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Global Marketing

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Submitted By JayArePeriod1
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Companies globalize with the idea of targeting larger markets. with a larger market, a company can increase its profits from the products and services that would be available to a greater number of consumers (0000000). With the world's economy becoming more globalize, it is providing domestic companies an advantage to expand into foreign markets. To expand globally, companies must begin with a strategic plan and then move on to full implementation (0000000). They must also conduct market research to ensure the right choices are being made. In 2010 our plan of action was to concentrate on market entry through exporting and other low risk, low cost global expansion alternatives. And now six years later, after a thorough search and screening process we have a target company we are seeking to acquire through an acquisition.

Advantages

The first advantage I would like to focus on is the speed at which this market can be penetrated. Since we are aware of the production capabilities of the target company it potentially gives us a huge competitive advantage. We are able to acquire resources and competencies, that was once unavailable, with less risks and less cost. Market power is also acquired with this acquisition, we will have a strong market presence which builds our market share. This decreases our competition and diversification is achieved. There will be no entry barriers to overcome because of the acquisition of a existing organization, and competitive reaction will be less likely. And even though the target company has a low share value, our stakeholders can expect growth. This is still a short term gain for Love Inc. through asset stripping.

Disadvantages Love Inc. has been made well aware of some of the disadvantages this acquisition may bring. For starters, I am sure it may be intergration problems. A new and a old companies activities may be difficult to intergrate. The cultural fit of the two organizations could be challenging. One's individual race, background or education can all increase conflict within the organization. We have to implement the right team of administrators to ensure the success of the acquisition. We will have a choice to make, do we hire new managers potentially causing cultural differences with the employees. Or do we keep the current staff and there be communication issues due to corporate culture disparities and the administrations lack of clear understanding of the differences. I think either way will be a disadvantage for the company. With a new acquisition comes new promotion material. Extra funds will have to be allocated to launch the promotion campaign and a modification of our product and packaging will need to be made. There may be technological differences in the country of our target company and because we are wanting to mirror our domestic organization, implementing a new technology infrastructure can be costly.

Advantages of Not Expanding Globally

A thriving business in the worlds best economy isn't bad at all. So why the need for international expansion!? Love Inc. has become the number one canned chicken facility in the world do we really want to risk what we have successfully built!? Political issues like nationalization, which refers to the process of a government taking control of a company or industry. (Investopedia, 2016). When this occurs, the former owners of the company may or may not be compensated for their loss in net worth and potential income.(Investopedia, 2016). If the is no stabilization clause negotiated in the agreement it will damage the company as a whole. Another political issue is Expropriation, the act taking privately owned property by a government to be used for the benefit of the public. (Investopedia, 2016). Even tho there is just compensation, we are back at square one having wasted time and resources. There is also economic issue we can avoid by not acquiring this target company, issues like exchange rates practices. Exchange rate is the price of a nations currency in terms of another currency. (Investopedia, 2016). Exchange rate changes create a risk to firms that hold assets in currencies (EconomicsOnline, 2016) this can lead to low return on our investment. Other economic issues like rising cost and decreased demand for export can all be avoided by not expanding internationally.

Disadvantage of Not Expanding Globally

According to the office of U.S. Trade representative, 95% of the world's consumers reside outside of the U.S. (Cramer, 2015). This statistic alone is the main reason we have chose this acquisition. It will put us at a great disadvantage by not converting. There are several untapped markets outside of this country that our competitors will eventually tap into decreasing our domestic competitive advantage.

Why MNC invest funds in financial markets outside of their country

Multinational corporations or MNC is a corporation that has its facilities and other assets in at least one country other than its home country. (Investopedia, 2016). MNC tend to invest funds in financial markets outside of their country to add value to the market place and gain its global market share. In most cases there are imperfections within these foreign companies that add an advantage to MNC's over the local firms. Imperfections in the product or factor market, which is a market place for the services of a factor of production. (Investopedia, 2016). Also, they capitalize on advantages categorized by the eclectic paradigm. A three-tiered framework for a company to follow when determining if it is beneficial to pursue direct foreign investment. (Investopedia, 2016). 1. Product or company specific advantages such as a comparative advantage, where a firm can produce goods and/or services at a lower opportunity cost. (Investopedia, 2016). 2. Location specific advantages, where the company derives greater benefit through a foreign establishment. (Investopedia, 2016). 3. Market internalization, meaning it is better for the company to exploit a foreign opportunity itself rather than through a agreement with a foreign firm. (Investopedia, 2016). These competitive advantages are protected by market imperfections.

Why some financial institutions prefer to provide credit in financial markets outside their own country

The motives for providing credit in foreign markets are high foreign interest rates, exchange rate expectations and international diversification. High foreign interest rates increase the value of a given country's currency. The higher interest rates that can be earned tend to attract foreign investment, increasing the demand for and value of the home country's currency. (Investopedia, 2016). With exchange rate expectations, creditors may consider supplying capital to countries whose currencies are expected to appreciate against their own, (Swlearning, 2010) which is beneficial to the creditors. International diversification provides motives for credit lending in that creditors are not vulnerable to unfavorable economic conditions in any single country. It may reduce the probability of simultaneous bankruptcy across borrowers. (Swlearning, 2010).…...

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