| Most companies move their business operations to | | | | (b) Economies of Scale |
| foreign countries by going global. They take their | | | | (c) Incentives |
| business overseas for different reasons. These | | | | (d) Resource assess and Cost Savings |
| companies adopt the reactive or defensive approach | | | | Many companies will prefer to invest their excess |
| to stay ahead of the competition. A few of them | | | | profits in order to expand, but sometimes they are |
| take the proactive or aggressive approach to | | | | limited because of the maturity of the markets in |
| accomplish the same purpose. A majority of them | | | | their area. Therefore, they seek the overseas new |
| choose to adopt both approaches to avoid a | | | | markets to provide such growth opportunities. So, |
| decrease in their competition. In order to remain | | | | these companies, in addition to investing their excess |
| competitive, companies move as quickly as possible | | | | profits, also try to maximize efficiency by employing |
| to secure a strong position in some of the key world | | | | their underutilized resources in human and capital |
| or emerging markets with products customized for | | | | assets such as management, machinery, and |
| the need of the people in such areas in which they | | | | technology. Companies seek economies of scale in |
| plan to establish. Most of these world markets are | | | | order to achieve a higher level of output spread over |
| attracting companies with new capital investments | | | | large fixed costs to lower the per-unit cost. They |
| with very good incentives. Some of the reactive or | | | | also, want to maximize the use of their |
| defensive reasons for going global are: | | | | manufacturing equipment and spread the high costs |
| (1) Trade Barriers | | | | of research and development over the product life |
| (2) Customer Demands | | | | cycle. Some of the developing countries that need |
| (3) Globalization of Competitors | | | | improvement and development through capital |
| (4) Regulations and Restrictions | | | | infusion, skills, and technology voluntarily provide |
| In the case of trade barriers, companies move from | | | | incentives such as fixed assets, tax exemptions, |
| exporting their products to manufacturing them | | | | subsidies, tax holidays, human capital, and low wages. |
| overseas in order to avoid the burden of tariffs, | | | | These incentives seem attractive to these |
| quotas, the policy of buy-local and other restrictions | | | | companies due to their increase in profits and |
| that make export too expensive to foreign markets. | | | | reduction of risks. Caution: The repatriation of profits |
| Companies respond to customer demands for | | | | and foreign exchange risks due to instability in |
| effective operations and product assurance and | | | | leadership of these developing countries should be |
| reliability, or/and logistical problem solutions. Most | | | | put into consideration in negotiation. Access to raw |
| foreign customers, who seek accessibility to suppliers | | | | materials and low operational costs in financing, |
| may request that supply stay local in order to | | | | transportation, low wages, lower unit costs, and |
| enhance the flow of production. Companies usually | | | | power are attractive in terms of resource access |
| follow that request to avoid losing the business. For | | | | and cost savings. Most companies move their |
| the globalization of competitors, companies are aware | | | | headquarters to overseas to avoid their respective |
| that if they leave companies overseas too long | | | | home countries' high taxes and other costs |
| without challenge or competition, their investments or | | | | associated in business operation in those countries. |
| foreign operations in the world market may be so | | | | Companies need to develop strategies, design and |
| solid that competition will be difficult. Therefore, they | | | | operate systems, and also work with people, |
| try to act quickly. Most companies' home government | | | | different companies, and countries around the world |
| may have regulations and restrictions that are so | | | | in the form of strategic alliance to ensure sustained |
| inconvenient and expensive, thus limiting the | | | | competitive advantage. Global management and |
| expansion, encroaching in the companies' profits, and | | | | management functions are usually formed by the |
| making their costs uncontrollable. Hence the reason | | | | prevailing conditions and ongoing stable and unstable |
| for the companies moving to different market | | | | developments in the world. A few countries take |
| environment with few foreign restrictive operations. | | | | advantage of these companies, but when companies |
| The proactive or aggressive reasons for going global | | | | become aware that they are being used, they should |
| are: | | | | then learn how they can be useful in that different |
| (a) Growth opportunities | | | | cultural environment in order to make a lot of profits. |