Research Paper on Going Global: Factors Motivating International Expansion

Introduction

The decision to go international is considered to be a strategy that is caused by different factors, and it is usually implemented over a certain period of time. Most nations across the globe usually sensitize different global organizations to enter their markets in order to improve or build the nations' economies. In most cases, different organizations are usually motivated to seek international expression by various factors that include, first, the need to improve their current profit margin. In most cases, when the growth measures are depleted at a national level, the organizations usually consider seeking or entering the international market as the most effective approach (Engle & Crowne, 2014). When a certain organization product is distributed in a foreign market, the organization tends to increase its customers, and as the organization continues to improve loyalty in the international market, the amount of revenue or profits also increases. Most organizations that venture into global markets are also able to improve their revenues since they usually relocate most of their operations near the suppliers, thus lowering the cost of production.

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Secondly, competing for new sales. The race to expand internationally is mostly perceived to be based on increasing the amount of sales in the foreign market. In most cases, being the first to arrive in a certain new market tends to have numerous advantages, for instance, the new organization tends to attract a huge number of customers compared to other organizations that may come in later. However, in order to gain the huge number of customers, the organization has to have a market solution that will improve the organization's ability to get the valuable access and improve the amount of revenue gained. Through the use of technologies, organizations also tend to establish specific or unique international strategies that help them to gain a competitive advantage in the new market, thus attracting a huge number of customers (Kalasin et al., 2014).

Thirdly, to diversify a business. Joining an international market usually helps an organization to diversify its operations in a number of ways that include; first, the organization is able to spread the risk of slowing demand in other nations. If a certain market loose or gains interest in the goods being offered, the organization can recover from the increased sales in another country (Kalasin et al., 2014). Secondly, the organization is able to connect with suppliers in the international market and also take advantage of the resources and raw materials that are not accessible in the domestic market. Thirdly the organizations are able to improve innovation and create additional variations to their solutions, particularly when operating in multiple countries.

Factors That Can Have an Impact on Your Business Abroad.

Survey indicates that approximately 68% of United States businesses are planning to expand to other nations across the globe within the next five years (Engle & Crowne, 2014). Expanding these businesses globally will help to create unique opportunities, to increase the profit margin and also target new customers. In order to ensure that business ventures into other countries are successful and meet the needed objective, the businesses have to consider various factors that can have an impact on the business. Some of these impacts include, first, political and economic stability. Both economic and political stability considerations are crucial to every business across the globe. Despite a country having good infrastructure, business culture and a talent pool, and other tools required for a business to thrive, all this may be depleted within a very short time if a country a sudden political or economic shift. For instance, most business that were initially started in the African nations were highly affected by the constant political and economic instabilities within the African nations causing the business to collapse. Therefore when choosing where to locate a business, ones should identify a country has had a good economic and political stability for a long time to avoid any risk of the business collapsing.

Secondly, culture. It is usually not advisable to set up a business in an area whereby the products and services offered are not needed by the local population. Therefore when planning to expand business globally, it is good to first understand the business environment or culture and the consumers in the host nation. One way of identifying and understanding the culture of a certain nation is by assessing how other business or organizations in the area usually operate and the needs of the potential customers (Engle & Crowne, 2014). If the initial test is successful and all other aspects have been identified and considered, the business management can start expanding introducing the business operations in the area.

Thirdly, tax regulations and employment. The employment and tax regulation usually vary from one nation to the other. For instance, the businesses conducting their operations in China are required to make numerous contributions to employees, social care and housing programs something that the western workers are not accustomed to. Before starting the business in other countries, the business management should be aware of the nation's tax regulation, for instance, how severity and effectiveness of the tax regulation regulations and the employment rules or laws. If these factors are fair to the business and the market condition is good, the business should work with various experts to ensure that the business remains compliant and the risks are reduced. Failure to consider or establish these factors may result to the collapse of the business due to the unexpected costs spent on workers and the increased cost of production.

