However, there are five distinct but mutually related reasons why companies decide to enter foreign markets, which is intended to result in an increase in income. These motives are: to gain access to new customers, to achieve lower costs through economies of scale, experience, and increased purchasing power, to gain access to low-cost inputs of production, to further exploit its core competencies, and to gain access to resources and capabilities located in the foreign market. This essay will examine to what extent reasons respond to the market’s realities, provide a personal opinion regarding which motive among the mentioned ones predominates, and discuss evidence that supports it.
It is possible to notice that the first reason why companies tend to expand the business is the limitation of the home country that makes impossible the further growth. According to Onyusheva et al. (2018), “increasing sales mean more profits,” which implies that the more people can potentially buy a product, the higher income the company is able to access (10). Johnson’s statement (n.d.) that is “if the domestic economy gets sluggish, you can temper the effect through revenue from countries with healthier economies” supports the previous evidence (“Diversified Income Stream”). It shows that diversification of revenue sources contributes to the significance of the motive “to gain access to new customers.” Simultaneously, other reasons are less important as they reflect the point made regarding domestic country demand and production means limitations, and potentially can be overcome without the firm necessity to enter a foreign market. Therefore, I am confident that new customers, the number of which in the domestic country is constrained, is the dominant reason among the five outlined above.
References
Johnson, K. S. (n.d.). Reasons Why Companies Go Into International Marketing. Chron. Web.
Onyusheva I., Ting Y. Q., Kaewpradit, P., & Changjongpradit, E. E. (2018). Key reasons why organizations enter foreign markets. “The EUrASEANs: journal on global socio-economic dynamics”, 5(12), 8–19. Web.