Globalization means that many businesses must find a way to expand their territories and their market share. There are several different strategies that they use to accomplish this. Each of the strategies has advantages and disadvantages. However, it must be noted that the strategies and the suitability for various business environments changes based on the particular business, and the industry in which it operates. In general, the four most common business strategies used are outlined as follows.
The first strategy involves foreign direct investment. Using a strategy, the company either purchases another company in a country different from where their headquarters are based. The advantages of foreign direct investment are that they already have local staff who will know the demands of the region in which they live. The disadvantage is that some laws and regulations discourage foreign ownership or investment. In addition, tax structures can be prohibitive.
The second strategy is to open up a satellite company that will directly compete with local companies. The advantage to this is that it often has fewer barriers than foreign direct investment. However, it is often costly in companies that are already established in the home country often have an advantage. They are familiar with their market and understand their needs better than the satellite company.
The third strategy is to partner with another company in the country of interest. One of the most common ways to partner is to become a supplier for that company. This is often the easiest way to become involved in the global competitive market. This is less costly than the first two strategies, but it also has limited returns. It is risky because another company can easily come in and steal the market share.
The fourth strategy for global competition is to vicariously entering cut to competition through the Internet or other means. Communication advances allow companies to compete on a global basis. The Internet is a relatively level playing field in that competitive strategies are similar to brick-and-mortar companies. The strategy gives the company access to a wide market, but it may be added disadvantage in terms of brand identity due to the absence of a physical storefront.
The first strategy involves foreign direct investment. Using a strategy, the company either purchases another company in a country different from where their headquarters are based. The advantages of foreign direct investment are that they already have local staff who will know the demands of the region in which they live. The disadvantage is that some laws and regulations discourage foreign ownership or investment. In addition, tax structures can be prohibitive.
The second strategy is to open up a satellite company that will directly compete with local companies. The advantage to this is that it often has fewer barriers than foreign direct investment. However, it is often costly in companies that are already established in the home country often have an advantage. They are familiar with their market and understand their needs better than the satellite company.
The third strategy is to partner with another company in the country of interest. One of the most common ways to partner is to become a supplier for that company. This is often the easiest way to become involved in the global competitive market. This is less costly than the first two strategies, but it also has limited returns. It is risky because another company can easily come in and steal the market share.
The fourth strategy for global competition is to vicariously entering cut to competition through the Internet or other means. Communication advances allow companies to compete on a global basis. The Internet is a relatively level playing field in that competitive strategies are similar to brick-and-mortar companies. The strategy gives the company access to a wide market, but it may be added disadvantage in terms of brand identity due to the absence of a physical storefront.
