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Unlock This CourseWhen businesses grow beyond their home country's borders, they enter the exciting but challenging world of global operations. Large businesses don't just sell products locally anymore - they operate across continents, employ people worldwide and serve customers in dozens of countries. Think about brands like McDonald's, Apple, or Unilever - you'll find them almost everywhere you travel!
Global operations involve much more than just selling products abroad. Companies must navigate different cultures, laws, currencies and customer preferences whilst maintaining their core brand identity.
Key Definitions:
Large businesses expand internationally for several compelling reasons. They might be running out of growth opportunities at home, facing intense competition, or seeking to reduce costs by manufacturing in countries with cheaper labour. Some companies go global to access new resources or to spread their risk across different economies.
Large businesses have several ways to enter international markets, each with different levels of risk, control and investment required. The choice depends on factors like the company's resources, the target market's characteristics and the level of control desired.
These involve the company directly investing money and resources in the foreign market, giving them maximum control but also maximum risk.
Creating a completely new company in the foreign country. This gives full control but requires significant investment. Example: Tesco's expansion into Asia with Tesco Lotus in Thailand.
Buying existing companies in the target market. This provides instant market presence and local knowledge. Example: Kraft's acquisition of Cadbury gave them immediate access to global chocolate markets.
Partnering with local companies to share costs, risks and local expertise. Example: Starbucks partnered with Tata in India to understand local coffee culture and regulations.
McDonald's operates in over 100 countries but adapts its menu locally. In India, they serve the Maharaja Mac (chicken instead of beef) and McAloo Tikki burger. In Japan, they offer rice burgers and green tea milkshakes. This shows how global businesses must balance standardisation with localisation to succeed internationally.
These methods involve less direct investment and risk but also provide less control over operations.
Simply selling products made in the home country to foreign markets. This is the lowest-risk method but offers limited control over marketing and distribution. Many UK manufacturers start their international journey this way.
Allowing foreign companies to use your brand, products, or business model in exchange for fees or royalties. Fast-food chains like KFC and Subway use franchising extensively to expand globally with minimal investment.
Operating globally offers numerous advantages that can transform a large business's growth prospects and profitability.
Access to billions of new customers worldwide. Apple's iPhone sales in China often exceed those in the US, showing how global markets can become primary revenue sources.
Producing larger quantities reduces per-unit costs. Car manufacturers like Toyota benefit from spreading development costs across global sales volumes.
Manufacturing in countries with lower labour costs can significantly reduce expenses. Many clothing brands produce in Bangladesh or Vietnam to remain competitive.
Beyond immediate financial gains, global operations provide strategic advantages that strengthen the business long-term.
Spreading operations across multiple countries reduces dependence on any single economy. When one market faces recession, others might be growing. Unilever's presence in both developed and emerging markets helps balance economic fluctuations.
While global expansion offers great opportunities, it also presents significant challenges that businesses must carefully navigate.
What works in one culture may fail in another. Walmart struggled in Germany partly because their friendly customer service approach was seen as intrusive by German shoppers.
Communication challenges can lead to misunderstandings and marketing disasters. Pepsi's "Come Alive" slogan translated to "Come Out of the Grave" in Chinese!
Different countries have different laws, regulations and business practices. Google has faced various legal challenges in Europe over data protection and competition laws.
Tesco, the UK's largest retailer, expanded aggressively into international markets but faced mixed results. They succeeded in some Asian markets like South Korea and Thailand by adapting to local shopping habits. However, they failed in the US with their "Fresh & Easy" stores because they misunderstood American shopping preferences and didn't offer the right product mix. This shows how even successful companies can struggle when they don't properly understand local markets.
Managing operations across different time zones, currencies and regulatory environments creates complex operational challenges.
Exchange rate changes can dramatically affect profits. A UK company selling in the US might see profits fall if the pound strengthens against the dollar, making their products more expensive for American customers.
Coordinating production, distribution and inventory across multiple countries requires sophisticated systems and can be disrupted by political events, natural disasters, or pandemics like COVID-19.
Successful global businesses master the art of "glocalisation" - thinking globally but acting locally. This means maintaining core brand values whilst adapting products and marketing to local preferences.
Smart companies modify their products to suit local tastes, regulations and needs without losing their brand identity.
KFC offers rice-based meals in Asia, Coca-Cola adjusts sweetness levels for different markets and Domino's Pizza tops include paneer in India and seafood in Japan. These adaptations help global brands feel local to customers.
Netflix demonstrates excellent global adaptation by investing heavily in local content production. They create original series in local languages for different markets - like "Money Heist" in Spain, "Sacred Games" in India and "Dark" in Germany. This strategy helps them compete with local broadcasters whilst building a global subscriber base. Their success shows how global businesses can respect local cultures whilst maintaining their core service offering.
Large global businesses significantly impact the countries where they operate, bringing both benefits and concerns.
Global companies often become major employers, providing jobs and career opportunities. Amazon employs over 1.5 million people worldwide across various skill levels.
International companies bring new technologies, management practices and training programmes that benefit local workers and other businesses.
Large businesses contribute significant tax revenue to governments, funding public services and infrastructure development.
However, global operations can also raise concerns about their impact on local communities and economies.
Large global companies might outcompete smaller local businesses, potentially reducing diversity in the marketplace. When Walmart enters a new market, smaller retailers sometimes struggle to compete with their low prices and vast selection.