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Literature Review: Barriers to Internationalization

Critical Literature Review: Barriers to Internationalization.

Introduction:

Every (Dark brown, 2008) business organization functioning in virtually any market whatsoever has development and diversification as an objective which intent to realize high level of success and fulfilling communal obligations in the process. An objective consequently is in every clarity defined at the stages of incorporation of the business organization. This purpose and target assist a firm in obtaining its pre-set goals. Business entrepreneurs performing at a local and nationwide level perceive internationalization as a step towards reaching global recognition, maximization of success through high level of sales and an increased market share at an area, countrywide and international level in comparison to their competitors.

Another aspect (Brady, R. H. 1973) which must be noted is the fact that the highly competitive, generally non-monopolistic, consumer oriented market scenario constantly demands businesses to be progressive in terms of not only the produced product but also the modes of development and growth followed for survival on the market. Internationalization here again is a technique implemented by several organizations to survive, expand and be competitive without which their only living could be threatened. Internationalization provides a high amount of credibility to the product in the house country and this result in raise in the sales in the house country as the level of consumer trust is increased on account of the fact that the product sold is working in the international market.

But the procedure of internationalization(Brady, R. H. 1973) is not devoid of complexities. Whenever a business business is in the process of internationalization of its product, the organization is attempting to market the product within an international market where in the consumer tastes and preferences are dictated by a certain lifestyle they lead due to differing requirements of living, ethnic influences, and option of substitutes and constantly transitional fads and styles.

Besides the essential consumers in the international market, other factors such as governmental rules and regulations regarding entry into international marketplaces, trade and tariff issues, political factors, currency valuation and so many more problematic issues could create barriers for an enterprise business to internationalize.

The barriers to Internationalization (Genck 1973) could be for the intended purpose of comprehensive examination is further bifurcated into A) Internal Barriers.

B) External Barriers.

In-depth Research:

The following inner factors could create barriers to Internationalization of business:

Lack of Determination:

Lack of Determination (Gore, S. K 2006) at different levels of a business firm could create a barrier to internationalization of the business organization. Getting into a foreign market requires a highly determined team of professionals working at different hierarchical levels in the business organization. THE STUDY and Development team, marketing, sales, development, promotion, finance and accounting and the other entire concerned team should work in proper co-ordination of the other person with high motivational levels in search of a common business strategy of coming into the international market. Lack of motivation on the part of any one particular team could pose a barrier to internationalization as their insufficient motivation could lead to product failure abroad.

Inadequate Market Research:

The concept of internationalization (Irwin, 1970) of business is in all essence to help make the organizations service or product available in a overseas land. Ahead of internationalization, it is a pre-requirement to handle in-depth general market trends about the commercial feasibility of launching the merchandise or rendering a service in an international market. Inadequate qualitative and quantitative research on a primary and supplementary level may lead to the failure in the sales of the merchandise and subsequently the expansion of the business in the international market. Hence, incomplete and inaccurate market research could cause a hurdle to internationalization. For the sake of exemplification, a soft drink company or a garment maker should conduct general market trends immediately or through market research companies in the foreign country about the buyer preferences in conditions of the product, price and other aspect before internationalization to avoid failure.

There is a (Levitt, T. 1999)need to identify your competition in the international market. The set up competitors with large existing market stocks could pose barriers to internationalization.

Adequacy of market research should include the next:

There should be sufficient testing on a preliminary level for international market offering profitable opportunities.

In-depth examination should be carried out of industry market potential.

The potential demand for the organizations products should be discovered with.

Sales forecasting to a higher level of reliability should be produced about the international market prospects.

The market talk about of the business should be rightly evaluated.

Adaptation:

Post do of sufficient (McGill, 1975) market research, the businessperson need to see to what scope he or she needs to make the merchandise or service to be rendered adjustable to international market. Insufficient adaptability in the product could lead to product failure and succeeding investment deficits for the businessman who would not only fail to set up himself in the international market as insufficient product adaptability would pose a barrier but the loss of money in the job could be considerable enough to make his home country businesses suffer. Consequently the consequences of such obstacles could affect the standing and continuance of the business organization.

Adaptation to consumer needs should be focused on the next:

Products (Murray, 1975)should adhere to the international market requirements.

There should be modification made in techniques followed for promotion of the products especially through advertising. Thought based on terms, cultural values and environment and legislation of the land should be made while implementing promotional strategies.

There is a need to make modifications in the charges of the merchandise taking factors such as transport costs, taxation insurance policies of the international country, exchange rate issues etc.

Establishment of a (Newman 1975) proper distribution system is necessary. The organization could sell directly to the ultimate consumer through create of an wall socket or sell through providers in international market. With regards to the product and the availability of funds, the organization has to create a syndication network. Insufficient a good circulation network could cause a major hurdle to internationalization.

