Which of the following is a reason why companies decide to enter foreign markets?

• A. To reduce their production costs by increasing tariffs
• B. To avoid economies of scale
• C. To increase domestic competition
• D. To access new customers and expand their market base

Answer: (D)

Verified step by step guidance

1. Understand the motivation behind companies entering foreign markets, which typically involves strategic business goals rather than increasing costs or avoiding efficiencies.
2. Recognize that increasing tariffs would generally raise production costs, so companies do not enter foreign markets to increase tariffs but rather to avoid them or benefit from lower costs.
3. Recall that economies of scale refer to cost advantages gained by increasing production; companies usually seek to achieve, not avoid, economies of scale when expanding.
4. Consider that companies entering foreign markets aim to access new customers and expand their market base, which helps increase sales and profits.
5. Conclude that the primary reason companies enter foreign markets is to access new customers and expand their market base, rather than to increase domestic competition or avoid economies of scale.