Globalisation Business Essay 40 Marks

Topics: Globalization Pages: 5 (1757 words) Published: December 23, 2012
Globalisation creates more opportunities for UK businesses than threats. What extent do you agree with this statement? (40 marks) Globalisation is the growing trend towards worldwide markets in products, capital and labour which is unrestricted by barriers. The process of globalisation includes companies with a national focus looking to expand their markets abroad and develop bases overseas to become a multinational company. They can develop sources of inputs based on cost advantages of being in a wide variety of locations. Globalisation creates a number of opportunities and threats and a company will need to weigh up both sides in order to decide whether moving abroad will be beneficial to the business. Furthermore another issue is whether the company can overcome the threats by using certain strategies available and therefore eradiating the threats. One main benefit of a company globalising is that it can give more opportunities for selling goods or services to consumers. You are more likely to gain higher sales revenue due to the fact that the company’s customer base population will increase as you move into a larger new market. Moving into a new market will mean a business is more able to create a pan European or global brand identity, which leads to the company being well-established and well-known with consumers. As the company increase their sales and hopefully therefore profits, they will be able to grow and expand even further, which will lead to economies of scale and improved profitability. Companies such as McDonalds and Kraft foods have derived enormous benefits from this increased access in terms of rising revenues. Entering a new market which is not saturated can create lots of open opportunities. Examples of countries that can create these opportunities are normally classed as emerging economies. These are fast growing markets with rapidly rising consumer incomes. One of the largest retailers in the world, Tesco, initial experiences with globalizing to emerging markets was not successful. However, subsequently Tesco started localizing its stores and products according to the international markets. It entered South Korea in the year 1999 by forming a joint venture with a well-established local retailer Samsung. The joint venture helped Tesco acquire in-depth knowledge of the market and also helped it acquire the best store locations. Tesco began operating in the country under the well-established ‘Home Plus’ banner. Tesco localized its stores according to the preferences of the Korean consumers and brought in some of its best practices into the country. The company’s operations grew rapidly in South Korea as more sales and profits were made and it now has emerged to be the second largest retailer in the country. A second benefit of globalisation is that in emerging markets there is more widely available source of cheap labour and cheap inputs and raw materials. This can create a cost competitive advantage as a company can cut cuts and reduce unit price to make more profit. One example of a country in an emerging market is China. Mothercare signed a joint venture with DF Brands and opened stores in China. Through this joint partnership, the threats of globalization are reduced, as the risks will be split and solved between them. By Mothercare expanding through China, they will benefit from the reduction in cost. As the labour costs will be lower due to the lower wage rate, cost of production, e.g. raw material and the rent of properties will be lower as well. Furthermore they are able to produce a lot more at a cheaper cost. This can also create economies of scale. Fixed costs, such as research and development can be spread across larger volumes of production. One main economy of scale many businesses experience is specialisation. This...
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