paper explores the benefits that a business may accrue by seeking foreign
markets. International business not only brings about advantages to the
business alone but also the economy of its home country. Needless to say, it
creates peace and harmony around the globe due to interdependence attained from
foreign transactions. Most firms which penetrate global markets are able
register higher levels of success as compared to their counterparts who remain
transacting in their local market.
businesses today remain stagnant in terms of revenue and wonder why. However,
the answer is simply failure to explore foreign markets. For a firm to prosper
and remain in business for the long term it must try its level best to permeate
foreign markets, to extend its life span. According to Peng (2013),
international business can be defined as a business or firm that engages in
international (cross-border) activities. Expanding a company internationally
provides numerous opportunities which a beneficial to a company. The objective
of international business can be looked at from two angles: the individual firm
and the government.
firms are able to generate higher amounts of sales. New markets go hand in hand
with a bigger customer base. When a firm penetrates a new foreign market the
number of consumers is larger, and hence purchasing power increases. This new
demand creates more sales as compared to that of a single country. Most of the
world’s largest companies according to Forbes(2017) derive over half of their
sales from foreign markets such as Phillips and Sony, just to name a few.
than that, once a firm goes global, it is able to enjoy greater economies of
scale. In economics, economies of scale are the cost advantages that
enterprises obtain due to size JSTOR (1977). The average cost of production is
minimized when more units are produced. Therefore when a company grows in size
by permeating a foreign market the production units increase and the firm produces more commodities while incurring lower costs.
going global helps to diversify risks. Risk diversification is simply spreading
risk out by having numerous businesses in case one of them fails. This strategy
helps to protect the firms’ financial position. Opening businesses in foreign
markets allows a company to spread the risk of slowing demand in its home
country. Thus if the domestic economy gets sluggish the firm is able to pick up
the slack from the foreign markets.
foreign markets also aids in extend the products life cycle. The product life
cycle describes the stages through which a product goes from the time it was
introduced till the time it is ultimately removed from the market. Going global
assists in saving a company’s product before it goes into decline. This is due
to the fact that foreign markets create new opportunities, especially if the
product was low in supply or unavailable in the foreign market. In this manner
the newly found market would help in sustain the life of the firms’ product.
conducted at a global level
W. Peng,2013, Global Strategic Management, International Edition.
Quarterly Journal of Economics Vol 91,No 3,( Aug 1977) pp. 385-400