Evaulate overseas expansion

Essay by will1628 May 2006

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These days many organisations are considering overseas expansion. New Zealand has a strongly trade-oriented economy and well-developed infrastructures to support economic activity. The well-developed basis has opened up immense opportunities for exporting business. Our company is performing successfully in recent years and we are planning to export overseas. Exporting is not the only way to grow our business. Moreover, it offers a larger market with greater economies of scale. Business will be gained from the overseas expansion. Not only the international competition encourages businesses to become more innovative, but it can also generate growth in production facilities, research, infrastructure and design. Obviously, before giving serious thought to off-shore expansion, the company needs to undertake substantial initial planning and research. Expanding further on the planning overview, it is no doubt that there are many issues to consider. Company may experience different problems in the process of overseas expansion, such as political risk, trade barriers and currency fluctuation etc.

Should the company expand overseas and start the export business? This essay will discuss the risk factors of overseas expansion through three perspectives: economic environment, political environment and social environment. Thus, a decision will be made after considering those risk factors.

To start with, the economic environment is one of the major factors which affect the overseas expansion. This part of the environment includes such factors as currency fluctuation, economic condition and infrastructure. It is clear that any companies that sell abroad must be concerned with the exchange rate, since the competitiveness of the company can be greatly influenced by the currency fluctuations(Thomas,2001).When the price of New Zealand dollar rises, company becomes less competitive. The foreign currency price of the export products appreciates, and it will lead to a loss of share in foreign markets. Any sharp appreciation of...