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Sunday 22 April 2012

Q.1 What is globalization? What are its benefits? How does globalization help in international business? Give some instances


Globalisation
Globalisation is a process where businesses are dealt in markets around the world, apart from the local and national markets. According to business terminologies, globalisation is defined as ‘the worldwide trend of businesses expanding beyond their domestic boundaries’. It is advantageous for the economy of countries because it promotes prosperity in the countries that embrace globalisation. In this section, we will understand globalisation, its benefits and challenges.
Most of us assume that international and global business are the same and that any company that deals with another country for its business is an international or global company. In fact, there is a considerable difference between the two terms.
International companies – Companies that deal with foreign companies for their business are considered as international companies. They can be exporters or importers who may not have any investments in any other country, apart from their home country.
Global companies – Companies, which invest in other countries for business and also operate from other countries, are considered as global companies. They have multiple manufacturing plants across the globe, catering to multiple markets.
The transformation of a company from domestic to international is by entering just one market or a few selected foreign markets as an exporter or importer. Competing on a truly global scale comes later, after the company has established operations in several countries across continents and is racing against rivals for global market leadership. Thus, there is a meaningful distinction between a company that operates in few selected foreign countries and a company that operates and markets its products across several countries and continents with manufacturing capabilities in several of these countries.
Companies can also be differentiated by the kind of competitive strategy they adopt while dealing internationally. Multinational strategy and global competitive strategy are the two types of competitive strategy.

· Multinational strategy – Companies adopt this strategy when each country’s market needs to be treated as self contained. It can be for the following reasons:
° Customers from different countries have different preferences and expectations about a product or a service.
° Competition in each national market is essentially independent of competition in other national markets, and the set of competitors also differ from country to country.
° A company’s reputation, customer base, and competitive position in one nation have little or no bearing on its ability to successfully compete in another nation.
Some of the industry examples for multinational competition include beer, life insurance, and food products.

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