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Economies Global Businesses | Management Sample | LSE100

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Question

  • Explain why globalisation is not only an imperative for survival, but also an opportunity for future growth of domestic businesses.
  • What makes Economies for Global Businesses an attractive destination for global businesses? Discuss the risks involved in such countries.

Use examples and evidence to support your views. You may also consider your own business or the company you work for to discuss the above points. Note, even if an organisation is not directly involved in global business, it may still be influenced by suppliers/consumers up or down the value chain. A minimum of 12 referenced journal articles are required for this paper.

Solution

Introduction

Globalisation or internationalisation is the talk of the century. Companies worldwide are looking out for opportunities to adopt globalisation in their strategies to grow and expand. Globalisation is a phenomenon that has a lot of causes and effects related to it. In this essay, we will see why globalisation is important, why companies look at developing countries as attractive destinations to set up their business and the risks involved in doing business in these developing nations. The essay also explains why globalisation is essential not only for survival, but also for growth, both within the home country and abroad. Globalisation has made the world smaller than it was before as nations come closer to facilitate smooth flow of business. Over the years, many companies have gone global and expanded their operations to nations other than the place of origin. In the following paragraphs, we see how globalisation is closely linked to the growth and sustenance of any business.

The need for Globalisation

Globalisation is a necessity in today’s competitive world. (Martin S. Edwards, 2006)While business looks for growth and sustenance, they also look for bigger and better opportunities. There are multiple reasons why a company would choose to go global. Firstly, the costs incurred to any business are very well accounted for. (Rodrick D, 2001) For example, in countries like the United States of America, where the costs of production are extremely high, it may not always be feasible to set up more and more plants and stores. In such situations, the company looks for countries where the cost of production is relatively lower than the home country. (Anon., 2011) Many fashion brands in the US actually outsource their manufacturing to countries like China and Vietnam, where the cost of material and labour is relatively lower. Proximity to ports, regulations in the country and the socio-economic scenario are all deciding factors in the choice of country. These are all covered under the corporate strategy. Companies know how important it is to have a strategic fit between the business and the environment. It makes no sense to sell Snowmobiles in the Middle East and it is absolutely illogical to sell Air conditioners in Alaska. Products like fast moving consumer goods are always in demand worldwide. Similarly, when it comes to sales, it is always profitable to sell your goods in countries where the demand is high. Fashion brands like Zara, Marks & Spencers etc. sell their goods in India, China, United Arab

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Emirates and other countries because there is a huge market for the clothes in these nations. Profits of these brands have gone up because they have expanded and gone global. Globalisation is facilitated by various ways like licensing, franchising, joint ventures etc. Big brands like Starbucks are entering developing countries by forming strategic alliances with those nations. H&M and Marks & Spencers are seeing Asia as a huge market for their products and are making all efforts to begin their operations in the Asian countries by the end of the year 2015.

There are two ways to look at Globalisation. One is survival. As the days go by, competition is constantly increasing. Bigger brands overpower small brands. It becomes imperative for companies to maintain cash flows and show profits in their financials year after year. Failure to do so often results in being eaten up by the bigger fish. Companies benefit a great deal by expanding into global markets and gaining larger market share, thereby ensuring long-term survival. The second one is the future growth of business. As mentioned above, growth and expansion are two sides to the same coin. Companies gain competitive advantage and make attempts to sustain this competitive advantage by resorting to various corporate strategies. One of the corporate strategies is which country to operate in.    Many multinational banking institutions take the globalisation route in order to establish themselves as global and bigger brands. The products and services in each country should vary as per the local requirements and tastes.

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