Assessing Intertnationalisation

Assessing Internationalisation

Internationalisation can give businesses greater opportunities.

Advantages of internationalisation

Accessing international markets gives businesses access to a larger market of customers which can increase sales revenue and profit.
Accessing international markets can reduce a business’ risk in case demand in the home market declines rapidly following a change in tastes and fashions.

Exporting

Exporting allows a business to access international markets by selling products abroad.
- For example, Foxconn export to markets such as America and the United Kingdom which allows it to access international markets.

Licensing

Licensing allows a business to access international markets by providing overseas businesses with a license to sell and produce its products in that country.

Alliances

Alliances allow a business to access international markets through working in partnership together to share risk.

Direct investment

Direct investment allows a business to access international markets through investing in facilities, such as a production centre, abroad.

Attractiveness of Internationalisation

Various factors affect a business choosing an international market to enter.

Size of the local market

The market’s growth rate and size must be considered as a large or growing market will be more attractive.

Political stability and culture

The political stability and culture of the country in which the international market is located must be considered as this can affect the complexity of entering the market.

Local competition

Local competition must be considered as this can affect the likelihood of a foreign business being able to access the market with success.

Sourcing Resources

A business may source its raw materials from overseas suppliers as these may be cheaper than raw materials bought from the home market.

Off shoring

Off-shoring involves a business moving part of its production process to an overseas manufacturer.
Off-shoring has advantages and disadvantages for a business:
- Off-shoring can reduce cost which allows a business to lower its selling price or increase profit.
- Off-shoring can lead to quality problems if overseas producers do not uphold the same quality standards as the business which outsources.

Reshoring

Re-shoring involves a business bringing its production processes back to the original country.
Re-shoring has advantages and disadvantages for a business:
- Re-shoring can increase cost which means a business may need to increase its selling price or accept reduced profit.
- Re-shoring can increase quality as production can be monitored more closely which can build a business’ reputation.

Entering International Markets

Businesses can enter markets in different ways.

Multinational organisations

Businesses can target overseas markets by becoming a multinational organisation.
A multinational organisation is a business which has production facilities in more than one country.

Influences on the decision to enter an international market

The importance of quality may affect a business’s decision when deciding whether to produce in an overseas market.
The importance of cost reduction may affect a business’s decision when deciding whether to produce in an overseas market.

Managing International Business

The management and leadership of an international business are quite different from the management and leadership of a domestic, or local, business.

Cultural differences

Cultural differences often influence the management of international businesses as trading may involve dealing with different cultures.

Legal differences

Legal differences often influence the management of international businesses as trading may involve dealing with the laws of different countries.

Markets and customer demands

Markets and customer demands often influence the management of international businesses as trading may involve dealing with customers and markets which demand different products and services, or adapted products and services.