentives: ‡Incentives offered by government to export and invest in foreign countries. ‡Governments of many countries offer incentives to foreign investors. Obligations: ‡Foreign exchange needed to finance imports, payment of royalty, debt etc. ‡Companies are subject to specific export obligations ± export house, EOUs,

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

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Reasons for Entering International Markets
Strategic Vision Spin - off benefits Growth Profitability

Economies of scale Why Should a Firm Enter International Markets?

Govt. 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

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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 Implement

External Factors Decide on -Market Environment -Competitive Profile

Organise Department Subsidiary Jt. Venture Export House

Export Review Modify Set new target

Allocate Resources *Product *Arrange Resources

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