Reason for Growth in International Business

International business has growth dramatically in recent years because of strategic imperatives and environmental changes.

Strategic imperatives include the need to leverage core competencies, acquire resources, seek new markets, and match the actions of rivals. Although strategic imperatives indicate why firms wish to internationalize their operations, significant changes in the political and technical environment have no doubt facilitated the explosive growth in international business activity that has since World War 2. The growth of the internet and other information technologies is likely to redefine global competition and ways of doing international business once again.

There are many reasons why international business is growing at such a rapid pace. Below are some of those reasons:

1. Saturation of Domestic Markets

In most of the countries due to continuous production of similar products over the years has led to the saturation of domestic markets. For example in Japan 95% of people have all types of electronic appliances and there is no growth of organization there, as a result they have to look out for new markets overseas.

2. Opportunities in Foreign Markets

As domestic markets in some countries have saturated, there are many developing countries where these markets are blooming. Organizations have great opportunities to boost their sales and profits by selling their products in these markets. Also countries that are attaining economic growth are demanding new goods and services at unprecedented levels.

3. Availability of Low Cost Labor

When we compare labor cost in developed countries with respect to developing countries they are very high as a result organizations find it cheaper to shift production in these countries. This leads to lower production cost for the organization and increased profits.

4. Competitive Reasons

Either to stem the increased presence of foreign companies in their own domestic markets or to counter the expansion of their domestic markets more and more organizations are expanding their operations abroad. International companies are using overseas market entry as a counter measure to increase competition.

5. Increased Demands

Consumers in counties that did not have the purchasing power to acquire high-quality products are now purchasing them due to improved economic conditions

6. Diversification

To counter cyclical patterns of business in different parts of the world, most of the companies expand and diversify their business, to attain profitability and uncover new markets. This is one of the reasons why international business is developing at a rapid pace.

7. Reduction of Trade Barriers

Most of the developing economics are now relaxing their trade barriers and opening doors to foreign multinationals and allowing their companies to set-up their organizations abroad. This has stimulated cross border trade between countries and opened markets that were previously unavailable for international companies.

8. Development of communications and Technology

Over last few years there has been a tremendous development in communication and technology, which has enabled people sitting at their home at one part of the world to know about demands, products and services offered in other part of the world. Adding to this is the reducing cost of transport and improved efficiency has also led to people expanding their business.

9. Consumer Pressure

Innovations in transport and communication as led to development of more aware consumer. This has led to consumers demanding new and better goods and services. The pressure has led to companies researching, merging or entering into new zones.

10. Global Competition

More companies operate internationally because

–      New products quickly become known globally

–      Companies can produce in different countries

–      Domestic companies, competitors, suppliers have becomes international

As international companies venture into foreign markets, these companies will need managers and other personals who understand and are exposed to the concepts and practices that govern international companies. Therefore the study of international business may be essential to work in global environment