- 9 Marks
BMIS – L1 – QE2 – Globalisation strategies
Question
In the preceding five decades, a significant number of companies have pursued well-conceived strategies of Globalisation in order to seize the immense business opportunities by operating on a worldwide basis. These companies have achieved notable success in the expansion of their business globally and have manufacturing facilities and marketing networks spread in several countries.
Required
State and briefly explain six significant objectives of multinational companies in pursuing policies of Globalisation.
Answer
The significant objectives of multinational companies in pursuing strategies of globalisation are:
(i) To achieve significant economies of scale in management and other functional operations of the global companies.
(ii) To recover extremely high Research and Development expenditures required in the manufacturing of knowledge-based products from widely dispersed target markets located in different countries.
(iii) To gain access to wide global markets without incurring substantial expenditures on product development in different markets.
(iv) To seize the advantages offered by growing economies, such as dismantling of trade restrictions, growth of free trade zones, and relaxation of regulations regarding direct foreign investments.
(v) To enter into widely diversified markets and achieve maximum profits through transfer pricing and tax concessions.
(vi) To derive maximum advantages of access to cheap sources of labour, raw materials, and energy.
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