Business Degree Certification Practice Test

Why do firms engage in international operations?

1. Cheap labor, cheap resources, and fair market opportunities

2. Competitive labor prices, cheap resources, and enormous market opportunities

3. Lax government regulation, low taxes, and few laws

4. Unsophisticated employees and eager learners

The correct answer is: Competitive labor prices, cheap resources, and enormous market opportunities

Firms engage in international operations for several compelling reasons, particularly highlighted in the correct choice. Competitive labor prices allow companies to reduce their operational costs significantly, which can enhance profit margins. Additionally, accessing cheap resources contributes to lowering overall production costs, making it more feasible for firms to offer competitive pricing or invest in other areas such as research and development. Furthermore, international operations open up enormous market opportunities. By expanding beyond domestic borders, firms can tap into new customer bases, diversify their markets, and increase sales volumes. This not only helps in spreading risk but also allows companies to achieve economies of scale through higher production levels. The other options present factors that are often not central to the main reasons firms choose to internationalize. While cheap labor and resources are important, the phrasing of the other options does not encapsulate the strategic focus on market opportunities and labor prices that drive international business expansion effectively. Hence, the correct answer captures the essence of why businesses seek to operate on a global scale more accurately.