Since the term globalization started developing around the world, risks involving this have also become apparent. Companies that decide to expand globally risk exposure in various aspects involving: cultural, economic, administrative and geographic. There are certain steps or precautions that a company should take in order to get the most effective profit out of expanding globally. Evaluating the company and calculating the profits of your company are some of these precautions.
Before enlarging a company, the association should keep in mind and weigh out the pros and cons of this expansion. For example, culturally, there are aspects that need to be kept in mind like the difference of language, religion, culture, social norms, and lack of social networks. These conditions can affect you company in a bad or in a good way. Depending on the country, your product might be profitable or not.
Another manner that a company needs to pay attention to is the economic difference. Economic situations vary between countries around the world. A company would have to examine the differences in the consumer’s income of a certain company before making a decision. Likewise, the differences in cost and qualities of natural, financial and human resources of the country also play a role in this decision-making.
Geographically, the lack of sea or rivers access and the lack of common borders affect the development of the company and it’s product. Other geographic factors that a company should take into consideration are the size of the country, differences in climate and lack of transportation and communication. If your product is fragile or perishable (like food), it is not in your convenient to expand to a country ar away or that doesn’t have transportation very developed.
Administrative factors such as absence of colonial ties or shared monetary or political association affect the productivity and profitability of a country as well. Political hostility and government policies alter from one country to another and influence how a product might be beneficial or not.
An American company called Chiquita, founded in 1863, has expanded gradually over the years. Now a days, they export to over 70 different countries around the world. They did not only expand globally, but also expanded their variety of products (from selling only bananas to selling pre-prepared salads and other types of fruits.)
In the developing process of Chiquita company, “Distance Still Matters” by Pankaj Ghemawat could’ve helped them. This company started by importing their goods from Jamaica and later selling them in the United States. As they amplified their company, common problems started to arise. They suffered from rotten fruits because of the climates in certain companies, diseases, etc. If they would’ve had knowledge of the CAGE method, maybe, they could have avoided these bumps in they’re expansion and in their budget. After a while, they started researching before expanding but the damage caused was already done. Thankfully, this didn’t affect them as much and they continued to grow and expand throughout the world.
With the advances that we have today, companies can take preventive measures and ensure their expansion to be profitable. Because of problems in the past, experiences, and articles like “Distance Still Maters”, companies know better than to export their products to other countries blindfolded.