The Advantages of Global Expansion Essay

Recent interviews of top supranational executives by the Myrddin Group in San Antonio have revealed they thought they could create nourish by transferring their patronage model and Ameri preempt style of harvest-time and merchandise to foreign food marketplaces. galore(postnominal) initially treated foreign markets much interchangeable the United States but soon found that this was not the correct approach. Many Ameri house products drew big yawns in Europe and Asia where most of the productive products were local. These national differences in customer tastes and preferences require a change in approach to merchandising. This requires a redefining of the actions managers can take to compete more efficaciously as an international business. The Advantages of Global ExpansionExpanding orbiculately allows a business to increase its profitability in ways not available to stringently domestic businesses. Companies that operate internationally be able to Expand the market for their product offerings by selling those products in international markets. Achieve situation economies of scale by distributing order creation activities around the globe to where they can be performed most efficiently. Earn a higher rate of reaping by leveraging any expertise developed in afield trading operations and shifting it to other parts of the companys global operations. While this sounds simple, it is constrained by the convey to customize products, marketing, and business come to the foreline to each of the different national locations. Most multinationals started out by pickings their goods or services and selling them internationally. Companies like Toyota for example found out that the small vehicles that were usual in Japan were not as popular in the US as the larger sized autos. They adjusted their product strategy to the US market and enjoyed the ensuing growth in market sh ar and profitability. McDonalds adapted likewise in India where cattle are revere d and the typical Big Mac was doomed as a product. Location EconomiesThe same principle holds true for location economies. Due to differences in feature costs, certain countries have a comparative advantage in theproduction of certain products. As an example, Japan might excel in the production of automobiles, the United States in the production of computer software, and China in the production of clothing. For a company attempting to prosper in a global market this might mean that it would benefit by basing every value creation activity it needs in the country where economic, political, and cost considerations are most conducive for that activity. For example, if the most productive labor force for convention operations is in China then any assembly operations should be there. If the best marketers are in the US then the marketing plans should be developed in the US. Companies that use a strategy much(prenominal) as this can realize these location economies and in doing so they c an lower the costs of value creation and arrive at a low-cost position.AdvantagesFaster growth Firms that have operate internationally go to develop at a much quicker pace than those in operation(p)(a) locally Access to cheaper inputs Operating internationally whitethorn enable the unswerving to source raw materials or labor at lower prices increase attribute and efficiency Exposure to foreign competition will progress change magnitude efficiency. Doing business in the international market allows firms to improve the quality of their product in order to gain a competitive advantage. refreshed market opportunities International business presents firms with new market opportunities. These new markets impart more opportunities for expansion, growth, and income. A bigger market means more customers, increased revenue, a larger profit margin, and allows the business to realize economies of scale. Diversification As the firm diversifies its market, it becomes less vulnerable to ch anges in local demand. This reduces wild swings in a companys sales and profits. DisadvantagesIncreased costs at that place are increased operating expenses including the establishment of facilities abroad, the hiring of additional staff, traveling of personnel, narrow transport networks, information and communication technology. Foreign regulations and standards The firm may need to conform to new standards. This may require changes such as in the production process, inputs and packaging, incurring additional costs.Delays in payments International trade may cause delays in payments, adversely affecting the firms capital flow. Complex organizational structure International business usually requires changes to the firms operating structure. Training/retraining of management may be necessary to ease restructuring.