Why Firms' Established over Sea Operation?

Why Firms' Established over Sea Operation?

1. Increase sales and reduce risk ~ larger market means more potential sales; more sales in turns, means more profit to firms. By expanding operations overseas, representing more sources of income, therefore reducing the risk of depending only on one single market. Proton has its cars exports overseas.

2. Lower Cost ~ lower costs in less developed countries compare to develop countries is one of the major reason company go oversea. Scania moves production to Mexico to lower costs.

3. Smoothing out the effects of local market swings ~ Companies seek out foreign markets to take advantage of business cycle differences among countries.

4. Acquiring resources ~ by acquiring raw material abroad, it will enable a company to improve its product quality. Exxon drills for oil in Asia and the Middle East.

5. Gaining an advantage over competitors ~ companies enter into international business because they want to counter advantages competitors might gain in foreign markets that, in turn, could hurt them domestically.

6. Capitalize on the Leverage ~ doing business overseas can be cheaper than doing business domestically. This is because a foreign marketer merely jumps into sales without any research and development