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Problem

Describe the proactive and reactive reasons for entering foreign markets.

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Step 1/4

The decision to penetrate a foreign market is among the most challenging of all decisions concerning new markets. A long-term commitment from management is necessary because without it, the entry into the market would fail because the competitors already present in the country in question are frequently fully focused on what is, for them, their domestic market.

Step 2/4

The proactive reasons for entering foreign markets:

• When anticipated profits take longer to materialize, a company with proactive motives, especially one that is aiming for further earnings, will frequently stay the course.

• One seasoned international manager claimed that doing business internationally takes more time, is tougher, as well as costs more than everyone in the company anticipates.

• Long-term profitability may be attained by a company that has genuine or perceived benefits in technology or product.

• Obtaining insider knowledge of clients, distributors, or rivals in overseas marketplaces can also serve as a proactive justification for expanding internationally.

• Another proactive driver is economies of scale. It's possible that entry into a certain product market won't be supported by the domestic market, particularly in a tiny country.

• It could be required to produce a lot of things in one location to compete with other big businesses. Lastly, a sizable market can be a key justification for expanding.

Step 3/4

The reactive reasons for entering foreign markets:

• Typically, reactive motives don't provide permanent results.

• To keep its rivals out of a foreign market, a company may be reactively motivated by competitive pressure to think globally.

• Many businesses enter these circumstances too quickly and discover themselves unready for the challenges they face.

• Similar reactive types of motivators include excessive production, overcrowded domestic markets, falling domestic sales, as well as surplus capacity.

• The fundamental notion is that international markets are employed as "safety valves" to pick up the slack for diminishing domestic sales whenever the domestic market contracts.

• The effects in these situations are short-lived, and then when local market activity increases, managements who are not committed to doing business internationally frequently scale back or stop their operations in foreign markets.

Step 4/4

As stated, are the proactive and reactive factors for entering international markets.