Running Head: ADAPTING TO FOREIGN MARKET INTERNATIONALIZATION 1

Adapting to Foreign Markets Internationalization.

Name

Institution
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Adapting to Foreign Markets Internationalization.

Introduction.

Firms operating at international markets implement different strategies in their operations

to maintain their markets. Implemented strategy depend on the forces within and outside the

market with which the firm operates. Decisions made in implementation of the preferred strategy

at the international markets are key to success of the organization’s existence in the market.

Organizations implement various international market approaches to bet into the market and

remain operational. Competition from both international and local firms in various existing

markets forces both the leading and upcoming firms clearly indicate that global competition is

not an option to corporative but an economic imperative. In rapid developing countries where

market opportunities are opened up, many firms find market entry points and aim at leading the

market in the industry with which it operates (Lee & Maleba, 2017). In most cases first firm to

get into the market with the right strategies of attracting and attaining the largest market shares

often leads the industry. Firms invests in different parts of the economy with an aim of

sustaining global competition due to existence and entry of many firms into the market.

Both local and international markets experiences markets fluctuation with manufacturing

industry seeking to operate at both local and international markets to expand their market

territories. Increased competition at the local markets by both local and foreign firms forces

many corporates to go for global markets and this has resulted to healthy competition in different

markets as new investments and quality products are pushed into the markets. Global markets are

accompanied by challenges of new communications and operations technology and increased

number of individuals with experience in international markets (Dominguez & Mayhrofer, 2017)
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leading to emergent of small fast-growing firms. In the recent decades, small business emerged

in different economies forming a greater percentage of the market.

Internationalization.

Firms decide to go for foreign markets due to emerging operational opportunities and

enters by developing international operations. In order to succeed in internationalization, firs

require effective strategies, structures, and efficient management. However, some scholars view

internationalization as the process by with firms extends their operations from local to

international through provision of products and services to the international markets. Local firms

partnered with other non-competitive firms from other countries to get their products into new

markets in both countries (Basaez et al. 2020). Some firms have consolidated their production

processes at home countries and put in effort in exporting their products and services to

identified markets. Other firms have taken risk of directly investing into foreign markets thus

different approaches depending on the firm’s decision of market entry approach. Existence of

improved technology, availability of materials and affordable labor may influence the firm to

directly invest in a given economy and export their products to new markets. However, both the

ownership of the corporate and the management dictates the direction strategy of the firm in

conjunction with business visions, resource capacity, and market conditions.

Internationalization brings to light ‘firm’s awareness of direct and indirect influence of

international transactions on their failure, and establish and conduct transaction with other

countries.’ Firms involved in international transactions may fail due to difference in the market

economies that are influenced by different factors. When an organization decides to have direct

investments in a foreign country without necessarily investing home country, the enterprise is

exposed to failure in case of unplanned forces erupt. Civil wars and calamities have exerted huge
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loses to foreign investments in nations experiencing wars and calamities like earthquakes, storms

and drastic change in harsh weather conditions. Drastic lose in strength of foreign currency

against local currency results into huge financial loses to the business.

Internationalization methods.

Different international firms use different method of internationalization depending on the

products and services offered and the market conditions for both local and foreign market in

which the business operates. Export methods, non-equity based and equity-based methods are the

most commonly used methods of internationalization by firms.

Export method.

Firms prefer exporting their products into foreign markets in case of home production

more economical compared to production in the foreign country where market exists. In cases

where production policies imposed to the foreign industries by the government seems to be

burden to the business as compared to the import policies of the markets, then be business would

prefer producing at their home country and exports to the targeted market. Export based method

of internationalization is divided into direct and indirect export. Indirect exporting is whereby the

firm is not involved in the export process but operates through intermediaries. According to

Elango & Pangarkar (2020), indirect exporting is mostly applied by export houses, conforming

houses, and buying houses. Export houses get products from local industries and sell at the

international markets on their own accounts. Conforming houses acts on behalf of buyers and

make connections between the buyer and the seller paid based on commission by both parties

and payment made by the end user. Buying houses connects buyers to the sellers by looking for

the seller with particular products that matches the buyer’s specifications.
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In direct export method, the firm is fully involved in the transportation and distribution of

its products into the targeted global market. The firm carry out market research by monitoring

development and competition existing in the market then decides the best marketing strategy

used to remain operational in the market. Both the firm as a producer interacts directly with the

consumers of its products thereby creating good producer-consumer relations (Alberio &

Molarri, 2020). Establishment of export processing zones in different countries in the past recent

years has enhanced export processes and attracted many firms to use the approach.

Non-Equity based methods of internationalization.

