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Strategic Management: Analyzing Global Expansion and Diversification Approaches

Evaluation of global expansion strategies and corporate diversification models.

Caleb Patterson
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Strategic Management: Analyzing Global Expansion and Diversification ApproachesDiscussion 1, Week 4What issues are likely to arise in a developing country when a global giant like Coca-Colabegins operations there? What kinds of advantages doessuch an expansion bring to theglobalizing organization?When a global giant begins operations in a foreign country there are four important factors thatshape a company’s strategic approach to competing in the foreign markets; the degree to whichthere are important cross-country differences in cultural, demographic, and market conditions, wwhether opportunities exist to gain a location-based competitive advantage, the risk of adverseshifts in currency exchange rates, and the extent to which governmental policies affect thebusiness environment (Gamble & Thompson, 2011).The huge difference in operating in the US vs. a foreign like china is the operation cost. In 1997the typical Chinese family earns as little as $100 a month so companies can hire much cheaperlabor (Pechter, 1997). This also makes the company face problems in selling their own productin that country. What is produced may not be affordable, so the question they also face is thecompany established for production or establishment of a new product to a foreign country.When the workers pay scale is so different the product cost less and then there is a bigger profitmargin to be made, but these profits are not as grand as it sounds. With an American companymoving into foreign soil the difference in culture comes into play that adds extra cost and eventhe regulations that governthat country may lead to added training or changes in how thecompany operates their vs. in America. Also, the raw materials that are supplied from foreigncountries are more easily transported to factories established their again add a bigger profitmargin.This is all balanced with the cons of operating there, one is how stable is their economy. Incountries that have an unstable economy the risk may outweigh the gains and the company mayface a huge loss.Reference:Gamble, J., & Thompson, A. (2011).Essentials of Strategic Management: The Quest forCompetitive Advantage(2nd ed.). New York: McGraw-Hill IrwinPechter, K. (1997). Intel wants to be `Nike of computer business' in China.Advertising AgeInternational, I2. Retrieved from EBSCOhost.

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