1. To achieve higher rate of profits
The basic objective of the business firm is to earn profit. The domestic markets do not promise a higher rate of profits. Business firms search for foreign market which hold promise for higher rate of profits. Thus the objective of profits affects and motivates the business to expand its operations to foreign countries.
2. Expanding the production capacity
Domestic companies expanded their production capacities more than the demand for product in domestic countries. In such cases, these companies are forced to sell their excessive production in foreign developed market.
3. Severe competition in home country
The countries oriented towards market economies since 1960’s, experience severe competition from other business firm in the home country. The weak companies which could not meet the domestic countries started entering the markets of developing countries.
3. Limited home market
When the size of the home market is limited either due to the smaller size of the population or due to lower purchasing power of the people or both, the companies internationalize their operations.
4. Political Stability v/s Political Instability
Business firms prefer to enter the politically stable countries and are restrained from locating their business operations in politically instable countries. In fact, business firms shift the operations from politically instable countries to the politically stable countries.
5. Availability of Technology and Managerial Competency
Availability of advanced technology and competent human resource in some countries acts as pulling factors for business firms from the home country. The developed countries due to these reasons attract companies from developing world. In fact, American and European countries depend on Indian Companies for software products and services through their BPO’s.
6. High cost of transportation
Initially companies enter foreign countries trough their marketing operations. At this stage, the companies realize the challenge from the domestic companies. Added to this, the home companies enjoy higher rate of profit margins where as the foreign firms suffer from lower profit margins. The major factor for this situation is the cost of transportation,
Under such conditions, the foreign companies are inclined to increase their profit margin by locating their manufacturing unit in foreign countries where there is enough demand either in one country or in a group of neighboring countries.
7. Nearness to Raw materials
The source of highly qualitative raw materials and bulk raw materials is a major factor for attracting the companies from the various foreign countries. Most of the US based companies open their manufacturing unit in Middle East countries due to the availability of petroleum. These companies, thus, reduces the cost of transportation.
8. Availability of Quality HR at less cost
This is the major factor, in recent times, for software, high technology and tele- communication companies to locate their operations in India. India is a major source for high quality and low cost human resources unlike USA and other developed countries.
9. Liberalization and Globalization
Most of the countries in the globe liberalized their economies and opened their countries to the rest of the globe. These changed policies attracted the multinational companies to extend their operations to these countries.
10. To increase market share
Some of the large-scale business firms would like to enhance their market share in the global market by expanding and intensifying their operations in various foreign countries.
11. To achieve higher rate of economic development
International Business helps the governments to achieve higher growth rate of the economy, increases the total and per-capita income , GDP, industrial growth, employment and income levels.