Analyzing the Reasons for Investing Abroad Essay

Analyzing the Reasons for Investing Abroad - Essay ExampleThis essay critically analyzes and discusses the reasons wherefore a firm assumes to invest abroad. Investing Abroad Firms decide to invest abroad for various reasons. notwithstanding so, companies that choose to invest overseas largely strive to strengthen their world-wide competitiveness. Numerous global companies choose to invest abroad to get in bigger overseas food markets. In order to sustain growth, a keep friendship should boost its sales or profits, which could be unattainable in the local anesthetic market. In general, according to Cohen (2007), local markets are restricted to a specific growth rate and size and are highly overt to competition from other local markets with comparable production, marketing, and product capacities. In this setting, put abroad is a rational issuing decision for a firm planning to penetrate a bigger market. Aside from the profitability of an additional, bigger market, foreign markets usually provide further competitive gains to the company (Ajami & Goddard 2006, 221). Such markets, for instance, may not get organizational capabilities that are comparable with or of similar level as those of a company invest abroad and the level foreign market competition may not be as cloggy as competition in local markets (p. 221). At times companies should do business abroad to penetrate global markets because government regulations of host countries mandate that the products of the company be produced locally. These regulations are commonly enforced to arise the growth of the national economy, employment, and overall domestic production (Carbaugh 2010, 12). Hence, the firm that plans to penetrate a foreign market has to spend for foreign facilities that are supervised by local managers, in domestic subsidiaries, or by means of several other mechanisms. A company penetrating a foreign market may prefer to do business there if it realizes that it is to a greater ex tent cost-effective to produce products locally, instead of producing them at stead and selling them abroad. Production economies may take place via other dynamics if the local market is huge and the demand is sustainable to give good reason for investment in the facility and tools required to consecrate a production system. For instance, the marketing and delivery costs could be cheaper than those of processes at home, the sources of needed raw materials could be nearer to the facility abroad, and the labor costs could be cheaper abroad (Frishberg 2010, 139). Another major aspect is the companys location. A facility located overseas could also be a lot more productive for a developing market. Generally, companies do business in direct competition with other global and local companies. This form of competition is especially strong in markets where only a small number of major companies dominate. In this setting, the strategies of a particular company are swiftly imitated and riva led by the others. As a result, if a company invests overseas, its rivals carry out the same tactic (Ajami & Goddard 2006, 222). One apparent reason for investing overseas is to be on a par with the established company in new markets and nub sales/profit. Another reason is the necessity of rivaling competitors overseas tactic otherwise, the competition may gain