Why Firms' Established over Sea Operation?

1. Increase sales and reduce risk ~ larger market means more potential sales; more sales in turns, means more profit to firms. By expanding operations overseas, representing more sources of income, therefore reducing the risk of depending only on one single market. Proton has its cars exports overseas.

2. Lower Cost ~ lower costs in less developed countries compare to develop countries is one of the major reason company go oversea. Scania moves production to Mexico to lower costs.

3. Smoothing out the effects of local market swings ~ Companies seek out foreign markets to take advantage of business cycle differences among countries.

4. Acquiring resources ~ by acquiring raw material abroad, it will enable a company to improve its product quality. Exxon drills for oil in Asia and the Middle East.

5. Gaining an advantage over competitors ~ companies enter into international business because they want to counter advantages competitors might gain in foreign markets that, in turn, could hurt them domestically.

6. Capitalize on the Leverage ~ doing business overseas can be cheaper than doing business domestically. This is because a foreign marketer merely jumps into sales without any research and development costs.

7. Liberalization of Government Policies ~ in the past decade, many countries have opened their door to welcome foreign investment by liberalizing most of their foreign policies. For example, China has opened its door for many countries then ever before creating a lot of business opportunities.

8. Reduce dependence on existing markets and suppliers ~ by expanding, company has more solid network of customers and suppliers.

9. Generating new ideas ~ in foreign market, companies generates more new ideas due to the cultural difference. And this may in turn benefit the local market.

10. The ability to command a higher price in new markets ~ in a new market which the company explores into, they can set the price higher as there is no competitors.