When a business reaches its maximum growth point with its current resources, it tends to look for new options to generate profits. If we think about the life cycle of companies and the volatile market we live in, fostering options to generate profit is a subject that must be constantly on the agenda.
We also have the Business Expansion, a strategy adopted in companies that have in mind to grow even more. The thinking is simple and practical: to reach new customers and/or new markets and/or new technologies.
The fact is that companies that especially seek to cover new markets will inevitably face the internationalization process at some point.
To introduce the subject and help you stay on top of companies’ internationalization strategies, we have prepared this super article for you.
Why think about Internationalization?
Market opportunity: the internationalization of companies happens when opportunities for new business abroad are envisioned. This can occur, for example, when the organization perceives that there is demand for its products in foreign markets, when trends favor its products abroad, or when it perceives the absence of competition in the market of other countries.
Risk diversification: another reason to internationalize the business is the desire to diversify the company’s risk. You know that story about not putting all your eggs in one basket? By opting for internationalization, while companies become more immune to changes in consumer trends for each of the markets in which they operate, they are also less affected by external factors that interfere with consumer behavior and the purchase of their products ( such as recessions, political turmoil, changes in interest rates, changes in exchange rates, natural disasters, terrorist attacks, weather, etc.).
Economies of scale: the broader the company’s operations, the more discounts it can obtain by purchasing in scale, in addition to being able to obtain better credit conditions from suppliers.
Seasonality: internationalization is an option for companies whose products are very tied to the seasonality of the domestic market. Imagine a product that sells more in the summer. By expanding boundaries, the organization can have an entire year of peak sales.
Competition: there is that law of physics that speaks of action and reaction. In many cases, companies find themselves pushed into the internationalization process because that’s what their competitors are doing. There is also that saying that the best offense is defense. Going international can be a response to a competitor that started its operations in the domestic market. In other words, a company enters a competitor’s home market in retaliation for a previous entry into its own home market.