A Firm’s Entry into Foreign Market Assignment Help
Discuss the advantages of a firm entering a foreign market and acquiring an existing plant as opposed to setting up an entirely new plant.
Discuss the disadvantages of a firm entering a foreign market and setting up an entirely new plant as opposed to acquiring an existing plant.
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Introduction
Globalisation is very essential for business firms in order to enhance their business activities achievement targeted objectives for sustaining business in long run. The study will shed light on the merits and demerits of business globalisation. Additionally, it will highlight the components of expected return, along with the utility theory and its relationship with other function.
a. Advantages of a firm entering into a foreign market
By entering into new foreign and market, business enterprises could experience significant benefits in expanding their business and attaining profits.
Diversification
Internationalising business is helps business organisation to produce wide variety of products and services to the new targeted customers attract them towards the business in order to gain profits (Marinescu, 2016). Additionally, it helps the organisation to enjoy economies of scale and thereby gain a competitive advantage in industry. Organisation such as Wesfarmers has expanded their business globally and is enjoying maximum profits strong base of customers and employees.
Talent access
Entering a foreign market enables companies to access new candidates, who are hardworking, skilled, and able to develop innovative business ideas, dynamic in nature and contribute to companies such as Wesfarmers, Woolworth limited and others towards remarkable business improvements (Marinescu, 2016).
Advantages of acquisition of existing firm
Cutting out extra funds: While an existing firm is acquired, extra cost of new set up and promotion is reduced. This is so because people of the place have the idea regarding the firm, which is not possible for a brand new set up. Apart from this, it becomes easier to target the new market with newer and better products than the previous one. Setting up of entirely new firm in a different place requires huge costing and workforce. This is not the same when companies acquire an existing organization.
b. Disadvantages of firm entering into a new market
Along with advantages this internationalisation possesses certain disadvantages.
Diversity issues
Entering into fresh market creates issues for firms to communicate with the employees hired from that country and maintain an ethnicity in the business environment. This can obstruct the firms towards successful business expansion and achievement of long term business goals.
High competition
Diversifying business to foreign markets where already a large number of firms exist in particular industry, it becomes significantly difficult for the firms to set up business as they might face intense competition in expanding business, attracting customers and gaining profits along with sustaining in the long run.
Disadvantages of acquiring an existing firm with help of examples
Poor location of the business can lower down the morale of the staffs. This can directly affect the business in future. For instance, Google wanted to enter into the market of smart homes by acquiring Nest labs. However, Google was able to excel in the building software but failed miserably in product innovation and hardware. This was a big issue for the MNC (cbinsights, 2018).
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