In order to achieve a global competitive advantage, firms as well as individuals pick strategic options that enable them to thrive in the international market. This is so because firms try to venture abroad for a wide of reasons. In this paper, we focus on key factors that can influence firm decisions in going international. These factors will offer a comprehensive rationale for the decision to go international. Therefore, the factor, which motivates firms to go international, is broadly divided into two groups pull and push factors.
The pull factors have proactive reasons because they are forces of attraction, which pull the firm in the foreign market. This is so because firms are motivated to internationalize due to the attractiveness of the foreign market. These attractions include the relative profitability and growth prospects. Moreover, the push factors are the constraint on the domestic market such as the constraints of the market, which motivate firms into going international. Most of these push factors have reactive reasons.
The significant incentive for going international is the profit advantage because international business could be more profitable than the domestic. For instance, there are cases where companies earned more than 100 percent of the total profit from the foreign markets. Another significant reason for going international is to capture new opportunities in other countries. For instance, developed countries are getting interested in the number of developing countries because the population and income are rapidly increasing in these countries.
Similarly, domestic demand compulsions drive several firms to expand the market to the international level. The market that has a number of products tends to decline in the advanced countries. This happens when the market potential has been almost fully captured. For instance, in the United States the stock of several consumer durables such as TV sets and cars exceeds the total number of households, which motivate producer to go international. Similarly, competition is another factor that drives firms into going international. This is so because increased competition is one of the causes and consequences of globalization. However, a protected market does not mainly motivate firms to seek business outside the home market. Finally, government policies and regulations may motive firms into going international. These are both positive and negative factors, which could result in internationalization. This is so because many governments provide several incentives and other positive support to domestic firms to export and invest in foreign markets.
RE: Strategic Advice on How to Enter the Sub-Saharan Market of Africa.
The idea of providing clean drinking water is a reasonable venture given the opportunities in the sub-Saharan market of Africa. In order to enter this market effectively, it is a reasonable idea to undertake an analysis of the environment in the Sub-Saharan. This analysis will provide general and specialized information for the French manufacturing company. The OECD and the leading newspapers will be helpful in providing this country’s profile and survey required before launching the product in this foreign market. However, a better understanding of the country’s political, economic and cultural environment will provide the greater chance of the clean water succeeding and less risk of the company’s profitability and reputation.
The degree of risk of entering the Sub-Saharan market should also be analyzed. This is so because the risks affect the choice of entry mode in the foreign market. For instance, the company should consider using joint ventures, licensing, and franchising because the Sub-Saharan market in Africa is a high-risk environment. The company should also evaluate political risks such as civil unrest, terrorism and changes in government policy and law. It should also evaluate economic risks, which vary from exchange rate exposure to the risk of financial insecurity in the Sub-Saharan market.
Similarly, it is hard to understand the business environment in the Sub-Saharan market without analyzing the current political system and institutions as well as government and economic policies. The economic analysis will help to understand the volume of external trade, information on particular industries, the competitive environment and the financial system in the Sub-Saharan market. The analysis of the cultural elements such as language, religion and social structure and attitudes will help in understanding the Sub-Saharan market before entry. Language will present particular difficulties when venturing the Sub-Saharan market, despite the prevalence of the English language. Since the information environment is constantly changing, it is vital for the French company to keep it up to date and study long-run trends to obtain a clear picture of the Sub-Saharan market.
The TPP is designed to promote trade and investment among its partner countries. The participation of counties in the TPP has led to a reduction of trade barriers, which is a gain to the agricultural sector. The TPP helps in boosting market growth and put products in a better market position. This is clearly demonstrated by the United States, which received agricultural benefits in 2009 for being TPP member. The participation in the TPP gives the countries full market exposure by providing duty-free access to goods and lift restrictions on services. It also promotes regional cooperation that facilitates trade and the expansion of production and among members. The TPP helps in facing various emerging trade challenges in the global trade.
On the other hand, the TPP can be influenced by hundreds of corporate lobbyists who have exclusive access to the details of the negotiations. There are high risks involved during the regulation of autonomy of TPP parties. These risks may affect the countries taking a balanced approach in case of lack of transparency. The language and cultural differences among the parties can facilitate the lack of transparency.
The currency transaction occurs in the foreign exchange markets. There is no one physical location where traders get together to exchange currencies because it is an over-the –counter market. Traders are located in the main international banks around the world to engage in the foreign exchange. This is so because the foreign exchange market is the leading market in the global currently.
Therefore, the main function of the forex market is to facilitate cross-border trade and investment. As different countries use diverse currencies, forex markets convert one currency to another currency to facilitate international trade. For instance, the forex market facilitates transfers of purchasing power between two countries, which promote investments. The transfer can be influenced by a variety of credit instrument such as bank drafts, master cards and foreign bills among others. The forex market also offers credit for foreign trade. For instance, when the firm uses foreign bills of exchange, a credit for about 3 months is required upon their maturity. Finally, forex market is known in facilitating the hedging foreign exchange risks. This happens because there are international exposure risks involved during the exchange of currencies. Therefore, the firm faces a great exchange risk if there are huge net liabilities to be achieved in the foreign currency. These exchange risk must be reduced and this is the reason why forex market offers facilities for hedging anticipated or actual liabilities.