Analyze the main reasons why companies decide to internationalize their activities - Assignment Example

Why companies decide to internationalize their activities Why companies decide to internationalize their activities From the research conducted by Kleinert (2004), internationalization relates to creating networks through penetrating into new markets by increasing commitment to resources in varying networks, integration by coordinating the various networks, and by extension through investing in new networks. From the case study, Chabros International Group is one of the companies that have gone through internationalization; Wal-mart is yet another example.

In the modern day business world, a lot of firms have resulted to operating internationally s opposed to locally. With the rush to globalize corporations on the increase, it is of great importance that the reasons behind this internationalization be analyzed. In the work of Rugman (2003), it is evident that corporations internationalize their businesses so as to remain competitive and relevant in the market. This form of networking is evident in the case of Chabros International Group that internationalized its markets so as to stay relevant in the tough economic times of the time (Farah, 2010).

Additionally firms internationalize so as to fit in the current global economy (Czinkota & Ronkainen, 2007). Relationships between varying firms are considered as networks that require co-existence and relationship between the varying complexes. For instance, the manufacturing industries have to create close links with production, distribution as well as service provision. In this case, internationalization is inevitable if a firm has to remain in the market. Mathis, Rogmans & Albqami (2011) say that there are many risks in the market including the political risk.

With the financial and political risks on the rise, notable the global crisis of 2007, and unrests in Middle East and North Africa respectively, Mathis, Rogmans & Albqami (2011) indicate that there was need to change the macroeconomic policies in UAE and Saudi Arabia to reduce the impacts of global crisis on the economy. In this instance, there is need for internalization of the management base of the investors in multinational companies so as to reduce the liability of foreign investors, and the need to incorporate local partners in their corporations.

Cavusgil, Ghauri & Sinkovics (2009) argue that corporations face stiff competition in the domestic market. Internalization for their markets gives them a chance to devise policies that will keep them running in such touch economic conditions. Through setting market policies, corporations are able to react to unforeseen threats from their foreign competitors, and as a result are prepared to strike back.The economic scenario constantly changes with time. If companies internationalize, chances are that they will have an easier market entry to global business (Doole & Lowe, 2008).

Companies are then able to sell their products in bulk, through their strict planning process; a good example is the sales made by the Chabros International Group in their first venture into international business. In the present day business world, international business has turned out to be more profitable unlike the previous decades. The opportunities for huge profits are high just as the chances of risk incurrence are high. However, with thorough planning, it is expected that internationalization of a business will have more benefits than demerits.

ReferencesCavusgil, T., Ghauri, P., & Sinkovics, R., 2009.New Challenges to International Marketing. NY: Emerald Group Publishing.Czinkota, R., & Ronkainen, A., 2007. International Marketing. London: Cengage Learning.Doole, I., & Lowe, R., 2008. International Marketing Strategy: Analysis, Development and Implementation. London: Cengage Learning EMEA.Farah, B., 2010. Chabros International Group: A World of Wood (Product #: W10001-PDF-ENG). Richard Ivey School of Business Foundation.Kleinert, J., 2004. The Role of Multinational Enterprises in Globalization.

London: Springer. Mathis, T., Rogmans, T., & Albqami, R., 2011. Foreign Direct Investment in the Middle East: Riyadh and Dubai. Dubai: Thunderbird School Of Global Management. Rugman, A., 2003.The Oxford Handbook of International Business. Oxford: Oxford University Press.