External Factors posing obstacles to Internationalization:

Culture Barriers:

Culture poses a significant (Olive, 1975) exterior barrier for business corporation which strategizes to internationalize. Culture and ethnic practices affects the consumption routine of the consumers the world over. A business organization likely to market their product in the international market must make an in depth analysis in conditions of the product and the level of its acceptability regarding prevalent cultural custom without provoking the cultural sensibilities of the consumers. To create provision for an illustration, an Indian firm which intends to market foods in the Arab countries such as Dubai could have to make certain that pork should not form a part of their available product variety. The addition of such products could sensationalize the problem leading to legal and public complications for the organization marketing such products. (Roberts, M. J. 1975)The food chain large Macdonald was confronted with severe outrage in India when it was rumored that meat was utilized in their food products. Cow being holy to the Indians, ethnic and spiritual sensibilities was harmed and eventually it led to MacDonalds withdrawing certain products. Particularly, Asian and Arab countries pose cultural obstacles to certain products in context to internationalization.

Legal Obstacles:

Legal obstacles (Satow, 1975) form a significant de-motivating factor for firms that anticipate strategizing to internationalize. The federal government of certain countries impose legal impediment or combine trade restrictive legalities for firms. This is done with intend to protect the national and local establishments or businesses form facing severe competitions from multinationals that happen to be heavily funded. The American Multinational companies which constantly internationalize create severe competition for local industries which have limited funding capacity so when confronted with such competition have a tendency to go in a state of dissolution which eventually leads to monetary imbalances and instability. Regulations related to level of trade, infrastructural legitimately permissible procedures etc. constitute legal barriers for business organizations to internationalize using countries.

Economic Obstacles:

Tariff and Trade Barriers:

Internationalization accelerates the amount of the availability of the product for consumers domestically to choose from. Since the availability of substitutes is large, there's a considerable dip in the price of commodities due to increased competition. Hence tariffs are enforced on brought in goods which increase to the price. This is done primarily to protect infant industries within the country from declination. This (Savas, E. E. , 1975)strategy of the federal government is termed as Transfer Substitution Industrialization (ISI). It really is employed by many encouraging economies where within is levy of heavy fees by way of tariffs on imported goods and in the process a domestic market is established for locally or nationally produced goods and providing cover for those industries from being wiped out of the commercial scenario. The other positive facet of high tariffs for producing nations is the fact that it reduces unemployment and dependency on agriculture. However the negative aspect is the fact is poses a hurdle for many businesses to internationalize.

Non-Tariff Hurdle:

Non-Tariff barriers (Gaedeke, R. M. (1977), such as quotas, embargoes, sanctions, quotas and other limitations pose barriers to internationalization. These barriers are frequently utilized by countries which can be large and developed. They are obstacles to trade which are create and have a form apart from a tariff. That is way barrier employed with intent to control the trade of 1 current economic climate with the other. Nevertheless, any form of barrier to internationalize causes economic loss which prove to be a de-motivational factor for businesses which plan to project into that business world.

Subsidy:

Subsidy occurs (Lovelock, Christopher H. , ed. (1977), as a barrier to internationalization as the subsidy provided by a government to home businesses permits them to reduce their cost. This can help them contend with business organization which have internationalized. Subsidy provided by the governments could maintain the proper execution of raw materials subsidy, financial subsidy that could be low interest short-term and long-term loans, subsidy in setting up the business enterprise. Subsidy leads to low type costs and with a considerable profit margin the product is available at a cheaper rate than the brought in products. This poses a great barrier for business to internationalize in countries where the governments help with barriers in the form of subsidies.

Political Barriers:

Political barriers (Henion, Karl E. (1976), tend to be posed by warring nations. Lack of politics peace creates a sense of hostility between countries and investments between those countries are primarily affected. Internationalization could be banned out rightly or politics influences over governmental legislation could be imposed to limit trade. Political unrest between U. S. A. and the U. S. S. R. through the cold battle period led to complete disruption of trade between these countries. Hence political barriers will be the worst perceived barriers to internationalization.

Conclusion:

In conclusion, obstacles to (MacStravic, Robin E. (1977), internationalization though widespread the world over, will not prevent business firm from venturing into the procedure for internationalization. Any business company when internationalizes its businesses attains a higher amount of trustworthiness in the neighborhood, nationwide and international market due to its procedures and services internationally. The sales of the merchandise accelerate in the home markets when consumers locally or nationally find out about the fact that the product comes in the international market. The merchandise achieves a certain stature which appeals to the consumers all the more. Internationalization is a technique which when developed by business decision manufacturers needs to focus on all the key areas which present barriers and multiple strategies should be so formulated to battle those obstacles. Business properties such as Sony Firm, Adidas, Nike, Macdonalds, Levis and many more have internationalized their products despite the barriers and are effectively catering to the global market. Their global bottom part over the last few ages has surfaced so strong that switch annual turnover volumes to vast amounts of dollars on account of internationalization despite political, social, ethnical and governmental obstacles.

If one we to grasp the objective of medium and small sized (Nickels, William G. (1978), business then we could infer that these barriers especially external could end up being de-motivating factor and a hindrance for internationalization. The money capacity of businesses of such composition might not have the money capacity to triumph over barrier posed. In the event of them wanting to internationalize, they may incur heavy loss to extent that not only their international project may go through but their basic life in their home market could be threatened on account of bankruptcy.

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