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The main reasons why companies decide to internationalize their activities - Essay Example

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The presence of emerging competition in many different markets and industries is one rationale for why companies seek internationalization strategies. The writer of this essay analyzes the main reasons why companies decide to internationalize their activities…
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The main reasons why companies decide to internationalize their activities
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Download file to see previous pages Porter (2011) identifies how paramount the risks are as they are associated with new entrants in a market when entry cost barriers are reduced or even when technological advancements make it easy for new entrants to replicate competitive products and infuse new competitive forces in the market. Growth in the competition after a business’ products are in the maturity stage along the product lifecycle and when markets are becoming saturated with emerging competition, it is no longer sustainable to maintain the presence in the domestic country. Instead of attempting to diversify the business’ product portfolio, which is not always achievable using existing resources and existing knowledge, firms will seek new foreign markets as an opportunity to build revenues and remove competitive risks. In this capacity, they can maintain the same operational costs associated with product manufacture and create a new demand with foreign consumers as a means of sustaining its profit margin. Furthermore, sourcing and manufacturing are now becoming a more globalised function as industry-wide benchmarks and standards are being established (Cavusgil, Yeniyurt and Townsend 2004). This means that supply chain networks are becoming more homogenous on a global basis which makes it easier for competition in a certain industry to gain the same type of procurement advantages related to cost and distribution. As emerging markets establish the distribution networks and tangible infrastructures necessary to reach foreign markets, competitors are able to benchmark supply strategies and erode any competitive advantages once achieved by another competitor. Further, the ability of competition to achieve replicable value-added activities in procurement drives another competitor to seek new opportunities to regain competitive advantages. Internationalisation, as it is related to procurement strategies, provides new opportunities to innovate new product development. ...Download file to see next pagesRead More
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