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Using relevant theories, explain why firms internationalize?




Institutional affiliation


1.0  Introduction

In general, the subject of internationalization is defined as the creation of products that are designed towards meeting the needs of the loyal and targeted customers from different regions of the world (Maitland & Sammartino, 2015, p.733). In an economic setting, according to Richter (2014, p.71), internationalization is recognized as the ability of a company to come up with strategies and mechanism aimed at increasing its market reach and business operations beyond its country of origin towards the global markets. Various reasons have forced organizations into coming up with plans to globalize, for instance, to increase the profit margin while reducing the costs of operation. Most of the companies have been forced to expand their business due to the growing popularity of cross-border commerce that has resulted in international economies being interconnected (Nagy, 2013, p.73). Also, companies grow due to strategic reasons with the aim of reducing probable risks of operating within a domestic market. The above reasons underline why organizations feel the need to run internationally.

2.0  Reasons for internationalization 

2.1 Venturing into new markets

Due to the existence of the factors that support globalization, most especially, technology, organizations are exploiting the available opportunities that can result in market expansion. The top management of different organizations feels the need to look for markets where they can set base and do business. Most of the areas targeted are in regions where the expanding organizations do not have any form of access without operating on an international stage. A study conducted by Maitland and Sammartino (2015, p.736), concludes that due to internationalization today specialized products are being sold globally despite most of them being sourced from specialized locations. Organizations seek to expand into new markets as a way of attaining competitive advantage and gaining an edge over direct rivals. Though gaining competitive advantage most of the organizations manage to remain operations due to staying ahead of the available competition.

Through venturing into new markets, organizations gain new platforms that support and increase the avenues through which they gain access to both the loyal and targeted customers. By acquiring a new market, organizations get to manage to be in business throughout a given year despite the seasonality of demand for certain products. For example, during summer in Canada clothing companies produce winter clothing that can be sold in other countries such as Kenya where during such a time it is wintering. This argument is supported by Pranshantham and Birkinshaw (2015, p.209) who opine that organizations increase operations into international markets because they gain a competitive advantage. The gaining of an edge over close rivals ensures that organizations remain in pole positions as market leaders due to the increased levels of their competitiveness in a given industry. Organizations are forced into internationalizing business operations as a way of keeping up with their close rivals who extend to conduct business globally.

Organizations are motivated to venture into new markets because they get to acquire the first mover advantage over close competitors. The way of conducting business has been impacted and changed by the existence of technology, for that reason, all kinds of businesses are grappling to have a share of the market by operating their operations internationally (Richter, 2014, p.77).  Due to increased competitiveness organizations are forced to internationalize operations by establishing innovative strategies or get into merges with established partners as a way of guaranteeing survival. The increased presence of international companies has resulted in organizations feeling an enhanced desire to seek new markets to increase their existence on the global stage. To remain competitive, organizations are getting creative by setting up an online international business that can be run remotely. Such platforms make it easy for firms to sell and market their products and services, for instance, Alibaba while primarily operational in China it has an international presence.

The Network Approach Model

The Network Approach Model supports the need for firms to venture into new markets as a...


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