Globalexpansion occurs when a company wants to do market mixing on thebasis of the potential they have to expand outside. The business atthe international market is great, and there are lots of returns.Moreover, despite the business being booming, international businessgives a company a great chance to raise their income if theirmarketing strategy at the international level is good. When a Companywants to venture into the international market, it should also beaware that the obstacles are many and should be ready to face them. Many factors ought to be considered by companies before they venturein international business. These factors are discussed in this paperin proceeding paragraphs.
COSTCOis a Company that deals with a wide range of merchandise on wholesalewhich ranges from appliances, electronics, furniture, computers,outdoor living, and jewelry. For a company to be in a position ofexpanding globally, the team of managers in place needs to bereshuffled to give room for a wider range of ideas. The management ofa global workforce ought to develop new skills for the team for themto be in a position to tackle a new market. For instance,communication is very vital for a company that is getting into theglobal markets, therefore the team of management will have to havesuch skills. One of the major challenges many companies face whenentering the global market is that of lack of management of funds atthe initial levels. Therefore, there is need to have a propermanagement team to ensure that all the funds that are invested intothe company are not wasted off. Hence, financial management is one ofthe skills that the team of management ought to have in order to havesmooth transitions from just a regional company to a global one. Ateam of management ought to be equipped with strategies usuallyreferred to as the global strategies which help them in tackling theglobal market. The stronger the management team, the smoother thetransitions to the global market (Terpstraand Sarathy, 2012).
Factorsto Consider when Entering the Global Market
TheCOSTCO Company management has the responsibility of doing a thoroughresearch on all the laws that govern the land they want to venturein. Such taxes may include import restrictions, tax laws, customslaws, and company organization. The management is also supposed tohave information on immigration, labor and customs law to avoidgetting to the wrong side of the government. It is impossible to dobusiness in a country without adhering to the law. Hence, for thesmooth running of a company, knowing the law is key (Terpstraand Sarathy, 2012).
Accordingto Terpstraand Sarathy (2012), manygovernments are always quite receptive when a foreign governmentwants to invest or expand in a foreign land. There are severalfactors that are looked at before permits are given. These factorsmainly include the reputation of a country and the shortcomings ofthe currency repatriation. The laws that are against foreigninvestors are put in place to give more opportunity to the localinvestors. There are countries which affect the ability of otherforeigners doing business in them due to the laws that are in place.For instance, in Thailand, there is a rule that prohibits foreignpeople from owning more than 49% of a business in their country.Therefore in order to do business there, one has to have a partnerfrom the country who owns 51% of the shares in that business. Inother countries, they put exuberant taxes on foreign companies toensure that the profit margin is lower hence making the company havemuch fewer benefits.
Abilityto Obtain New Financial Sources
Gettinginto the global market will defiantly cost the company a lot in termsof finances. The company defiantly has to have a plan to run thesetransitions. In most cases, due to the financial strain, the companyought to have a partner who is an inhabitant of the country they wantto invest in this is safer in two ways one because it may help ingetting the permits and legal documents and also for the financialboost. On the other hand, if at all a company does not want to engagewith a partner, the other option would be to get financing from alocal bank in the country they want to invest in. This could help inlegal proceedings of the company as it enhances trust. The methodused by the company will wholly depend on the management team andtheir strategy. On the other hand, what determines the ability ofbanks or partners to offer to do business with depends on the percapita income that the company earns every year. Nobody would want todo business with a company that is not doing well. Hence, performanceis vital (Terpstraand Sarathy, 201.
Accordingto Terpstraand Sarathy (2012),Whilecoming with a business plan, one of the vital considerations isdemographics this includes the nature of population where thebusiness is going to be set. This may include information of thegeographic area characteristic, gender, income of the people,educational level, and age. Demographics enable the aspirant to knowhow well or how badly a business is likely to thrive. The demographicinformation is available in the census bureau of every country. Demographic helps in avoiding mistakes that may be very costly forthe company. It helps a prospecting company to know how ready themarket is to avoid flopping. Marketing ought to be quite strategic
Everycompany protects its citizens from the competition of foreignersthrough placing laws that protect local business. Bearing this inmind, the board of managers ought to be aware of the resistance thecompany may face while venturing in the global market. All customershave a preference when it comes to products and hence if at allclients have your commodities as a preference the company is a muchbetter place. Considering the supply and demand ratio of thecommodities being produced tells a lot about the competition thatexists. Competition on its self is affected by issues ranging frompolitical factors, internal and external factors, customerspreferences as well as cultural aspects. Competition is usuallyhealthy in the sense that it enables the company to have the urge toimprove products to fit the taste of the taste and preferences of thecustomers. However, there also exists unhealthy competition in thesense that the company ability to penetrate and do well in a certainmarket relies on the political system of the country. In this case,this becomes a shortcoming, and the company is not able to do well.
Sustainabilityrefers to the ability of a company to be able to survive now andserve its purpose and in the future also. Unfortunately, the lifespanof many companies is short lived in the global markets. This dependsentirely on how the management team is able to deal with the risksinvolved with the business. The sustainability span of COSTCO Companyis put on stake by the ability to handle the risks that exist outthere. There are many ways to ensure sustainability of business inthe global market. One the best ways of achieving sustainability aremaking partnerships with the inhabitants of the country the companyis doing in. Partnerships give the company a soft landing in thesense that they neutralize risks that could otherwise be experienced(Terpstraand Sarathy, 2012).
Oneof the risks could be political instability. Sometimes a countrycould have so much potential business wise but then, a sudden andabrupt war starts, and it costs the company. Another very tight riskis competition in the market. Sometimes the risk of competition ishidden until when it is too late. Sometimes in other markets, itproves to be completely impossible to penetrate the market. Finally,there will always be cultural differences between the foreign companyand the people of the country. Such differences may lead reduce thecompany`s ability to make a profit well due to resistance. It ishighly recommended that before expanding a business globally,thorough research should be done to lower the risks of the adventureflopping. However even though, some risks may be out of control ofthe management of the company, it is important to understand the riskthat is likely to be faced. At the initial steps, the company isadvised to do a background check as well as risk assessment on therisks that are likely to happen.
Terpstra,V., Foley, J., & Sarathy, R. (2012). Internationalmarketing.Naper Press.