Why Firms Decide to Go Global
Why firms decide to go global
Growth
Many companies will prefer to invest their excess profits in order to expand, but sometimes they are limited because of the maturity of the markets in their area. Therefore, they seek the overseas new markets to provide such growth opportunities. So, these companies, in addition to investing their excess profits, also try to maximize efficiency by employing their underutilized resources in human and capital assets such as management, machinery, and technology.
For firms seeking growth, overseas markets represent new market segments, which they may be able to serve with their existing range of products. In this way, a company can stick to producing products that it is good at. Finding new overseas markets for existing or slightly modified products does not expose a company to the risk of expanding both its products range and its market coverage simultaneously.
Market Saturation
Saturation of its domestic market can force an organisation to seek overseas markets. Saturation can come about where a product reaches the maturity stage of its life cycle in the domestic market, while the market for fast food restaurants may be approaching saturation in a number of western markets – especially the United States – they represent a new opportunity in the early stages of development in many eastern European countries.
Reducing dependency on one market
As part of its portfolio management, an organisation may wish to reduce its dependence upon one geographical market. The attractiveness of individual national markets can change in a manner that is unrelated to other national markets. For example, costly competition can develop in one national market but not others, world economic cycles show lagged effects between different economies, and government policies ,through specific regulation or general economic management ,can have counterbalancing effects on market prospects.
The nature of the product
The nature of a firm’s
Growth
Many companies will prefer to invest their excess profits in order to expand, but sometimes they are limited because of the maturity of the markets in their area. Therefore, they seek the overseas new markets to provide such growth opportunities. So, these companies, in addition to investing their excess profits, also try to maximize efficiency by employing their underutilized resources in human and capital assets such as management, machinery, and technology.
For firms seeking growth, overseas markets represent new market segments, which they may be able to serve with their existing range of products. In this way, a company can stick to producing products that it is good at. Finding new overseas markets for existing or slightly modified products does not expose a company to the risk of expanding both its products range and its market coverage simultaneously.
Market Saturation
Saturation of its domestic market can force an organisation to seek overseas markets. Saturation can come about where a product reaches the maturity stage of its life cycle in the domestic market, while the market for fast food restaurants may be approaching saturation in a number of western markets – especially the United States – they represent a new opportunity in the early stages of development in many eastern European countries.
Reducing dependency on one market
As part of its portfolio management, an organisation may wish to reduce its dependence upon one geographical market. The attractiveness of individual national markets can change in a manner that is unrelated to other national markets. For example, costly competition can develop in one national market but not others, world economic cycles show lagged effects between different economies, and government policies ,through specific regulation or general economic management ,can have counterbalancing effects on market prospects.
The nature of the product
The nature of a firm’s