The three advantages and disadvantages of having international operations?

Answer 1

ADVANTAGE 1. Foreign operations can absorb excess capacity, reduce unit costs, and spread economic risks over a wider number of markets. 2. Foreign operations can allow firms to establish low-cost production facilities in locations close to raw materials and/or cheap labor. 3. Competitors in foreign markets may not exist, or competition may be less intense than in domestic markets. 4. Foreign operations may result in reduced tariffs, lower taxes, and favorable political treatment in other countries. 5. Joint ventures can enable firms to learn the technology,culture, and business practices of other people and to make contacts with potential customers, suppliers, creditors, and distributors in foreign countries. 6. Many foreign governments and countries offer varied incentives to encourage foreign investment in specific locations. 7. Economies of scale can be achieved from operation in global rather than solely domestic markets. Larger-scale production and better efficiencies allow higher sales volumes and lower-price offerings. DISADVANTAGE 1. Firms confront different and often little-understood social, cultural, demographic, environmental, political, governmental, legal, technological, economic, and competitive forces when internationally doing business. These forces can make communication difficult between the parent firm and subsidiaries. 2. Weaknesses of competitors in foreign lands are often overestimated, and strengths are often underestimated. Keeping informed about the number and nature of competitors is more difficult when internationally doing business. 3. Language, culture, and value systems differ among countries, and this can create barriers to communication and problems managing people. 4. Gaining an understanding of regional organizations such as the European Economic Community, the Latin American Free Trade Area, the Intenational Bank for Reconstruction and Development, and the International Finance Corporation is difficult but is often required in internationally doing business. 5. Dealing with two or more monetary systems can complicate international business operations. 6. The availability, depth, and reliability of economic and marketing information in different countries vary extensively, as do industrial structures, business practices, and the number and nature of regional organizations.