Question

An alternative to a strategic alliance is locating abroad. Describe the advantages and drawbacks of this global strategy.

Answer 1

Strategic Alliance- It is an alliance of two or more companies to achieve their objectives by using each other's resources. Entities remain independent in strategic alliance.

Companies want to go global and operate internationally, it has following advantages and drawbacks-

Advantage of the global strategy- Are as following:

1. Companies that go global achieve growth in the business with the help of expansion, they also achieve higher revenues and profits.
2. Companies diversify the risk by operating globally, thy invest into different projects in national as well as international market that diversify their portfolio and risk.

Drawbacks of the global strategy- Are as following:

1. Companies face issues as they operate in foreign culture, foreign customers do not adopt them easily, it takes much time to settle the business in abroad.
2. Companies may face foreign exchange and interest rate risk while operating globally.
3. Companies have to pay taxes at different level, i.e. local level, state level, central level, excise etc.