Global expansion report

Essay by adones1 July 2005

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The reason why companies expand into the global market is the saturation of the exiting markets that companies operate. Global expansion provides the ability to access the new markets and opportunities to utilize economies of scale. There are many concepts of global expansion. Such concepts suggest that motivation influences companies to expand their business to the oversea market. These influences are "key supplies, market-seeking, and the desire to access low-cost factors of production" (International Business Competing in the Global Marketplace).

Companies need to adapt to various environments, geographical separation, cultural and national differences, and in business practices between corporate headquarters and overseas offices. Companies also need to determine which countries offer the best market and operating environment. These are technological, political, economic, physical and social factors. From the findings of global expansion, it can be seen that global convergence and national awareness influence companies to transform to worldwide or even a virtual corporation.

Economies of scale is an important methods to achieve a companies inner cost differences in capital industries or even where advertising, distribution, and new product development are important parts of the total cost. An economy of scale is defined as "cost advantages associated with large scale production" (International Business Competing in the Global Marketplace). It is linked with the concept of increasing returns to scale and they are present when the output of goods has increased with the cost per unit. The economy of scale has to spread the fixed costs over a greater volume of output. This can only happen if the cost of the last unit produced has cost less than the overall average.

Economies of scale lie within the cost curves and how companies can produce things in a more effective way. There are many reasons companies experience economies of scale with some due...