Reardon’s Hotels is group of hotel chain located in UK. It’s a family run business with centralized management and decision making. The firm acquired hotel in Spain and wanted to expand their business internationally. There are several reasons because of which a firm chooses to internationalize. They are discussed below.
Access to international market: Organizations are always looking for opportunities to expand to new markets and cater to new population. Access to new market helps organization grow revenue and increase share in market. It can lead to the competitive advantages (Ernst and Kim, 2002).
Access to factors of production: Lower cost of production is an important reason. Firms save resources and reduce costs by expanding to areas where cost is cheap. In Spain, the salary of manager is less than that of manager in UK. Firms are always looking for lower costs.
Competitor activity: Firms expand as a result of competitor activity. Because of internationalization of market, it is very difficult for the firm to operate in a competitor free zone.
Free trade and liberalized trade laws: Trade barriers between countries have reduced significantly. Trade agreements between nations are also increasing. Also, organizations such as WTO have led to increase in international trade. Many nations have become liberalized in terms of international investment (Schuler, Jackson and Tarique, 2011).
Global communication: Due to rapid changes in technology, global communication has become easier, cheaper, quicker and more varied. As a result, people are becoming more and more aware of the events happening around the world.
Knowledge sharing and education: As firms are becoming globalized, there is increase in sharing of management philosophies and methodology. Information about technology, services and products is also shared. Also improvement in education has led firms to produce world class products and services. English language is becoming global language and is helping in communication across the world (Hustad, 2004).
There are several forms of international organisations. International organization is best suited for Reardon’s Hotels. Global organisations are those firms that are based primarily in the home country but also have significant operations in other country (Novicevic and Harvey, 2001). They offer similar service in both home market as well overseas markets. Such organizations are controlled by headquarters in the home country (Marschan-Piekkari, Welch and Welch, 1999). However, the overseas organizations can take certain decisions independently. Significant decision making is done by headquarters. They are high on global efficiency but low on local responsiveness.
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