Diversification
Globalization has been common for many companies in recent time. Many companies believe that one way of growing the company is diversification of its items. They can reach out to new and more customers and therefore realize increased returns. The company can also make use of rare resources especially if they lack in the home country. There are however organizations which do not celebrate diversification due to several factors. This paper aims at discussing the reasons as to why some of these companies do not want to utilize globalization despite the huge benefits that are to be reaped.
Among some of the factors is the high level of competition especially from developed companies. Majority of the companies especially in first world countries are so advanced, and therefore it makes it difficult for competitors from the third world to join the market. Therefore, less powerful companies would opt to stay in their home countries.
Diversification also brings about additional costs. These costs include payments of tariffs, port charges, shipping charges, and transportation costs. This makes it too expensive for the company to run all the activities. The organization, therefore, opts just to stay back and avoid coming up with branches outside.
Political stability is also one of the determiners of the performance of businesses. It also deals with the system of governance. Some governments may not be supporting a particular business and therefore diversifying it will be hard. Political stability also determines the security the business is exposed to. Some countries are characterized by frequent wars and violence and therefore may opt not to diversify.
According to Hitt, Ireland, & Hoskisson, (2013) to that country, globalization will also depend on the economic level of the country. These have to do with economic policies and conditions and exchange rates. Some policies in some countries may be too hard for one to diversify. The currency of some countries is very low and therefore making the companies leave out diversification and only cater for the exam. The management of many companies have tried this and has become a bit difficult.
The culture also of people may greatly affect diversification. Some cultures are so strict in particular things and therefore may be difficult especially if the company is dealing with items that cannot be accepted. For example, opening a pork processing company in Saudi Arabia would be a bit challenging. The dressing code is also varied, and therefore, if one is to diversify, he must be very crucial in analyzing what the culture of the people looks like. Otherwise, it would be very difficult for a company to diversify.
The rules and regulations of some of the companies especially those contained in the company’s act may not be favorable. They vary from one country to another. This may hinder diversification in the case where the rules and regulations do not favor the company.
In conclusion, companies have faced challenges when it comes to diversification which varies according to several factors. Among them include political stability, economic risks, the culture of the people, competition and additional costs. These either hinder the business from an operation or blocks it from diversifying. The responsibilities of companies if to analyze the factors that may hinder them and determine the consequences. This would, therefore, make it even to be more accountable and increases security.