Why do companies go global?

There are several reasons why companies go global.

These are discussed as follows:

• Growth needed- Need to grow
• Low cost of resources
• Overcoming geographical distance and time
• Barriers of trade going down
• Alliances has increased strategically
• Level of Domestic market no longer adequate

• Growth needed-Need to grow-The first and foremost reason of globalization is need to grow. It is the basic need of the organizations. Often finding opportunities in the other parts of the globe organization extend their businesses and globalize.
• Low cost of resources -Reliable or cheaper source of raw-materials, cheap labour,-Reliable and cheaper source resources is one of the reasons why a company chooses the path of globalization. These resources can be combination of five resources or even one of five resources. These resources are man, money, machine, material and level of motivation.

For example: Hyundai got competent engineers at lower cost, industry friendly Maharashtra Govt. which allowed them to set-up a unit in India which supplies spare parts for all Hyundai cars across the world, Companies often set up overseas plants to reduce high transportation costs. Making a car in Korea and exporting it in Europe and America can be expensive and time consuming therefore India as a manufacturing hub for Hyundai, proved to be better place.

• Overcoming geographical distance and time

Shrinkage of time-There is rapid shrinking of time and distance across the globe, thanks to faster communication, speedier transportation, growing financial flows and rapid technological changes

• Barriers of trade going down

The apparent and real collapse of international trade barriers redefines the roles of state and industry. The trend is towards increased privatization of manufacturing and services sectors, less government interference in business decisions and more dependence on the value-added sector to gain market place competitiveness. The trade tariffs and custom barriers are getting lowered, resulting in increased flow of business.

• Alliances has increased strategically

Globalization has made companies in different countries to form strategic alliances to ward off economic and technological threats and leverage their respective comparative and competitive advantages

• Level of Domestic market no longer adequate

Domestic market no longer adequate-It is being realized that the domestic markets are no longer adequate and rich. Japanese have flooded the U.S. market with automobiles and electronics because the home market was not large enough to absorb whatever was produced.