explain the different reasons for firms to enter foreign markets
explain the different reasons for firms to enter foreign markets
explain the different reasons for firms to enter foreign markets
Solution
The main reasons and motivations behind a firm's entering international markets are as follows.
1) The firm wants to increase revenue by adopting a market expansion strategy. By entering
other high-growth markets, a firm can increase its revenue.
2) Consequently, if costs are managed effectively, a market expansion strategy will boost the
firm's profit & profitability.
3) Firms want to diversify their risk portfolio by focusing on markets outside the domestic
market. They do not want to exclusively concentrate on the domestic market only.
4) Often, firms want to access superior resources like technology, available in another country, to
streamline its existing domestic operations by going global.
5) Firms can target on achieving economies of scale and economies of scope, by global
expansion.
6) Entering a global arena will lead to the firm's brand enhancement with global recognition of
its brand.
7) Tax benefits is one of the reasons, though this motive is less strong. Firms may want to setup
production facility in countries that have low tax rates, known as "Tax haven", so that at the
corporate level, total tax burden may get lowered.