Thursday, December 19, 2019

Why Companies Expand Beyond Their Own Borders Essay

There are many reasons why firms expand beyond their own borders and attempt to gain success on a global scale. A key reason is the ability to diversify its risk. Much like the old adage â€Å"don’t put all your eggs in one basket†, the firms attempting to gain success internationally are following the same belief. They are simply trying to spread their risk amongst many different countries rather than depending on one country’s operational capabilities. Another reason is to gain access to achieve lower costs that it cannot get in its home market, which in turn increases its competiveness. An example of this is cheap labor, countries such as India and many Latin American offer cheap labor compared to the wages of American workers, so firms will expand into these markets to take advantage of this valuable resource (and save money in the process). Besides cheap labor, firms will move into international markets to gain access to resources that it cannot obtain in i ts home market. For example, if iron is a key input in the manufacturing of steel and it costs more to import this resource than to relocate to a country like India where iron is more plentiful; then it would make sense to relocate and take advantage of these resources than to continue to import them at a higher cost. A fourth reason that firms compete in international markets is to gain advantage of its core competencies in foreign markets. For example, Netflix has had a great deal of success in America but has alsoShow MoreRelatedEssay on Nations Should Promote Localization, Not Globalization1278 Words   |  6 Pagescommunications are not limited by national borders, would be a good explanation for this. Maybe the tourist didn’t want to be reminded of these typical American things, perhaps they wanted to escape and be completely immersed into a place and culture untouched by these foreign influences. 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