In: Economics
Globalisation refers to an intensification of cross-border interactions and interdependence between nations. Globalization has brought with it both fierce competition and uniformity in the market and it is vital that businesses to develop strategies that improve compliance with prevailing market trends. The drivers of globalization that forces an oraganisation to enter the global trade are as follows:
1. New revenue streams
Entering global production, and selling the products and services globally can open up new revenue streams for an organization.
2. Improving scales:
Global production results in improving economies of scale. Launching a product globally means more markets in which it can be sold, thus generating more money and neutralising risk. Economies of scale can save organisation money in terms of labour, packaging and marketing material costs, too
3. Learning to compete:
It helps organisation in learning how to compete with international companies to sell that product, thus leading to innovations and research.
4. Life cycle:
Global production is useful to product life cycle also. An organisation can phase its release of products; introducing older products into newer markets which are less developed and saving the launch of a new product's which are the most recent version for well-developed markets.
The globalisation is opposed due to the following reasons:
1. New Regulations:
Establishing organisation trademark or patent in each country is different and important to protecting the brand. Moreover, the trademark laws also differ among countries. To start global production, an organisation need to comply with each country's rules regarding products and services imported from other countries.
2. Different Cultures
Each country has different cultures, and reaching these can require significant staff time, energy and money. At times, the research cost of each market and plan carefully exceed the expenses before deciding to launch in each country.
3. Operational Risk:
Operational Risk is involved in global production. If employment laws or corporation laws change in the country where an organisation manufactures its global product, consequently it could ruin everything.
4. Macroeconomic Risk
One-size-fits-all approach does not work in all markets in all the countries, thus if an organisation research and estimates does not fall at its place, the mistake could cost it a fortune.