Business Internationalization
In recent years, internationalization of business has become an international trend, and many companies have taken the strategy of internationalization, which has brought them huge economic and social benefits, while also bringing opportunities to many developing countries.
Internationalization of business is not a new phenomenon. Since the start of 20th century, multinational corporations have existed, and the phenomenon of global markets is increasingly evident. An internationalizing business strategy involves the company expanding its operations and products into other countries internationally with the most common form taking the shape of a joint venture between foreign and domestic companies. Furthermore, internationalizing a business involves more than just the relocation of core operations. Additional considerations include cultural understanding and compliance with different legal, tax, and labor regimes.
The main reason for companies to internationalize is access to new markets, and in this, there are three types of strategies available to businesses; diversification, market extension, and replication. Businesses enter new markets through diversification when they create and develop new products, services, and markets outside the company’s domestic areas of specialization. Market extensions are similar in that companies enter new markets, while the products and services of the company remain the same, but with variation in the pricing, packaging and promotion. Replication involves the same product and service being offered in new markets, but this strategy is often pursued when the new markets can replicate the success of a product and service in the domestic market.
In terms of economic benefits, the transfer and introduction of new technologies greatly improve economic growth and efficiency in the global market both in terms of cost savings and the conversion of labor intensive industries to capital-based production processes. Furthermore, internationalizing businesses creates a fair and competitive playing field, as firms from all over the world can compete for customers, meaning the prices become competitive and is beneficial to those customers. This in turn also benefits consumers who have wider access to cheaper goods and services through the global marketplace.
Finally, from a social perspective internationalizing businesses have much to offer. International companies, as members of the global community, are expected to contribute to the development of a sustainable global environment for the betterment of all countries. The presence of foreign companies provides access to employment, training and investment in the host countries and create opportunities for the transfer of such skills to the local population. This in turn helps the host countries to build their own technological capabilities and increase their access to the global market.
Business internationalization is rapidly becoming a key issue in the area of globalization and has far reaching consequences. As foreign firms check into new markets, they bring with them not only economic benefits but social ones as well. The challenges and opportunities associated with business internationalization require companies to address a range of strategic, financial, economic, and legal issues as they navigate these new markets. Ultimately, the benefits of business internationalization are evident, and with the continuation of the trend, it is likely that many more countries will be able to take advantage of the opportunities presented.