Some corporates have opted for non-equity-based methods of internationalization which

include; licensing and franchising. Corporate gets into agreement with the local firm to get

special permission to use its patent or copyright at a fee to push its products into the market for a

period of time, and this is called licensing (Liu et al 2018). Licensing offers firms with ability to

access markets which has restrictions for foreign products and operates under minimal chances

of risk occurrence. However, in case where the corporate is licensed by incompetent foreign

partner the business remain at risk of making loses. Some businesses get into relations with

franchisors to get a license privilege of carrying business in a global market while seeking for

assistance in organizing, merchandising, training, and marketing of products. Through

franchising the firm escapes the cost and risk of opening its own market and enjoys the privilege

of operating in the existing and well analyzed firm with known risks and opportunities.

Expanding the business in the foreign market through franchising method may be less costly

compared to local market. However, the business is not entitled to control quality since it

operates under another firm. Tolstoy et al. (2020) researched that in case of inconsistency in the

quality of products of the franchiser then the firm risks making loses and losing potential
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customers. The business lacks freedom of operations since most of the operations are restricted

by the franchiser. This may cause conflict between the franchisee and franchiser over going

against regulations and agreements by franchisee creating division that may lead to rivalry thus

competition in the near future. Franchisee’s ability to make profits and increase market share is

limited since it operates under regulations that do not suit its marketing strategies and

management approaches.

Equity based method of internationalization.

Some companies implement foreign direct investment approach to get into developing

economy markets globally. It opens up profit sharing amongst the firm and agents, distributors,

and licensees. There are many commonly used methods including; joint ventures, acquisition and

green field investments, alliance, consortia keiretsu’s and chaebols. However, this paper will

look only into joint ventures since it is the most commonly used method by both small business

enterprises and corporates.

In joint ventures, two or more businesses come into an agreement by creating new market

identity and take active equal role in formulating effective strategies and decision making. Joint

ventures are formed to share and lower costs associated with technology and implementation of

Joint ventures as an equity-based method of internationalization.

complex projects, to gain economies of scale and to create effective future competition within

the industry of operation (Matsuo & Schimdt, 2019). In specialize joint ventures, each partner is

entitled with a specific role and duty in the business. In shared value-added joint ventures, both

partners contribute equally or as per the agreement to an activity or operation of the project.

However, companies in joint ventures companies lack control over technology since the business
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shares control to its partner. Shared ventures may lead to competition in the future since both

firms shares information concerning strategic approaches applied by the other.

Impact of foreign market internationalization.

Diversification.

The global market experiences competition making existing corporates to produce more

than one unique product to remain operational and sustain its market share while attracting new

customers. International competitions drive businesses to produce effectively and efficiently

depending on the availability of resources used in production. Local businesses expand their

operating environment by getting into international markets either through production of excess

products for exportation to the identified markets.

Competitive advantages.

Businesses are always keen on type of competition they experience in the market. Some

businesses invest into markets where their competitors do not operate to expand their market

shares. In foreign markets, pioneers build strong brand awareness to capture the market with an

aim of remaining ahead of their competitors and maintaining the leading in the market. Access to

new markets provide businesses with opportunity to adopt new effective technology used in

production and other operation processes (Kraus et al. 2018). Businesses with strong

international brand recognition faces healthy competition which is essential to business existence

in the market.

Foreign investment opportunities.

Businesses exploring international markets tend to find business gaps that are essential

for investments. Firms identifies new resources suitable for production of unique products

attracting customers. Some investment opportunities do not exist in home country thus enabling

the business to take foreign direct investment strategy boosting the business income (Chen, Yu &

Zangh 2018). Incentives offered by the foreign governments to foreign direct investments

existing or entering in their countries lowers the cost of investment to foreign businesses.

Access to new markets.

Corporates involved in internationalization find access to new markets full of investment

opportunities. When the business takes control over the identified market, it expands its

operations and increased production that is essential for business to make more profits and

remain operation in the industry. New markets have different challenges which are also essential

for business progress when overcome. Since new challenges provide new ideas, the business

information system is improved.

Access to talents.

Corporates benefits from diversified workforce due to different professional skills and

experiences due to diverse educational backgrounds. According to Alves et al (2019), corporates

attract new employees with innovation skills which is essential in corporate development.

Employees with different cultural backgrounds provide the business with opportunities to access

new market segments because they provide market information that is used by the marketing

department to develop effective marketing strategies.

Conclusion.
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Competition impacts both small enterprises and corporates in different industries leading to

seeking of new business opportunities in other nations apart from home market in which

businesses are located. Emergent of new technology and changes in technology enhanced

globalization of firms in the past two decades in different parts of the world. Enhanced foreign

direct investment policies in many nations across the globe provided opportunities for corporates

to explore new markets and benefits from competitive advantage. Entry of competitive

corporates into new markets has enhanced quality in production and emergent of unique products

and services to customers by the local firms. Improved technology in developing countries and

enhanced innovation which plays key role in the development of a nation are as a result of

internationalization of different firms. In the near future, more firms are expected to operate

internationally due to emergent of developing economies in different nations.

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