Unlocking Growth: When and How Firms Should Venture into International Trade

Navigating International Expansion: Key Considerations for Firms in Global Trade

The movement from local to international business is motivated by the need for market expansion. This expansion means that a company will get more customers, more labor, and ultimately more profit. It is a factor of business growth and development. International business offers endless opportunities for business because it offers untapped market. Looking at the American market, one can see how it is huge. It is a market considered the largest in the world and competes with those of continents such as Asia and Europe. The large market has attracted many corporations from around the world to the extent that today, the market is not large enough for entrepreneurs (Gray, 1998).

 The development of globalization thanks to advancement in communication, transport, and other technologies, has made it easy for companies to get access to markets form other parts of the world. These new markets provide resources, labor and most of all markets for their products. It allows entrepreneurs to reduce dependence on local markets and provides them with a wider choice of where to sell products. Makes the products have a higher sales life (Hoffman, 2012).

 International markets also help businesses protect themselves from fluctuations in market cycles in the local market. Changes in market characteristics caused by fluctuations of the economy may be bad for business. A good example is The Great Recession between 2007 and 2009. This was a period of great economic problems, and many businesses closed down because of unfavorable economic conditions. The International business provided an opportunity for most companies to save themselves by seeking other markets. Most companies moved their production to Asian countries where costs of production were low and offered opportunities of a larger market from the Asian people (Hoffman, 2012).

The above aspects show the importance of moving from local to internal markets. Globalization has played a key part in the expansion of international business. The knowledge of the existence of products from other countries has created high demands for products and many companies are getting attracted to the opportunity and take part in the international business (Zabel, 2002).

Sometimes businesses grow immensely in their localities to the extent that they saturate their markets. Market saturation means that growth is limited because there are no more customers. This creates the need to access a larger market to facilitate the growth of the organization (Hoffman, 2012).

Another case is associated with the reduced marketability of the organization’s products locally. A good example is the soft drink industry in the United States. Two of the largest companies such; coca cola and Pepsi were market leaders in the country. They shared the entire country as their markets and recorded great levels of profit for many years. However, there grew the issue of health implications of soft drinks associated with high levels of sugar in them. The popularity of fast foods and soft beverages went down as the population adopted healthy ways of living. These countries were forced to explore other markets for their product and now focus of other continents such as Africa where soft drinks are still popular (Zabel, 2002).

The other factor is associated with stiff competition. Competition leads a reduced market share if an organization is not faring very well. This forces such organizations to seek greener pasture and international business provides a great opportunity for business growth and development. The decision to engage in international business is based on the above factors. Sometimes businesses do it willingly, and sometimes they are forced to do it. In either case, successful transition into international business may prove very profitable (Gray, 1998).

A concise summary: Key Considerations for Firms Expanding to International Trade

A firm should consider expanding from strictly domestic trade to international trade when:

1. Market Expansion Opportunities: The local market is saturated, and there is a need for growth. International business provides access to untapped markets, more customers, labor, and increased profit potential.
2. Globalization Trends: Advancements in communication, transport, and technology have facilitated globalization, making it easier for companies to access markets worldwide. International markets offer resources, labor, and diverse opportunities for product sales.
3. Risk Mitigation: International markets can help businesses mitigate risks associated with fluctuations in the local market. Economic downturns or market cycles can negatively impact local businesses, and having access to international markets provides a buffer against such challenges.
4. Marketability Concerns: If the marketability of the organization's products declines locally, seeking international markets becomes crucial. For example, health concerns or changing consumer preferences in the local market may prompt the exploration of markets in other regions.
5. Competition Dynamics: Stiff competition and a reduced market share locally may drive a firm to explore international business for growth and development.

Factors influencing the firm's decisions in each case include market saturation, changes in consumer preferences, health considerations, and the need for competitive advantages. Successful transition into international business requires strategic planning and consideration of these factors.

References

1.      Gray, V. L. (1998). Casting your net abroad. Black Enterprise, 28(10), 66.

2.      Hoffman, G. H. (2012). HOW GROWING COMPANIES APPROACH INTERNATIONAL BUSINESS. AFP Exchange, 32(8), 36-37.

3.      Zabel, D. (2002). Doing Business Internationally (Book). Reference & User Services Quarterly, 41(3), 223.