Module Code: MKIB 225
Module Title: International Business
Essay Title: Why do business internationalise?
Student ID: 200992874
Module leader: Dr.Clases Belfrage
Date of Due: 9am ON Thursday 6th of March, 2014
Word Count: 988
Why do business internationalise?
The business internationalise means a company’s production and business activity are not only confined to one country, but also integrate the different countries’ raw material and labour and technologies to
produce products and sold to multi country. The primary purpose of business internationalise is seek a wider range of competitive advantages and integrate resource in order to profits maximization. The Internationalization motives include three points: to find the new customers and market for existing products and services; looking for low-cost resources and labour; build the core competitiveness. Next, the mainstream and alternative international business theory will be compare and contrast to answer why do business internationalise. Companies have many different ways to enter the international market. The new trade theory indicates that early into new market than theirs competitors will get more market share that establishes the entry barriers (Krugman, 1985). This is the advantage about economies of scale. In addition, economies of scale could reduce the marginal cost of produce unit goods as output expands. The lower cost will support the price advantages than competitors. Cooperation with foreign companies has many uncertainty factors, and the transaction cost will increase when the frequency of transaction increased. (coase, 1937) Consequently, internationalization will reduce the uncertainty, complexity, information asymmetric, and opportunism (Williamson, 1981). Because business internationalise transform the multinational business act from external to internal behaviours, it reduce bargaining and contractual cost through reduce the unexpected factors in...
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