New venture: International or Domestic
There are three key considerations that I will make before deciding whether to take my business to the international level or to operate in the domestic market. There are many benefits that company reaps by expanding its operations to the international market compared to operating in the domestic market only. However, this decision should be made carefully since there are certain factors that must be put into consideration, to ensure that the intended expansion is successful (Moore, et al, 2000). The first criteria I will use in deciding whether to go global is asking my self whether i am familiar with the target market. This includes the cultural beliefs of the people there as well as well as the prevailing market conditions. This will help me assess whether my new venture stands any chance of winning a share of the target market. Taxes and government regulations will also be put into considerations since directly affect the profitability and operations of a company.
The second consideration that I will make before deciding whether to take my new venture into the global market is whether I have the necessary resources to support the venture. Venturing into the global market requires the company to have enough resources and also to come up with an export department responsible for overseeing the operation of the foreign markets (Campbell, 2007). This will require me to have a sales manager who will oversee all the operations of the international. Such undertakings are extremely expensive and risky especially when considering liability and overhead.
The availability of companies willing to enter into a joint venture with my company is another criterion that I will consider before expanding my operation sin to the global market. Companies that go it alone when venturing into markets find it exceedingly hard to win over customers and establish a sizeable market share. Partnerships are highly effective since they counteract any political or cultural issues that may arise, as new companies are usually viewed suspiciously. By entering the market through a local company, the firm establishes itself more quicker, as the task of sales and marketing is shared with a local enterprise already in the market. Great considerations should be made when choosing a partner to ensure that the partner sufficiently fits into the goals and beliefs of the company and its customers (Campbell, 2007).
Advantages and disadvantages of taking my business into the international market
The first advantage of expanding into the international market is that it brings about faster growth. Going global brings new customers to the company and this means increased sales. With increased profitability, the company grows quickly and may expand into more new markets. Compared to companies that operate in local markets, multinationals grow at a faster rate and are more stable. The second advantage of expanding into new markets is that it enables a company gains access to cheaper inputs. When companies operate locally, they are sometimes at risk of buying inputs at inflated prices (Thill, et al, 2007). This is because their main source of inputs is the local supply which may be susceptible to occasional fluctuation of prices. By the nature of their operations, multinational companies can source for labor or raw materials from any market in the world. Expanding into new markets offers businesses new market opportunities. In turn, this transforms into new opportunities for expansion increased income and growth. More to this, bigger markets mean larger customer base, increased earnings and larger profit margins. Finally, expanding to international markets, enables a company diversify its market, therefore, making it less vulnerable to fluctuations in demand in the local market. This enables the company to maintain its sales and profitability, thus ensuring that it remains stable.
Disadvantages of taking my business into the international market
One significant disadvantage of expanding into the international market is that it requires a lot of money. A company that needs to venture into new markets need to set up new facilities abroad, hire new employees, set up information and communication systems and pay for new licenses among other expenses. Raising this money can be quite a challenge to some companies especially new and small ones (Hall, et al, 2008). The second disadvantage of expansion into global markets is that it comes with new foreign regulations and standards. As a firm expands, it is forced to work under new rules and standards compared to what it is used to. This may force it to change some of its operations like production, packaging and marketing resulting in extra expenses. Multinational companies have a complex organizational structure compared to national ones. This means that as a company expands, it will be required to retrain its management to enable it deal with new challenges brought about by expansion into the international market. This in turn, leads to increased expenses. Finally, operating in the international market is immensely complex , and it sometimes may lead to delays in payments. If nothing is done, such delays could affect the cash flow of the company involved.
As my business is new, I will concentrate on the local market first. This is because the company is not yet financially stable to support expansion into overseas markets. More to this, there is a lot of untapped potential in the local market that I feel I must tap into first before thinking of expansion into international markets.
The first law that would affect the operations of my business internationally is the US trade laws. These laws inflict sanctions on countries that are judged to violate certain U.S laws. Such laws could make it impossible for my company to offer its services in the United States. The second law that could affect the international operations of my business is the consumer privacy law. As an insurance company, it will be mandatory for me to ensure that all data and information about my clients is kept safe. This law will require me to invest heavily in information technology to ensure that all client data is kept safe.
Dave Hall, et al (2008). Business Studies: Fourth Edition. Pearson Education, Limited.
Campbell, D. (2007). Comparative Law Yearbook of International Business. Volume 29. Kluwer Law International.
John V. Thill, et al (2007). Excellence in Business Communication. Pearson Prentice Hall.
Michael L. Moore, et al (2000). U.S. Tax Aspects of Doing Business Abroad. American Institute of Certified Public Accountants.