Going Global: Why?

9 important questions on Going Global: Why?

What are Advantages of Going Global?

- Gain access to Larger market
- Gain access to Low-Cost input factors
- Develop New Competencies

Advantages of Going Global: Gain access to Larger market

oEconomies of scale and scope can be reaped by participating in much larger market; domestic markets are often too small -- companies become MNE´s

Advantages of Going Global: Gain access to low-cost input factor

o Low cost materials such as lumber, iron, ore, oil, and coal which was key during Globalization 2.0


Globalization 3.0 -- cheap labor
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Advantages of Going Global: Develop new competencies

o   Attractive to firms which use the differentiation strategy;  Location Economies

What are Location Economies?

Benefits from locating value chain activities in optimal geographies for a specific activity, wherever that may be.

What are Disadvantages of Going Global?

- Liability of foreignness
- Loss of reputation
- Loss of intellectual property

Disadvantages Going Global: Liability of Foreignness

oAdditional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances

Disadvantages Going Global: Loss of intellectual property

o   Companies can lose their intellectual property to other foreign host firms.

Disadvantages Going Global: Loss of reputation

oReputation can have many dimensions (innovation, customer service, brand reputation); globalization can lead to an unintended loss of that reputation

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