The document outlines 9 reasons why firms internationalize: 1. To seek growth opportunities through market diversification and providing products/services not offered in their home country. 2. To earn higher margins and profits by operating in countries with high demand. 3. To gain new ideas about products, services, and business methods from exposure to foreign markets. 4. To serve customers who have relocated abroad. 5. To be close to supply sources and benefit from global sourcing advantages. 6. To gain access to lower-cost factors of production like labor, materials, and technologies. 7. To develop economies of scale in sourcing, production, marketing and R&D by operating at a large

1. 9 reasons why firms
internationalize
By Thabiso Mphuthi

2. 1. Seek opportunities for growth through market
diversification.
Offer services that are not offered by
businesses in home country.
Provide products and services which reached
maturity at their home country.
Examples: facebook, sony, Samsung and
Gillette.

3. 2. Earn higher margins and profits
Coping with intense competition of international
firms.
Operation in countries where there is a high
demand rate of the offering.
Example: Microsoft selling its products in USA due
to usage of software there and computer operations
there.

4. 3. Gain ideas about products, services and
business methods
International businesses are characterised by tough
and ability to constantly meet customer’s ever
changing demands.
New environment expose foreign firms to new
ideas, products, processes and business methods.
Example: is just-in-time technique was introduced
by Toyota in japan which is now a norm to most
businesses.

5. 4. Serve customers who have relocated abroad
Serve customers who have moved to
foreign markets.
Example is McDonalds in south Africa
serve different burgers which can
accommodate Americans when they are
in south Africa with business.

6. 5. Be close to supply sources, benefit from global
sourcing advantages and gain flexibility to product
sourcing.
Companies establishing its operations located
abroad next to the suppliers.
The firm look for an easy access operation and
where they can easily acquire raw materials.
Example is ford establishing its operation in Dubai
due to petrol affordability which means people are
more likely to buy cars there.

7. 6. Gain access to lower-cost or better value
factors of production.
The international business targets low cost
operation and value of factors of productions.
Access to capital, material, low labour costs and
new technologies.
Example businesses targeting china as it is a market
where labour cots are low and better productivity.

8. 7. Develop economies of scale in sourcing,
production, marketing and R & D.
 Reducing economies of scales per unit cost manufacturing
due to operating in high volume.
 Producing more units is much cheaper than producing little
units.
 Firms may operate in countries where demands are high to
be able to produce more units.
 Example producing 50 cars is much expensive than producing
5000 cars, the unit cost is less when quantity is large.

9. 8. Confront international competitors more effectively
or growth of competition in home market.
The international market is increasing and
competition is becoming tough.
Multinational competitors are invading
different countries worldwide.
Example levi’s jeans catering for different
customers in different countries.

10. 9. Invest in a potential rewarding relationship
with foreign partners.
Firms joining ventures with profitable
partners.
Developing partnerships to grow business
with partners for profit making opportunities.
Example: Groupe bull partnering with Toshiba
to gain insight in developing information
technology.