By expanding themselves through either China or India, firms might benefit from the reduction in cost too. As the labour cost will be lower due to the lower wage rate, cost of production, e.g. raw material and the rent of properties will be lower as well. They might also benefit by develop relationship between clients or even adopt the local culture wherever they locate the business, which help the business in the long run, as they are able to interact with customers. According to the article, Tesco’s success is due to their ability that acts like a local company where they are not trying to sell PG Tips and digestives to the Koreans, they are using their general retailing skills to apply them in Korea.
Globalization increases the freedom to arrange mergers and takeover as a means of expansion aboard, like Tesco and Samsung set up a partnership, a conglomerate by Samsung. Homeplus generates sales of more than 3 million. So in a way of joint venture or mergers/ takeover does help to reduce cost, increase the sales, so the profit will be higher.
The increase in number of firms expands internationally increases the competition. The give firms the incentives to become more internationally competitive. As the firms innovate more products, the new ideas would help them to increase sales. For example Ben Dawson Furniture, they used the latest computerized machine tools to fashion their products like desks, cabinets in the airy factory-cum-design studio in order to compete with other firms.
However, the opportunities of globalizations might also be the threats of it. As businesses from other countries now have freer access to the UK market, so competition rises. Some firms like British furniture industry might wipe out by foreign competition due to the low costs of production, also may not able to cope with the rapid change like economic issues with a combination with competition and so they go bust.
Expansion in big potential market (or just internationally) can lean to significant transport and communication problems. There is the risk of unethical practices by managers with delegated authority thousands of miles from head office. For some entrepreneurs, they might not have the experience in foreign countries, they might have the language barriers, approaches between boss and managers/staff might become harder. According to the article, expansion in other countries, suppliers of raw materials or the workers, quality will be lower. Staff’s attitudes might be different too, it will be easier to lead to a lack of trust, and so lead to a failure in the end.
Anti-globalization pressure groups may increase their activity. This will result in bad publicity for the multinationals and for those firms found guilty of environmental damage in foreign countries. For example: Tourism. It is a good example where people travel to different places, like Dominican Republic, due to the higher volume of people, the place were being polluted, like water pollution.
In conclusion, I think globalization create more opportunities than threats as firms will grow bigger and bigger. But I think the truth between opportunities and threats is depends on a lot of things. It depends on the business itself, like culture and the product they sell. For example, Mothercare sells baby equipment, toiletries and clothes, where the expectant mother and her baby share characteristic that they are very similar everywhere, so there will be a constant amount of sales. Or like Tesco Homeplus, where they adopt management where only 4 UK workers in the management level, so the rest of the Korean workers are able to make sure Homeplus is localizated. It also depends on the PeD of the products, and the economy conditions. In the case of furniture firm, their products are furniture, they have high durability, so the demand of them will be inelastic, also the production cost is high, they might find struggle in sales compared to Tesco or Mothercare.