4-5 page paper identifying, analyzing, and summarizing the opportunities and threats faced by businesses seeking to expand into global markets.

Opportunities and Threats of Global Expansion

Name of the student

ANSWER

Opportunities and Threats of Global Expansion

Global expansion strategies are formal and multi-level plans integrated among businesses to enter international or overseas markets, establish their growing presence, maximize their bottom-line, and increase their competitive advantage. The growth and success of businesses and companies are achieved through both local and foreign operations. Global expansion is a crucial strategic decision and growth strategy adopted by many large companies and businesses. The entry of businesses into the global market is faced with numerous challenges and opportunities that require effective and comprehensive supportive policies or strategies to maximize the opportunities’ attainment and full exploitation while minimizing the adverse effects of the threats. Successful businesses in the international sphere must comprehend the heterogeneous environments they plan to operate (Motohashi, 2015). The international marketplace and operating milieu provide opportunities and threats that form the basis of this paper. The paper discusses political considerations and legal compliance, cultural differences, and diverse economic milieus, as the primary sources of opportunities and threats faced by businesses seeking to expand into global markets.

Primarily, culture us an integral part of every society in the world, which communicates the sets of values and socially accepted norms shared among citizens, including social organizations such as family, religion, social class systems, and education arrangements, to mention a few. Businesses need to understand the cultural beliefs and values in the foreign markets seeking and planning to expand to as it forms both an opportunity and a threat in their expansion strategy. Cultural differences form and determine business practices and negotiations in each foreign market. (OpenStax, 2012) A company that embraces inclusivity, diversity, and cultural sensitivity has better chances and opportunities while expanding in global markets. This is because cultural sensitivity strengthens relationships with local people in foreign markets, as the company is aware of the people’s new cultures, maximizing respect. Strong and durable relationships build bridges in the global marketplace forming a ready market and workforce; hence, it is presented as an opportunity. Weak relationships characterized by disrespect or lack of knowledge of local people’s culture are a threat to a business, as customers, partners, and the local workforce will be difficult to solicit. This places the business in jeopardy and minimized competitiveness, as it will lack the local support, which is vital in establishing its presence. Besides, language is another source of opportunity and threat. Language barriers make it difficult to operate without understanding each other, as effective communication is impeded. However, a business with adequate knowledge of the local language, including the global business language English has more significant opportunities for expanding, as communication barriers are eliminated. For instance, if a Chinese business plans to expand in Europe, learning English among employees will provide more excellent opportunities as they can easily communicate and negotiate business matters efficiently and vice versa.

Secondly, it is vital to consider and plan for political considerations, including the stability of the country, dominant ideologies, political structure, and legal aspects, as they are sources of business opportunities and threats of operation. Every country has unique political laws, regulations, ideologies, and internal stability. Hostile political climates such as war-torn countries with numerous intra and interstate conflicts threaten foreign expansion. This is because a hostile government can forfeit, confiscate, expropriate a foreign business’s assets, and take ownership with or without any compensation (Schmitz, 2012). This occurs when rebellions and intra-state conflicts are rampant.  Political structures and bureaucracies’ capacity can jeopardize a foreign business’s operation. A country with weak and corrupt institutions translate into weak and un-favoring policies such as in the tariffs and exchange controls threatening foreign investments and the success of international trade. Peaceable and amicable climates characterized by political stability and strong bureaucracies presents opportunities for FDI as these countries encourage and protect foreign operations such as New Zealand with lenient and affordable regulation, taxation laws, and tariffs.

Moreover, ideologies and philosophies that shape a country’s reception can be an opportunity or threat when seeking to expand into global marketplaces. For instance, countries holding extreme nationalism and protectionism ideologies such as Iran and currently, the USA with the presence of Trump’s tariffs, among others, are threats of foreign expansion. These ideologies threaten and impede free markets and international trade, as the countries champion the loyalty of its citizen to national cultures and interests over another country such as foreign companies and businesses (Skripak, 2016). In radical countries, practicing extreme nationalism and protectionism may even block and discourage FDIs and foreign operations, thus adversely impacting a business seeking to expand in such as country. Suppressed and impeded operations by a host country are similar to losses and no operations at all.

Economic milieu is another aspect that provides opportunities and threats when expanding in foreign marketplaces. The development level determines the growth of a business, as countries with excellent economic infrastructure, including the primary institutions, sophisticated technology, developed industries, and even public facilities, present numerous business opportunities and vice versa. Economically developed countries present numerous business opportunities. For instance, there are effective banking and financial systems that form sources of loans for investment; sufficient educational facilities show the presence of skilled workforce and presence of R&D, an essential functional strategy and function of businesses (OpenStax, 2012). Moreover, developed transport and communication systems and networks provide the presence of lean and easier supply chain management, which helps reduces costs and maintain high product quality. In countries with strong economies, it means the citizens have larger salaries, which translates into higher purchasing power and increased demand for consumer goods, services, labor, and technology necessary, as they are essential productive assets of trade. Such areas provide increased business opportunities worth exploiting while planning to expand globally as global wealth is presented, and targeting new niches is easily facilitated. However, countries with loose and restrictive trade policies, weak or underdeveloped economic infrastructures, present economic threats unhealthy for business operations, and FDI. Finally, international business operations and expansion include numerous paperwork concerning international regulations and rules such as taxes, business registrations, intellectual property, and employment laws (Skripak, 2016). Lack of compliance in local and international trade laws provides a threat for business expansion on foreign marketplaces, considering each country’s laws and regulations are unique.

A business seeking to expand globally and enter international marketplaces needs to consider the political, economic, legal, and socio-cultural environments of the countries they plan to invest in and expand their presence. Businesses must watch out for aspects that threaten business operations such as politically unstable countries with extreme nationalistic and protectionist ideologies, weak bureaucracies, lack of economic infrastructures, and loose trade policies, as they make business operations difficult. Moreover, cultural sensitivity, diversity, inclusivity, language awareness, absolute legal compliance, and politically stable countries with suitable or friendly regulations and laws and developed economic infrastructures are some of the opportunities worth exploiting during global expansion in the marketplaces.

References

Motohashi, K. (2015). Global Business Strategy: Multinational Corporations Venturing into Emerging Markets. New York: Springer.

OpenStax. (2012). Introduction to Business. OpenStax .

Schmitz, A. (2012). International Business. Saylor Academy.

Skripak, S. J. (2016). Business in a Global Environment. In Fundamentals of Business (pp. 81-114). Virginia: Saylor Foundation’s .