Globalization effect

Published: 2020-04-27 20:14:29
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The list of companies that benefited and continue to benefit from adopting a global strategy and expanding internationally is rather long. In 2011, 54% of General Electric revenue was generated outside U.S. market. Ford received about 51% of its revenue from overseas sales, IBM 64%, Boeing 41%, Intel 85%, and McDonalds 66% (Newman, 2011).

Still, it is important to recognize that globalization creates not only opportunities for business but also significant threats, and there are downsides for the home country. When pursuing the global strategy, many companies tend to relocate their production to other countries, thus reducing job opportunities in their domestic country (Newman, 2011). There is also a threat that the customer expectations and management practices may differ across countries even though the industry seems to have global standards. Such industries are in fact glocal rather than global, and it would be hard for the company to operate in such environment (Alexander & Korine, 2008). In the case where the domestic markets are big enough, it may be even better for the company to stay domestic. For instance, since the U.S. market is much bigger, profits margins of Procter & Gamble in the U.S. are more than two times higher than its international profit margins (The fear factor, 2014).

The biggest threat of adopting the global strategy is that the company just would not have enough strength to pull it off. The coordination of international operations, integration of production and marketing systems require significant management skills. Moreover, the costs of process harmonization across global business units may in some occasions exceed the potential benefits from globalization (Alexander & Korine, 2008).

Nevertheless, I have been a proponent of globalization from the very beginning of this course and would definitely recommend my company to adopt the global strategy. The furniture industry is not glocal: consumer preferences may vary across countries, but not significantly. I believe that the companys products will find its customers in every country. Still, it is important to note that our company is going to make gradual expansion and for now will enter the market of only one country. In such way, it will be able to gain the necessary knowledge and expertise in running complex international business systems.

 

References

Alexander, M., & Korine, H. (2008). When you shouldn't go global. Harvard Business Review. Retrieved from https://hbr.org/2008/12/when-you-shouldnt-go-global

Backaler, J. (2014, May 6). 5 reasons why Chinese companies go global. Forbes. Retrieved from http://www.forbes.com/sites/joelbackaler/2014/05/06/5-reasons-why-chinese-companies-go-global/

Claessens, S., & Schmukler, S. (2008). IMF study tracks which firms go global. IMF Survey Magazine: IMF Research. Retrieved from https://www.imf.org/external/pubs/ft/survey/so/2008/RES041708A.htm

Gordin, A. (2011). Expanding internationally: Is it right for you? Wharton Blog Network. Retrieved from http://whartonmagazine.com/blogs/expanding-internationally-is-it-right-for-you/

Newman, R. (2011, June 30). Why U.S. companies aren't so American anymore. U.S. News Money. Retrieved September 13, 2015, from http://money.usnews.com/money/blogs/flowchart/2011/06/30/why-us-companies-arent-so-american-anymore

The fear factor. (2014, May 31). The Economist. Retrieved from http://www.economist.com/news/special-report/21602831-why-asian-firms-need-take-world-fear-factor

sheldon

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