1. Regional integration Regional integration is a process in which states enter into a regional agreement in order to enhance regional cooperation through regional institutions and rules. The objectives of the agreement could range from economic to political to environmental, although it has typically taken the form of a political economy initiative where commercial interests have been the focus for achieving broader socio political and security objectives, as defined by national governments. Regional integration has been organized either via supranational institutional structures or through intergovernmental decision-making, or a combination of both. Past efforts at regional integration have often focused on removing barriers to free trade in the region, increasing the free movement of people, labour, goods, and capital across national borders, reducing the possibility of regional armed conflict (for example, through Confidence and Security-Building Measures), and adopting cohesive regional stances on policy issues, such as the environment, climate change and migration. 2. Internalization
Internationalization is the process of acceptance of a set of norms and value established by people or groups which are influential to the individual through the process of socialization. John Finley Scott (1971) Also it can be defined as a process through which we come to identify parts of our culture as part of ourselves especially to norms and values.
3. Internalization process In international business management describes the process in which the firm gradually becomes involved in international business and enters foreign market whereby the discussions and decisions on development of the domestic market and international market are made.
The term international usually refers to either an attitude of the firmtowards foreign activities or to tlie actual carrying out of activities abroad.*Of course there is a ciose relationship between attitudes and actuai behaviour.The attitudes are the basis for decisions to undertake international ventures and the experiences from international activities infiuence these attitudes. In the case descriptions we have to concentrate on those aspects of the internationalization that are easy to observe, that is the international activities. We consider, however, these attitudes as interesting and important and the discussion of the internationalization process is basically an account of the interaction between attitudes and actual behaviour
4. Expand Sales
Companies sales are dependent on two factors: the consumers’ interest in their products or services and the consumers’ willingness and ability to buy them. The number of people and the amount of their purchasing power are higher for the world as a whole than for a single country, so companies may increase their sales by reaching international business. Ordinarily, higher sales means higher profits, assuming each unit sold has the same markup. For example, the Star Wars cost millions of dollars to produce, but as more people see the films, the average production cost per viewer decreases. So, increasing the sales will be major motive for a company’s expansion into international business.
5. Acquire Resources
Manufacturers and distributors seek out products, services and components produced in foreign countries. They also look for foreign capital, technologies, and information they can use at home. Acquiring resources may enable a company to improve its product quality and differentiate itself from competitors in both cases, potentially increasing market share and profits. Although a company may initially use domestic resources to expand abroad, once the foreign operations are in place, the foreign earnings may the serve as resources for domestic operations.
6. Diversify Sources of Sales and Supplies
To minimize swings in sales and profits, companies may seek out foreign markets to take advantage of business cycle recessions and expansions differences among countries. Sales decrease in a country that is in a recession and increase in one that is expanding economically. By obtaining supplies of the same product or component from different countries, companies may be able to avoid the full impact of price swings or shortages in any one country.
7. Minimize Competitive Risk
Many companies enter into international business for defensive reasons. They want to counter advantages competitors might gain in foreign markets that, in turn, could hurt them domestically. For example company A and company B compete in the same domestic market. Company. A may fear that Company B will generate large profits from a foreign market if left alone to serve that market. Company B may then use those profits in various ways (such as additional advertising or development of improved products) to improve its competitive position in the domestic market. Companies harboring such a fear may enter foreign markets primarily to prevent a competitor from gaining advantages.
8. Controlling Expenses
Every business wants to have low expenses; so some companies will therefore enter the global arena to minimize their costs. Companies will examine the resources they need and where they can get them at the lowest price. By searching outside of their own borders, companies hope to find more economical solutions to the production and manufacturing problems they have. Business might choose to take advantage of lower labor costs, they might move manufacturing plants closer to natural resources, invest in new and more efficient technology, or profit from another countries innovations or tax structures.
For example a company that is located in Toronto that gets most of their resources from Japan might want to look into moving the company closer to Japan or they might have to look into finding a new place to get their resources. This is known as outsourcing, meaning that a company will obtain something by contracting it from another source.
In order to diversify a company’s product line they may choose to enter a specific international market. This will apply to both a large scale international business along with a small company. Companies have a foothold in a number of countries so they don’t have to depend on the economy of one country. Companies engaged in international business can protect their investments and their markets by dealing with countries in a variety of countries. A recession in one county won’t have a huge effect if business is doing well in another country.
Many companies expand globally for defensive reasons to protect themselves from competitors or potential competitors, or to gain advantage over them. In today’s business environment, even a small business is competing with international businesses. A neighbourhood video store is facing competition from a larger international company such as Blockbuster Video. A local store may have a limited selection because of its small size but it may be able to offer more personal service, a more specialized stock or even lower prices. On the other hand, local businesses may find if difficult to compete with the selection and price that multinational companies can offer. If their businesses are too threatened, they may find wider markets or merge with a larger, possibly international company.
International Business Theories
Analytical framework of International Business (IB) is built around the activities of MNEs enunciated by the process of internationalization (Kamwesara, 2010p.17). Before emergence of MNEs, Foreign trade and IB were regarded as synonymous and international trade doctrines based on labour cost differentials free trade guided the international transactions among trading partners. Several theories have been formulated which form the basis of international trade and FDI.