Question

What are the benefits of an organization entering global production? What are the disadvantages? Can you provide an example of why a business would not want to pursue global production?

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Answer 1

Below are the benefits for an organisation who is entering globally

1. New Revenue Potential- You gain access to a much bigger customer base by taking your company globally. If your product or service is a success, even if you have saturated your markets domestically, you can enjoy enhanced revenue from these fresh clients. Globalization could be precisely the life shot that your business wants to bring to fresh heights with its profits.

2. Greater Access to Talent- Another great advantage of taking your worldwide company is that you have access to a fresh pool of prospective staff with distinctive abilities and attitudes. You may even discover that these prospective hires have hard-to-find abilities in your home nation, which provides you an advantage over other organisations in your sector that have not yet gone global.

3. Exposure to Foreign Investment Opportunities- As many businesses already understand, foreign investment can be highly useful to your company. That may be why foreign investment in 1997 was up to seven times as high as it was in the 1970s. You can learn more readily about these investment possibilities and how useful they can be to your business when you go global.

4. Improving Your Company’s Reputation- Businesses that are able to go global effectively and market their offers to a completely distinct population will enjoy the prestige of calling themselves an international company. It's not an simple feat to achieve, so prospects and prospective business associates will immediately believe more about your business when they realize you have an global presence.

Disadvantages for entering global production are:

1. Cultural Barriers- Cultural obstacles are one of the issues that many companies face when they go global. In one nation, what works well may not necessarily sell well in another. If you don't think you're growing into the country's culture, it might backfire. Some nations may offend your marketing attempts or your products. Companies are required to undertake market research before they enter another nation.

2. Regulations- You may run into regulatory problems in some instances. Countries frequently participate in free trade agreements that make selling to other states easier for businesses. Other nations make moving into their land hard for vendors. Throughout the process, you may have to pay exceptionally elevated tariffs or taxes, which may disadvantage your product. Companies will have to assess whether it is worth the trouble of shifting to some nations.

3. Product Customization- You may find it necessary to customize your products when you sell to another nation. For instance, you may need labels written in other languages on your products. This can be hard if you have a restricted budget. Customization of the product costs cash and requires extra time to execute it. If you have a worldwide brand, you may not need to customize anything, but this can be difficult to accomplish without a adequate quantity of advertising.

Business would not want to pursue global production due to the following:

Globalization promises significant benefits such as fresh development and scale. It's beautifully paid off for some businesses. But worldwide mania has blinded many companies to a difficult reality as well: worldwide strategies are difficult to implement devilishly.

Some of the remains of these unfortunate ones have littered the countryside. Specific painful instances are DaimlerChrysler and ABN Amro— dismembered and acquired by activist shareholders.

The global race can lead you to overestimate the size of the prize.Companies often lack the skills needed to unlock the coffer holding the prize. The full costs of going global can dwarf even a sizable prize.

After deregulation, formerly state-owned sectors (telecommunications, utilities) globalized to stimulate development and escape heavy domestic competition. They suppose that to attain cross-border economies, they can use their current competencies in fresh markets. But, for instance, optimizing electricity flows over uncoordinated grids has been hard for utilities. Many service companies (retail, insurance) are going global to produce growth beyond domestic markets that are threatened by international competitors. Their strategies depend on individuals or processes being coordinated— no simple feat. For example, Wal-Mart has struggled to get his partner companies and staff overseas to embrace his techniques of working.