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Globalisation - Essay Example

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Currently, a large number of businesses are expanding internationally to fit into the global economy. Global economy refers to merging of markets from different countries to form an international market. …
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Download file to see previous pages There are a number of factors that contribute to the existence of international business. The first is the degree of demand for a product across the world. The second factor focus on diversity in tastes and preferences and buying behaviour of consumers from in both the mother country and other countries. For instance, there has been an increase in the market of organic products all over the world in past years. Therefore, companies that engage in production of organic products will have a ready market all over the world. The third one is the removal of boarder barriers, such as import and export taxes, flight barring, and currency risks. However, transaction of business internationally has an impact on risks facing these businesses and in management of those risks. It is a fact that every business has risks involved in its operation. However, unlike local businesses where the business accountant or lawyer knows the risks to expect the global market is more complex and complicated in those different countries have different business environment. For example, a business in an industrialised county does not face similar risks and challenges in managing risks compared to those that a business in a developed country would face (Mclvor, 2000). According to a survey conducted by AON Company (2011), some of the risks that an international business would face are economic delays, regulatory changes, business interruptions, high completion, price risks, reputations damage, and cash flow risk, failure in supply chain, third party liability, and failure to retain the top talent. These risks are influence by the political diversities, cultural differences, legal issues, economic and financial issues, and differences definition of risks. In managing these risks, most international businesses prefer insurance despite the alternative methods of risk transfer and financing. There are a number of factors that would influence a business to opt insurance as part of their risk financing strategy, these includes authorisation, coordinated global insurance programme, compulsory insurances, taxation issues, the condition of local insurance market, and influences of reinsurers. Most international businesses use captives insurance in purchasing and managing their insurance portfolio. Globalisation Globalisation is a terminology used to describe the interactions and integrations amongst government, companies and people from different countries. In business, globalisation is into two parts which include globalisation of the market and globalisation of the product. Globalisation in the market is where distinct markets from countries all over the world merge to form a global market. There a number of factors influencing globalisation of the market. The first one is falling of border barriers whereby businesses are free to conduct business transactions across the borders. The second is striving to satisfy the taste and preferences of the consumers worldwide. For example, smart phone’s demand in the world has increased tremendously over the last few years. Therefore, forces of demand have led the smart phone company to become an international company. The last one is standardisation of product such that the products are acceptable worldwide. An excellent example of a company whose product meets the global standards is Coca-Coca Company (vogt, 2012). Production, packaging and distribution of Coca-Coca Company products allow it to fit in the global market. Globalisation of products occurs when a company from a developed country establish a production plants and start producing in a developing country. The developing countries mostly offer cheap labour, land and low start up cost. For example, outsourcing of cheap labour and technological innovations are becoming global ...Download file to see next pagesRead More
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