Motives for Internationalisation

ACCA P3考試：Motives for Internationalisation

The Ansoff matrix suggests market development as one approach to achieving growth; international diversification is one approach to achieving this growth. Over the last 50 years there has been a large increase in international diversification. Multinationals from the emerging markets have joined large multinationals, and many tart-up companies are "born global"—building up international relations from the outset.

There are many factors or drivers that push organisations to trade internationally:

1 General Factors

The barriers to international trade are much lower. Organisations such as the World Trade Organisation (WTO) have worked to reduce trade tariffs, and better international legal frameworks and cheaper travel have made international trade easier.

2 Market Drivers

Standardisation of markets: Applies to some products, where customers have similar tastes and needs (e.g. TV sets).

However, this does not apply to all products and services, as cultural factors may prevent a product or service that is popular in one country from succeeding in another (e.g. TV programmes may not always find standardisation of markets).

Globalisation of customers: If a business produces parts for a car manufacturer, for example, it will be expected to follow the car manufacturer into new markets.

Transferable marketing: The growth of many international brands where the approach to marketing is similar across the globe.

3 Government Drivers

Governments both encourage and discourage international trade. On the one hand, governments often adopt policies to protect domestic companies (e.g. trade tariffs or other legal requirements). On the other hand, many countries are members of free trade agreements (e.g. WTO or the European Union), which promote the free movement of goods and services among member states.

4 Cost Drivers

Where the domestic market is small, increasing sales volume by expanding into foreign markets may lead to economies of scale.

This is particularly true in industries that have large research and development costs, where a higher volume of sales means that these costs can be recovered more easily.

5 Competitive Drivers

Where competitors have a truly international strategy, they may be able to subsidise operations in one country with profits from another, undercutting local competitors. The only way to compete in such a situation is to have a similar international strategy.