Normally three objectives may induce companies to engage in international business, this includes expanding sales, acquiring resources, and minimizing risk. These objectives guide all decisions about whether, where, and how to engage in international business.

Expanding Sales - A company’s sales depend on two factors: Consumer interest in its products or services and consumer willingness and ability to buy them. For any product or service there are more potential customers in the world than there are in a single country so increasing sales becomes a major attractive motive for companies to expand into international business markets in fact many of the world’s largest companies including Volkswagen (Germany), Nokia (Finland), Ericsson (Sweden), IBM (USA), Michelin (France), Nestle (Switzerland) and Sony (Japan) to mention a few derive more than 50% of their sales from outside their home countries. It is also important to note that even the smaller companies (those employing fewer than 20 people) may also depend extensively on foreign sales. In the USA for example small companies make up nearly 97% of USA exporters. Many small firms also depend on sales of components to larger companies which in turn install them in finished products to be sole abroad.

Acquiring resources- Producers and distributors seek out products, services, resources and components from foreign countries. They also look for anything that will give them a competitive advantage, this at times means acquiring a resource that cuts costs. Sometimes firms gain competitive advantage by improving product quality or by differentiating their products from their competitor’s products. In both cases they are potentially increasing market share and profits. For example most automobile companies hire one of the several automobile design companies in Northern Italy to help with styling. While many other companies establish foreign research and development facilities to tap into additional scientific resources and ultimately acquiring useful knowledge in the process. Avon for instance applies its know-how from its Latin American marketing experiences to help sale to Hispanic in North America and elsewhere.

Minimizing risks- Operating in countries with different business cycles can reduce swings in sales and profits. The key is the fact that sales decreases or increases more slowly in a country that is in a recession and increases or grows rapidly in countries that are expanding economically. For example in the early 2000 Nestle experienced slow growth in Western Europe and USA while experiencing faster growth in Asia, Eastern Europe and Latin America. Companies also often engage in international business for defensive reasons, sometimes to counter advantages gained by competitors in foreign markets that might hurt them elsewhere. For example USA based Procter & Gamble operating in Japan hindered Japanese companies from amassing the necessary resources to expand to other international markets where P&G was active.

Proactive and Reactive Motivation

In others words the drive to internationalise can be proactive or reactive. Motivations are often mixed and usually multiple. Proactive motivations represent stimuli to attempt strategic change. Reactive motivations influence firms that are responsive to environmental changes and adjust to them by changing their activities over time. In other words, proactive firms go international because they want to, while reactive ones go international because they have to.

Change Agent

Internationalisation is a result of change, from a local to an international business. For change to take place, someone or something within the firm must initiate it and shepherd it through to implementation. This intervening individual or variable is here called a change agent.

Internal Change Agents: (a) A primary change agent internal to the firm is enlightened management. The key factor leading to such performance-enhancing enlightenment is the international experience and exposure of management. (b) Managers or employees entering a firm having already had some internationalization experience in previous positions will try to use this experience to further the business activities of their new firm. (c) The development of a new product useful abroad can serve as such an event, as can the receipt of new information about current product uses.

External Change Agents: (a) The primary outside influence on a firm’s decision to become international is foreign demand.   (b) If other firms are internationalizing in the industry and are succeeding. Formal and informal meetings among managers from different firms at trade association meetings, conventions, or business roundtables therefore often serve as a major change agent.  (c) Some distributors are engaged, through some of their other business activities, in exporting. To increase their international distribution volume, they encourage purely domestic firms also to participate in the international market.   (d) Banks and other service firms, such as accountants, can serve as major change agents by alerting domestic clients to international opportunities.   (e) Chambers of commerce and other business associations that interact with firms locally can frequently heighten exporting interests. (f) Governmental efforts on the national or local level can also serve as a major change agent. In light of the contributions exports make to growth, employment, and tax revenue, governments increasingly are becoming active in encouraging and supporting exports.  (g) Many states have formed economic development agencies that assist companies by providing information, displaying products abroad, and even helping with financing. Trade missions and similar activities are also being carried out by some of the larger cities.