WHY COMPANIES GO

INTERNATIONAL?

Prof. A.K. Sengupta

Former Dean, Indian Institute of Foreign Trade
1
 WHY COMPANIES GO
INTERNATIONAL?
Two Factors: Pull factors
: Push Factors
Pull factors: Proactive reasons – forces of attraction – pulls the
business to foreign markets – profit, growth etc.
Push factors: Reactive reasons – compulsion of domestic market
prompts companies to internationalize – saturation etc.
Profit Motive:
•International business – profitable than domestic market –
investment in low cost locations.

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Growth Opportunities
•Economic growth in many foreign countries strong attraction.
Domestic Market Constraints
•Market for product tends to saturate or decline (happens frequently in
advanced countries) – Transfer of technology to developing countries.
•Scale economies – Need to enter foreign market in addition to domestic
market – Korea – economic size plants
Competition
•Competition – driving force behind internationalization – A protected
market motivates domestic sales
•Economic liberalization in 1991 increased competition from foreign
firms as well as domestic firms – many Indian companies going
international.
3
Government Policies and Regulations
Incentives:
•Incentives offered by government to export and invest in foreign
countries.
•Governments of many countries offer incentives to foreign investors.
Obligations:
•Foreign exchange needed to finance imports, payment of royalty, debt
etc.
•Companies are subject to specific export obligations – export house,
EOUs,

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Spin off Benefits
•International business may help companies to improve domestic
business – Helps to improve image of the company.
•Foreign exchange earning may enable company to import capital goods,
technology.
Strategic Vision
Systematic and growing internationalization of many companies is
essentially a part of their policy.

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 Reasons for Entering International
Strategic Markets
Growth
Vision Profitability
Spin - off
benefits
Economies of
scale

Govt. Policies & Why Should a Firm

Regulations Enter International Spreading Risk
Markets?

Competition in
Domestic Access to
market Imported inputs
Spreading Marketing
R&D Opportunities Uniqueness of
Cost Due to life Product or
Cycle services 6
 Process of International Marketing
Commitment to Export

Analyse

Internal Factors External Factors

-Product Decide on -Market Environment
-Resources -Competitive Profile
International Market Involvement
Market Identification & targeting
Entry mode selection
Marketing Mix
*Product *Price *Distribution *Promotion

Set Targets

Implement

Organise
Department Export Allocate Resources
Subsidiary *Product
Jt. Venture *Arrange Resources
Review
Export House
Modify 7
Set new target