Question : Explain how firms
can increase revenue and profit by expanding globally.
Through globalization firms
can expand globally. When the goods and services of a firm moves
from its domestic country to other countries then the firm can be
considered to be expanded globally. Thus when firms are expanded
globally they can increase their revenue and rate of profit. The
firms that are operating globally have following
benefits,
- They are able to sell their
domestic products in international markets and thus can expand
their market globally. This will help to increase the growth rate
of the firm as it sells products produced at domestic country at
both domestic and international market. It will help the firm to
reach more customers and there by increasing the
sale.
- They will be having cost
advantages as a result of large scale production. Thus they can
have economies of scale which will contribute to increase
profits.
- Valuable skills in foreign
operations can be leveraged in order to warn greater returns to the
firm.
- There will be competitive
advantage. When the opponent of a firm is not operating often in an
expanded market, then the firm can take a first mover advantage
that will help the firm to create a powerful and strong awareness
among the customers in that market about the brand before the
firm's opponent enter the market. This will have positive impact on
the demand for firm's product and hence its sales and revenue will
increase.