Why companies engage in international business
There are several reasons why companies engage in international business:
1. To expand their market:
Companies may engage in international business to expand their customer base and increase their sales and profits. Companies can tap into new markets and reach new customers by selling products or services in other countries.
2. To access new resources:
Engaging in international business can also provide companies access to new resources such as raw materials, labor, and technology. This can help them reduce costs and improve the efficiency of their operations.
3. To diversify their operations:
International business can also help companies diversify their operations and reduce their risk. By operating in multiple countries, companies can spread their risk across different economies and political systems. For example, a company that relies on one market may be vulnerable to economic downturns in that market. By operating in different countries, the company can mitigate this risk.
4. To compete with global competitors:
In today's globalized world, many companies face competition from global firms. Engaging in international business can help companies stay competitive and maintain their market share. For example, a company that produces car parts may decide to open a manufacturing facility in Mexico to take advantage of lower labor costs.
5. To take advantage of trade agreements:
Companies may also engage in international business to take advantage of trade agreements and other initiatives that facilitate cross-border trade and investment. These agreements can help companies access new markets and reduce barriers to entry.
6. Access to new technologies and ideas:
By operating in different countries, companies can access new technologies and ideas that may be outside their home country. For example, a company that produces solar panels may decide to enter the Indian market to access new technologies and ideas related to solar energy.
7. Increased profits:
By operating in different countries, companies can increase their profits by taking advantage of lower labor and production costs in other countries. For example, a company that produces clothing may decide to open a manufacturing facility in Bangladesh to take advantage of lower labor costs.
8. To diversify risk:
The international business allows companies to diversify their risk by expanding into different markets. For example, if a company's domestic market is facing an economic downturn, it may turn to international markets to maintain its revenue.
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