Firms go international for several reasons, including accessing new markets, diversifying risks, obtaining resources and inputs, achieving economies of scale, and gaining competitive advantages. In the Indian context, there are several examples that illustrate these motivations:
Access to new
markets: Indian firms often expand internationally to tap into new customer
bases and increase their market share. For instance, Tata Motors, one of
India's largest automobile manufacturers, has gone international by acquiring
foreign automobile brands such as Jaguar Land Rover. This strategic move
allowed Tata Motors to access new markets globally and strengthen its presence
beyond India.
Why do firms go international Explain with the help of
examples from Indian context
Diversification
of risks: Going international helps firms reduce their dependence on a single
market and diversify their risks. An example is Infosys, an Indian
multinational information technology company. Infosys expanded its operations
globally to reduce its exposure to any potential downturns in the Indian IT
market. By diversifying geographically, the company mitigates risks associated
with fluctuations in a specific market.
Access to
resources and inputs: Indian firms often go international to gain access to
resources, technologies, and inputs that are scarce or unavailable domestically.
An example is Reliance Industries Limited (RIL), a conglomerate in India. RIL
has made significant investments in global energy assets, such as shale gas in
the United States and oil refineries in Europe, to secure energy resources and
enhance its competitive advantage.
Economies of
scale: International expansion allows firms to achieve economies of scale by
increasing production and spreading fixed costs over a larger customer base.
One example is the pharmaceutical company Sun Pharmaceutical Industries Ltd.
Sun Pharma expanded globally through acquisitions, enabling it to leverage
economies of scale in manufacturing, research and development, and
distribution, leading to cost efficiencies and increased competitiveness.
Competitive
advantage: Firms may go international to gain a competitive advantage over
their rivals. An example is the Indian information technology sector, which has
seen numerous firms expand globally to leverage their expertise in software
development and IT services. Companies like Tata Consultancy Services (TCS),
Wipro, and HCL Technologies have established global delivery centers, enabling
them to offer cost-effective and high-quality IT services to clients worldwide,
giving them a competitive edge.
Overall, Indian
firms go international for various reasons, including market expansion, risk
diversification, resource access, economies of scale, and competitive
advantage. These examples highlight how Indian companies have pursued
internationalization strategies to strengthen their market position and achieve
growth beyond the domestic market.
Expansion and
growth: Firms often venture into international markets to tap into new customer
bases and increase their revenue streams. For instance, Indian IT companies
like Tata Consultancy Services (TCS) and Infosys have expanded their operations
globally to cater to the growing demand for IT services in markets like the
United States, Europe, and Asia. b) Saturation in domestic markets: When
domestic markets become saturated or face intense competition, firms may look
to international markets for growth opportunities. The Indian automobile
manufacturer, Tata Motors, expanded internationally to mitigate the impact of a
slowdown in the domestic market. It acquired Jaguar Land Rover to access new
markets and diversify its product portfolio. c) Access to emerging markets:
Some firms venture abroad to capitalize on the growth potential of emerging
markets. For instance, pharmaceutical companies like Dr. Reddy's Laboratories
and Cipla expanded globally to access markets with increasing healthcare needs,
such as Africa, Southeast Asia, and Latin America.
Resource-seeking:
a) Access to raw materials: Firms may go international to secure a stable
supply of raw materials or natural resources. Indian oil companies like Oil and
Natural Gas Corporation (ONGC) have invested in oil fields and exploration
projects abroad to ensure a consistent supply of oil and gas. b) Cost
advantages: Companies may establish operations in countries with lower
production costs to enhance their competitiveness. Indian textile
manufacturers, such as Arvind Mills and Welspun India, have set up
manufacturing units in countries like Bangladesh and Egypt to take advantage of
cheaper labor and production costs. c) Technological advancements: Firms seek
international collaborations or acquisitions to gain access to advanced
technologies and innovation. Indian pharmaceutical company Sun Pharmaceutical
Industries acquired Taro Pharmaceuticals, a multinational generic drug company
based in Israel, to leverage its advanced manufacturing capabilities and expand
their global reach.
It's important
to note that these are just a few examples, and firms may have multiple
motivations for going international, including strategic alliances,
diversification, and leveraging economies of scale. The specific motivations
can vary based on industry dynamics, market conditions, and individual firm
strategies.
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