There are various factors that act as barriers to internationalization. Some of these include a lack of knowledge by the business operators. Due to business operators not having adequate knowledge of the available markets in foreign countries, it becomes hard for them to venture into the international market. Organizations also lack staff with adequate knowledge in exportation. For example, most non-oil products exporting companies in Saudi Arabia fail to venture into the international market due to a lack of knowledge and experience in internationalization.
The lack of financial resources acts as another barrier to internationalization. It becomes difficult for most organizations to raise the required amount of money to start exporting their products. For instance, most of the businesses in Cyprus have not been able to venture into the international market due to their inability to obtain the required funds. International barriers are another factor that hinders internationalization.
Different countries have come up with varied regulations that organizations have to abide by for them to be given the green light to operate in their markets. The lack of organizations to be able to comply with these regulations leads to them being rocked out of the market. For instance, the United States came up with varied regulations in a bid to protect its domestic industries from competition. These regulations hindered foreign companies from venturing into USA’s market.
Some of the risks associated with internationalization include fluctuation in foreign exchange, political risks, and competition. At times, exchange rates may go low, leading to an organization not making any profit. For instance, Minnesota Mining and Manufacturing Company (3M) from the United States has, in most cases, suffered losses when the exchange rate fluctuates. At times political instability may turn out to be detrimental to international business organizations. This has been the reason why most international business organizations have failed to extend their operations to African countries. For instance, the Coca-Cola Company recorded a lot of losses during the political havoc that rocked Kenya in the year 2008.
Another risk associated with internationalization is competition. Organizations have been found to quit certain international markets due to stiff competition. Organizations with sufficient capital and a strong brand name dominate the market, making it hard for others to make substantial sales. The big companies establish themselves in a market originally occupied by smaller companies taking all their customers, thus making the smaller companies lack the market grip. This has been the case in the banking industry, where big banks such as Barclays lead to minor banks failing to venture into the international market.