Why domestic firms expand into global markets

Definition of the key terms

Local firms are organizations that are geographically limited to operating in one country. On the contrary, global corporations are those that have transcended the geographical barriers: they have operations in multiple states. The global market could be the answer to a firm before it considers winding up after it has exhausted the local market. Several important reasons will undoubtedly force a firm to expand into the global market.

Summary

The article explains the major reasons behind domestic firms expanding into global markets with a particular emphasis on enterprises in Brazil. The writer explains four reasons that influence firms going global and one effect of such a move on the Brazil corporations. Foremost, the article postulates that global expansion has become an essential business strategy in the nation (Wheatley, 2010). It enables a company to develop beyond the limits of its local operations. Expanding worldwide is also depicted as a vital defense against acquisitions by foreign firms. Investors seeking to have a local footing often dread opening companies and instead prefer acquiring established local corporations. Secondly, expanding globally enables a firm to look for and acquire new technology because developed countries tend to buy new technology before the developing ones do. As such, venturing into the industrialized states enables enterprises to obtain the technology before it arrives in their home countries. Lastly, the article explains that expanding to the global markets allows a firm to enhance its closeness to its customers. These clients could be other entities or the high-end individual consumers. Being closer to ones customers enables one to monitor their perceptions and even get direct feedback, which can be integrated to make the product or service better.

Discussion

Growing into the global market is a great feat that promises multiple rewards for an organization if appropriately executed. Firms have attained their next level of growth by venturing into the global markets. The move introduces them to new customers, technologies, and competitors. Although the latter may seem like a disadvantage, it can also be merit if the competitor pushes an enterprise to innovation and efficiency.

 

References

Wheatley, J. (2010, November 15). Globalisation: Companies must expand to prosper. Retrieved from https://www.ft.com/content/a9288530-edfe-11df-8616-00144feab49a

Considering global growth? Try domestic expansion first. (2017, February 01). Washington Post. Retrieved from https://www.washingtonpost.com/sf/brand-connect/wp/enterprise/considering-global-growth-try-domestic-expansion-first/?noredirect=on

This article, published in the Washington Post, advises firms to first exhaust avenues and modes of local growth before considering expansion to the global market. The article also highlights certain pertinent questions that ought to be addressed before undertaking the growth process. An organization should be able to answer two questions. These are, should you grow? What kind of growth does your company need? Lastly, the firm should be able to strategically decide whether to partner to facilitate growth or go at it alone (“Considering global growth? Try domestic expansion first,” n.d.).

Hope, K. (2015, June 23). The challenges of going global. BBC News. Retrieved from https://www.bbc.com/news/business-33224596

This article goes beyond the advantages and reasons for expanding into global markets to articulate the challenges to be expected. The first hurdle is harsh competition since the global markets not only comprises of many firms that produce similar products and services but also introduces a firm to highly effective and efficient businesses. The firm has to adapt to survive in the harsh environment. For example, where competitors are using enhanced technologies and investing heavily in innovations and research, an organization should strive to achieve the same. Secondly, a company is introduced to new rules and regulations that have stringent labor laws, such as those requiring the entity to hire locally (Hope, 2015). This means the firm will have to teach the locals how to work per their requirements and hire hem even though it already has workers. Lastly, the firm has to flourish since failing in the attempt to expand globally may send a negative signal to customers.