The Entry Modes Your Organization Needs to Consider Before Going Global

There are numerous ways or means in which a certain business can join a foreign market; however, there is no one entry strategy that works in all international markets. One market entry strategy, such as exporting, may be favorable to one country but not the other. The market entry mode that a country uses is determined by factors such as the tariff rates. Therefore in order to expand my organization operations globally, i will have to consider various business entry modes. Some of these entry modes include, first, direct exporting, this is the easiest entry mode strategy that involves selling products directly to the selected market using your own resources in the first instance. For instance, if the business wants to sell products in China, the business will just bring the product into the Chinese stores and assess how well they sell (Ang, Benischke & Doh, 2015). In direct exporting, the distributors and agents usually act as the link between the business and the market stores. Considering that the distributors and the agents are representing the organization face and interest, they should be well selected or chosen.

Secondly, licensing, this is a well-organized marketing entry mode that involves transferring the right to use a certain product to another organization or business in the foreign market. This strategy allows another business to handle any risk incurred on behalf of the organization that owns the product. Licensing entry mode is considered to be useful if the purchase of the entry license has a huge market share in the new market. In order to acquire the entry license, the organization is required to spend a very small amount of capital that provides a high investment return. In most cases, licenses are usually granted to organizations for marketing or production.

Thirdly, a joint venture. These is a business partnership that usually involves the formation of another independently managed organization. The partnering organizations usually have an agreement to work jointly in a certain market or business environment and share the profits and risks equally. Joint venture entry mode is mostly applicable in the country's that do not allow foreign organizations to have 100% ownership in various industries such as, print media, insurance, multi-brand retailing and the power exchange sector (Laufs & Schwens, 2014). Fourth, foreign direct investments which involves joining an oversee market after making a significant investment in the foreign country's market. These entry modes usually require a significant amount of capital to cater for the expected costs. For instance, the cost of the technology to be used, staffs and premises. In most cases, this entry mode is considered to be viable if the size, demand and growth of the market is large enough to justify the foreign direct investment.

Discuss the Benefits and the Implications of Each Mode You Mention

Joint Venture

Joint venture usually has several benefits which include; first; both business ventures can leverage their specific expertise to expand and grow the business within the chosen market. Every party within the venture usually has the right and freedom to utilize the available expertise to improve the current business position. Secondly, the political risk is considered to be reduced due to the involvement of a local partner. Most foreign nationals do not allow the foreign investors to have a 100% ownership of the business; however, partnering with another local partner tends to reduce the likelihood of the government to interfere with the business operations (Laufs & Schwens, 2014). Joint ventures also have several implications which include; first; the venture can result to cultural clashes due to differences in organizational cultures among the partnering companies. Organizations that form the joint venture usually have different ways of doing business and handling situations; such differences usually result to conflicts that may dissolve the partnership. Secondly, in case of disputes, the process of dissolving the joint venture is considered to be complicated and lengthy. The organizations involved may take years before coming to an agreement on how to share the business operations.

Direct Exporting

Direct exporting has several benefits and impactions to the organization involved. Some of the benefits include, the organization has the right to choose their own foreign representatives. Since there are no laws in place that determine the kind of foreign representatives that organizations joining a new market should choose, most organizations are usually attracted by this entry mode. Secondly, organizations use this strategy to test the market before making any huge investment. Being able to test the markets help to identify the demand for the product and the amount of capital they should invest. The implication of this entry mode include; first, it is considered to be costly, particularly for the offline products. To reduce this high cost, the organization is expected to set up every product and business operation from scratch.

Licensing

The benefits of licensing include, first, reduced cost of entering a new market. The organizations intending to join the new market do not have to spend a lot of capital to establish the business; they are only required to get licenses and accreditation from the foreign government. Secondly, the foreign investor does not incur any risk since there is another person or business to handle all the risks involved. The implications of licensing include, first, the foreign investor may not have complete control of licensing in the foreign market. Countries across the globe usually have different rules and regulations that regu...