What benefits to firms derive by entering into international business ?

1. Prospects for higher profits : International business could be more profitable than the domestic business. When the domestic prices are lower, business firms can earn more profits by selling their products in countries where prices are high.

2. Increased capacity utilization : Many firms set up production capacities which are quite in excess of demand for their products in the domestic market. By planning overseas expansion and procuring orders from the foreign customers, they can think of making use of their surplus production capacities and also improving profitability of their operations. Production on a larger scale often leads to economies of scale, which in turn lowers production cost and improves per unit profit margin.

3. Prospectus for growth : Business firms find it quite frustrating when demand for their products starts saturating in the domestic market. Such firms can considerably improve prospects of their growth by plunging into overseas markets. This is precisely what has prompted many of the multinationals from the developed countries to make an entry into markets of the developing countries. While demand in their home countries has got almost saturated, they found their products were in fancy in the developing countries and demand was picking up quite fast there.

4. Intense competition in domestic market : When competition in the domestic market is very intense, internationalization seems to be the only way to achieve significant growth. Highly competitive domestic market drives many companies to go international in search of markets for their products. International business thus acts as a catalyst of growth for firms facing tough market conditions on the domestic turf.

5. Improve business vision : The growth of international business of many companies is essentially a part of their business policies or strategic management. The vision to become international comes form the urge to grow, the need to become more competitive, the need to diversify and to gain strategic advantages of internationalization.