Drivers of international trade
As the international environment is constantly changing due to today’s economic crisis, where are we going to be able to grow our businesses? You may need to grow your business internationally. At HSI, we have noticed that different companies have different reasons for growing their business and these are summarized below:
- Some companies require large capital investments in plants and machinery.
- Strong incentive to spread the costs of these fixed costs over a large number of units
B. Import / Outsourcing
Some companies, in response to consumer demands, attempt to offer goods at the lowest possible price, moving manufacturing overseas (such as in China or Mexico)
Strong incentive to lower production costs
- Companies follow their domestic competitors abroad to maintain their world-wide market share.
- Companies retaliate against foreign competitors entering their home market by going to these competitors’ home markets.
- Companies counter a competitor’s new product entry by offering a similar product, often produced abroad.
3. Market factors
- Consumers’ tastes and preferences have become increasingly uniform worldwide.
- Consumers have become increasingly knowledgeable about products and willing to try new foreign alternatives.
- Diffusion of information is universal
- Competition for products is worldwide: the Internet allows people to trade with one another.