Essay on Competiting in International Markets

3083 Words Dec 19th, 2011 13 Pages
Why Companies Expand into Foreign Markets
Companies opt to expand outside their domestic market for any of four major reasons: * To gain access to new customers, raw materials, capital, skills and expertise – expanding into foreign firms offers the potential for increased revenues, profits, and long term growth even more so when home markets are mature. * To achieve lower costs and enhance the firm’s competitiveness - Sales volume from one country isn’t enough to fully capture manufacturing economies of scale. * To capitalize on its core competencies - A company with a competitively valuable competency or capability might be able to leverage
…show more content…
Achieving low cost producer status often requires a company to ha ve the largest worldwide manufacturing share. However important marketing and distribution economies associated with multinational operations can also yield low cost leadership. * Flactuating Exchange Rates – the votailty of exchange rates affect geographical cost advantages, to a point of wiping out a country’s low cost advantage or transforming a former high cost location into a competitive cost location. A strong US dollar makes it easier for US companies to manufacture in foreign countries. On the other hand, a fall in the US dollar can eliminate the cost advantage and even prompt foreign companies to establish production plants in the US. * Host government Trade Policies – National governments enact all kinds of measures affecting international trade and the operations of foreign companies in their markets. Host governments may impose import tariffs and quotas, set local content requirements on goods made inside their borders by foreign companies, and regulate the prices of imported goods. Outsiders may also face a web of regulations regarding technical standards, product certification, prior approval of capital spending projects, withdrawal of funds from the country, and minority ownership by local citizens. Subsidies and low interest loans are also provided to domestic companies to help them compete against foreign based companies. Other governments,

Related Documents