In many cases, businesses have to determine whether they should expand domestically or globally. This question is extremely relevant to growing companies that want to improve their financial performance and increase their share in new markets. This paper is aimed at discussing the advantages and disadvantages of global and domestic expansion.
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In this case, one should focus on the size of an organization, the degree of an organization, and other factors that are important for decision-makers. First of all, organizations decide to operate at an international level when local market become very saturated and it is difficult for a company to improve its profitability because of intense competition (Hill & Jones, 2009, p. 252).
This is why the senior managers try to seek new clients in other countries. The main advantage of this strategy is that it enables a company to increase their revenues, especially if their brand is familiar to clients (Chon, 2012, p. 156). It should be noted that businesses choose to work in countries with growing populations, and they expect to attract a great number of clients within a relatively short time (Pearl, 2001, p. 102).
These are the main benefits that a businesses can derive from global expansion. These goals cannot be achieved if an organization decides to stay only at a domestic level. As it has been said before, the intensity of competition can pose significant for businesses. Furthermore, their target audience will be limited only to one country. These are the main factors that should be considered people who take strategic decisions in organizations.
Global expansion has several drawbacks in comparison domestic approach. It should be noted that an international company may have to operate in countries with different languages or cultures. This is why they may have to adjust their commercials so that they could appeal to new clients (Pride & Ferell, 2011, p. 250). This is one of challenges that businesses should not overlook when developing their strategies.
When operating in a domestic market, they will not encounter such difficulties. It should be taken into consideration that customers can feel some affiliation to local producers, and they can give preference to a foreign company only if it offers superior products. Additionally, business administrators should bear in mind that their organizations may have to work in countries with different legislation and their corporate rights may not be properly protected by a foreign state (Segal-Horn & Faulkner, 2010, p. 2).
This is another limitation that should not be disregarded. Additionally, it is important to remember about the size of an organization. As a rule, start-up companies have fewer opportunities to enter global markets in part because their brand is not recognized, especially by people living in a foreign country. In contrast, larger corporations that have already established their positions in a domestic market can benefit from global expansion.
Overall, the decision to expand globally can have profound implications for a business. Certainly, this strategy can help businesses increase their revenues and gain the loyalty of new clients. However, this step can be ruinous for a company if its products do not enjoy sufficient demand among clients. Senior managers should consider such criteria as the degree of market saturation, the popularity of a brand, the intensity of completion, and the situation in a foreign country.
Chon, K. (2012). The International Hospitality Business: Management and Operations. London: Routledge.
Hill, C., & Jones, G. (2009). Strategic Management Theory: An Integrated Approach. New York: Cengage Learning.
Pearl, M. (2011). Grow Globally: Opportunities for Your Middle-Market Company. Around the World. New York: John Wiley & Sons.
Pride, W., & Ferrell, O. (2011). Marketing. London: Cengage Learning.
Segal-Horn, S., & Faulkner, D. (2010). Understanding Global Strategy. Boston: Cengage Learning EMEA.