Numerous motivational factors play important roles when companies expand internationally.
A company’s intention to expand internationally may be a result of the market opportunities that be present overseas. The desirable opportunities often are the demand of the product in overseas market, the favorable change of trends for the product or, sometimes it is just the lack of competition for the product that provides the company with a first-mover advantage (Lobo et al 2017). There are opportunities like greater profitability of the foreign market and also at times prestige gain in the domestic market due to being an international brand.
A major factor in the motivation of a company’s international expansion is the diversification of risk. With the help of this, the company can mitigate its risk in a market where the trends are always changing. Also, a company can successfully mitigate the effect of external factors that can influence consumer behavior and the company’s sales, like climate ( Lin & Chang 2017).
Economics of scale
This factor also plays a major role in motivating a company to be global. The distribution network and the transport can be effectively economized by achieving economies of scale. Also, the products can be manufactured cheaper than domestic manufacturing units in some countries due to the cost of the component, labor wages, availability of the supplier, and distinctive legislations.
Profitability and Sales expansion
Companies always seek opportunities where they can reduce the cost of manufacturing the product so as to increase the profit. There are many foreign countries where this is possible to achieve. And by achieving this, also the company is entering a new market, where they can reduce the prices as the manufacturing cost allowed that, to get a hold of that particular market against any competition. And in this process, they are appealing to the global customers, by which the sales expansion is also achieved.
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