Is An International Firm Just A Domestic Firm Also Doing Business Across National Borders?

Submitted By loumckerrow
Words: 2142
Pages: 9
Open Document
Is an international firm just a domestic firm also doing business across national borders? Discuss and fully support your arguments.

Friedman (2005) argues, “The world is flat!” Friedman’s research highlighted the fact that the barriers, which limited trading across the world, had been demolished. He further argued that with the introduction of new technology and the advancement in transportation meant that trading internationally had become commonplace. As a result organisations now face competition from across the globe. The motivations behind an organisation’s expansion can now be realized on a larger, global scale.

Organisations consider international and global trade for a number of reasons. An organisation may have to respond to a sudden increase in foreign competition resulting in a “follow the competitor” strategy. Alternatively an organisation may choose to set up in the native country of a competitor in order to take business away from them. Longer-term strategic direction of an organisation’s international trade could be focused towards reducing costs by looking at foreign direct investment or vertical expansion whilst overcoming border tariffs. It has been suggested that even if a domestic firm maintained it’s native position whilst exporting goods to the international market they would find that this comes with a higher variable cost and therefore it would make sense for some kind of integration in to the international market to maximize it’s potential (Oberhofer and Pffafermayr, 2012).

The motivation to ‘trade’ in any environment is the same for both domestic firms as well as international firms. However there are inherent differences between the two in both their resources, structure and influence in being able to trade within an international context. In this essay we will attempt to identify the key terminology whilst looking at structure and differences between the two.

International trade has considerably changed and developed from the mercantilism theory of trade. The Mercantilism theory of trade proposed to maximize the use of domestic resources whilst limiting that of foreign ownership. However, the simplistic notion of a purely domestic firm, operating within its national boundary, and maintaining no interaction with other countries is unusual. With Friedman’s Shrinking Globe idea (Friedman, 2005) with increasing global ability, even domestic “firms may face international issues, such as those related to their foreign business partners, corporate cultures or employees of foreign origin” (Burkert, Ivens & Shan 2011 p544).

The domestic firm is an organisation, which focuses on its “home” country. Akin to sheltered industries (Grant & Jordan, 2012) such as railroads, hairdressers and milk production, which remain locally dependent, they rarely develop their business over national borders. Remaining very much in their home market they conduct their business under fairly simplistic restrictions in terms of government and regulatory restriction. A domestic firm will maintain a degree of competitive advantage in that they are able to easily understand and recognize their competitors. As discussed earlier, it could be suggested, that a truly domestic firm no longer exists. Even hairdressers who remain sheltered in terms of scope, structure, customer demand and local competition are affected by the developments internationally supplier products and international trends. Influence of international suppliers combined with a growing demand for products from abroad can influence the domestic firm to trade. Grant and Jordan (2012) support this by arguing that the sheltered industries are shrinking and are beginning to succumb to the forces of internationalization.

An international firm is defined as “business that takes place across national borders” (Worthington & Britton, 2009, p 398). Buckley and Caisson also agree with this through their Internalization Theory (1976)
Show More

Related Documents: Is An International Firm Just A Domestic Firm Also Doing Business Across National Borders?

An Introduction to Intercultural Communication Essay

An Introduction to Intercultural Communication Intercultural communication is of importance to international businesses as it examines how people from different cultures, beliefs and religions come together to work and communicate with each other. Demands for intercultural communication skills are increasing as more and more businesses go global or international. They realize that there are barriers and limitations when entering a foreign territory. Without the help of intercultural communication…

Words 29173 - Pages 117

Managing Information Technology (7th Edition) Essay

CONTENTS: CASE STUDIES CASE STUDY 1 Midsouth Chamber of Commerce (A): The Role of the Operating Manager in Information Systems CASE STUDY I-1 IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform CASE STUDY I-2 VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier CASE STUDY I-3 The VoIP Adoption at Butler University CASE STUDY I-4 Supporting Mobile Health Clinics: The Children’s Health Fund of New York City CASE STUDY I-5…

Words 239873 - Pages 960

Sources of Ethics Essay

ETHICS: 6 1- Religion: 6 2- Genetic Inheritance: 8 3- Philosophical Systems: 8 4- Cultural Experience: 8 5- The Legal System: 9 6- Codes of Conduct: 9 2.0- EXPLANATION OF THE SOURCES OF ETHICS: 10 2.1- RELIGION: 10 Teaching business ethics 12 2.11- Impact Of Religiosity: 13 2.12- Ethics Of Islam: 14 Nature of Islamic Ethics 17 The Human-Environment Relationship: 20 The Sustainable Care of Nature: 22 The Practice of Islamic Environmental Ethics: 22 2.14-…

Words 20200 - Pages 81