Discuss the primary factors that motivate companies to expand internationally.
The organization considers a lot of factors before starting it locally. There are various other factors too that need to be considered before expanding the business globally. The world is advancing in technology. It is essential to grow the market locally to internationally.
Example- The cell phone network Sprint was initially started in Kansas City initially. It eventually expanded to all the states of Unites States with in short span of time. Now this network is also targeting to grab the Canadian market.
Before an organization to grow globally or internationally there are some factors that motivates the company to get more opportunities for market growth and diversification. Entering the international market is a strategy followed when the organization is looking for growth and expansion.
1. More profit margins- When the organization is doing well locally, it has to look for opportunities to add more customer base and more market. This in turn leads to entering the international markets. As a result the profit margins of the organization are expected to grow in a higher rate.
2. Diversification- The international expansion of the organization helps the company to diversify. It also helps in reducing the risk of demand. If one market does not do well there is always a chance to gain the market with alternatives. There is always a scope for success in one or the other market. It can also help in finding the raw materials and supplies which can be cheaper and easier to get when started initially.
3. Increase in sales- This is one of the most important factor that motivates an organization to grow globally. The sales that happen locally can be way lower when the organization grows internationally, which in turn is linked to gaining more profits and having more customer base.
4. Customer Base- If the product is sold internationally, the customer base is very high. It is important to note that the customer base is linked with all the other factors.
It is important to note that along with the motivating factors there could also be challenges that the company has to face while entering an international market. All the motivating factors and challenges are dependent on each other. The company has to study all of these in detail and make an informed decision.