Domestic Business Venture

International Opportunities

Name

Institution

Domestic Business Venture

Although there are many advantages a business firm would enjoy when it does business abroad, there are also many risks involved, especially because it is not a guarantee the firm would get the market for its products and activities. Some companies think it is too expensive to expand internationally, and it would take a lot of money by the time the settle the international standard agreements, licensing and export costs, let alone moving their activities to the foreign countries. Certain domestic companies do not have any knowledge about international markets and doubt that other foreign countries would even recognize their products. As a result, the companies opt to maintain their domestic markets where people are used to their goods and services. Not all countries welcome products from abroad and some companies find it difficult to control the movement of their products internationally, and also they do not control the quality of their products as the host country might want regulate and expect a particular standard. The costs of other necessary products in the host country are higher, for example, like fuel, and this would raise the cost of transporting goods and services to the markets. There are some countries with similar line of consumers, and this gives one of the countries a hard time competing for markets, making it extremely difficult in getting market for their products, for example, the Simms, Marks & Spencer beauty Products Company and The Body Shop which encountered difficulties because of similarities in consumers (Honohan & Caprio, 2001).

Avoiding Regulations Laws

There are certain companies that prefer to do their business in countries where there are few regulation standards and restriction to the movement of goods and how many products to accept from imports. These companies realize much profit because the costs incurred in carrying out their activities are low, with a number of cases of tax evasion because they do not get monitored by standardization agencies. There are risks involved in such strategy though, for instance for the company, it would be difficult to seek compensation by the host country or reinsurances companies in case of disaster like a terrorist attack. There were no strict rules of conduct and no agreements set forward before the business venture so the company would stand a big loss and start all over or cease their operations (Hoskisson, 2008).

Laxity in Business Laws and regulations

Business undertaking in foreign countries and forming business alliances is very risky, and the cooperatives need to know all ventures about the other and the other partners already in the cycle and with which they would have to work. This is because of the risks involved when partners decide to make sudden changes in their strategy without informing their allies or decide to bail out leaving their partners stranded because they have to handle pending business deals and debts on their own. Examples include Enron and World Com in the U.S., and Barings Bank in the United Kingdom.

Corporative Strategy

Many ethical issues have arisen as several companies try to come together to do business and expand their international territories. There are certain countries, which have always had behavior issues and bad reputation and this makes it very difficult for them to enter into agreements with other countries or companies as partners. Trust is a key factor in forming a partnership as it is associated with positivity in the business focus and the expectations of the parties that do transactions, and this protects the future of the alliance. If there are misunderstandings and disagreements in the code of ethics, there would not be a strong partnership formed, for example, in the case of China which has very strict codes of conduct, and recently made it difficult for companies such as Rio Tinto, Google and Honda to fit in their business partnership. Most Western companies have difficulties to merge their business codes with that of China because their rules and regulations are not so compatible and fail to blend. It would take much studying in order to get enough knowledge about foreign markets and business laws abroad, but it is still the most important aspect before expanding internationally in business.

References

Hoskisson, R. E et al. (2008). Competing for advantage. Mason, OH: Thomson/South-Western

Honohan, P., Caprio, G. (2011). Finance for Growth: Policy Choices in a Volatile World. Oxford: A copublication of the World Bank and Oxford University Press.