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7 Reasons Why Businesses Operate Internationally.

Categories: Business

Reasons why businesses operate internationally

Complete this template with 7 reasons why businesses operate internationally.

Reason 1 – Growth:

The reason as to why a business like ebay would expand their business to ireland would be because they are then able to expand their business to a larger audience this is beneficial for ebay as it would mean that they are able to gain more consumers which would mean that the business will be become more popular among the irish citizens.

Ebay would benefit from choosing to operate in southern ireland because once the UK leaves the EU northern ireland will also leave which would mean that operating there will not beneficial for them as it would mean that the prices for importing and exporting goods will increase meaning less people will want to purchase goods and services which will slow growth, however if they operate in southern ireland the importing and exporting prices will remain low which will help increase prices which would essentially mean that they are increasing in volume.

Alongside of this they will have a larger market coverage this essentially means that they will be creating a bigger market to sell their products and services to which is beneficial for them as it means that they have more consumers, this will also help them to increase their market share.

As ireland is known to be one for the top ten countries who are constantly improving in their technological aspects such as software it would benefit ebay to operate there as they do not have any physical stores their software would need to of a high standard as many people from around the world use their services to purchase products meaning that their data is kept of the system and in order to keep is secure they will need a really good software programme.

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This will help with the growth of ebay as it shows customers that the database that they are using is secure which would mean that more consumers will use their services.

By operating abroad a business like ebay will benefit as they may be performing better as they may have more resources in order to purchase more goods than they originally did in their home country, this essentially means that they will be able to gain more growth which will help them to trade much better.

Reason 2 – Economies of scale:

Reason 3- Diversification:

When looking at diversification for a business such as ebay we look at all the different goods and services the business sells for example when looking a ebay we know that the products on their differ from home products, electronics to fashion / beauty. This is beneficial for them as it means that if one of their investments performs poorly over a period of time the business will be able to fall back on to their other investments that have done well this reduces the risk of potential losses if they had put all their capital under one type of investment. Alongside of this when looking at diversification we know that because ebay use diversification it means that as a business they are not relying on a singular type of income.

Risks of diversification:

Diversification is beneficial for ebay but these different aspects of their investments could be affected by operating in other countries for example political risks this means that if another government comes into power they may change certain rules where a business is unable to sell certain goods and services. This is not good for ebay as they would need to sell their goods and services in order to make an income. However if a government changes their policies it could also mean that there may be a rise in inflation and interest rates which could mean that it would affect ebay’s stock prices.

Another diversification risk that would affect ebay would be currency because ebay have many different sectors in which they sell different products and services this will impact them because for every euro that is spent in ireland it would mean the business is receiving 0.78 pence, this means everytime the exchange rate changes they are either making a profit or a loss.

Reason 4 – Emerging Markets:

An emerging market essentially refers to a country that does not have a well developed economy or capital market in comparison to the developed market.

When looking at emerging markets for Ebay we don’t look at ireland as one solely because they have a developed capital and economy. however countries such as india and china are looked at as emerging countries as they are more focused on becoming a more economically disciplined country this would look at things such as an increase in fiscal transparency, focus on production of goods and services etc. as well as focusing on developing their regulatory bodies.

However if ebay choose to move to an emerging market economy such as china it would be beneficial for them as it means that they would have the resources that ebay may need if they want to set up their business there as well as having the infrastructure to do so. However if ebay wanted to operate in ireland it may find it difficult to do so as it is a developed country which means that it has a ‘built out infrastructure’ which links to transportation, communications etc.

Reason 5 – Cost Reduction:

Ebay may choose to reduce prices if they going to operate in ireland because by doing so it would mean that they would be more competitive to local businesses this is beneficial for a business such as ebay is because it would mean that as business that is newly starting up in ireland they would keep their prices low so it would mean that the irish citizens would be able to afford the goods and services that may be cheaper in another store. This will benefit them as it means that more people will want to purchase goods and services from them in the future compared to their competitors.

Alongside of keeping their costs low, ebay may want to operate in ireland due to the fact that the labour and land may be less expensive than it is in their home country for instance the hourly pay in the US is $7.25 and the hourly pay in ireland is 9.55 euros an hour.

Furthermore when looking at operating in another country such as ireland we would be looking at shipping of goods which would be less expensive in southern ireland as they will still be apart of the EU when the UK leave due to brexit. Being within the EU allows the citizens of southern ireland to receive their products at lower prices as they would pay less for shipping fees compared to the citizens of northern ireland as it means that becuase they are not going to be within the EU once brexit goes through they will find it harder to receive products at a lower price becuase importing goods will become more expensive for them.

Reason 6 – Taxation Regime:

Reason 7 – Legal and Regulatory regime:

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7 Reasons Why Businesses Operate Internationally.. (2019, Nov 25). Retrieved from http://studymoose.com/nafisah-mehmud-p5-in-class-assessment-template-example-essay

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