Posted at 11.10.2018
International diversification is very important for an international enterprise, this can be a corporate strategy. It really is created by higher sales of new products and new market segments, and increase profitability. Diversification can occur at the business enterprise product level and corporate level. In this essay, we will concentrate on advantages and disadvantages of international diversification for the business. At the moment, many companies are international based which developed their business to the different countries and areas, of course, they also facing a lot of dangers and opportunities, in the following, I will analyze advantages and negatives of discovering business internationally. This technique involves different strategies. For the different sectors of the business, the different countries must be developed and applied. The management of the high capacity of the strategies must be developed, the huge possibility to go into new market of business whatever the implementation of the best challenges and complications, cross-border diversification to draw in the company's long-term development, and progress in existing business on the marketplace in other countries.
International diversification is a basic and the most crucial principles in the business world. In the past 10 years, the impact of the value of corporate diversification is just about the target of attention of the research significantly. The vast majority of this content has centered the industry on this issue. Diversification is a strategy to increase gains for selling the new products in new markets of a corporate and business. In fact, all strategy has its benefits and drawbacks, one of the business's management staff will be utilized to accomplish different purposes of the benefits and drawbacks. Diversifying internationally is a thought to enhance the value of the organization, which is a source of international immediate investment (FDI). Enterprises to invest abroad, the utilization of company resources transferred abroad, reached the economies of range and the economies of scope. Through the operational overall flexibility associated with a multinational commercial system, value creation from international procedures can be created. Now a day, international environment is very uncertain, an internationally diversified network can gives the possibility to the company to exploit market conditions. Varied corporate marketing, it could be found in a developed market, the establishment of new corporations, in order to increase the profits of the company. Also, it could be used to diversify the investment of the business's assets, in order to avoid the downturn on the market of the country. You will discover two type of diversify, the first one is the internal development, through the inner growth and diversification of creation, creation of different products and brands. It could be achieve the perfect inside development. On the other hand is the exterior development, external growth through acquisitions or strategic alliances to enhance the awareness of the enterprise in the global market, to development of income and achieve the international expectations. In the following, consumer electronics big Samsung Electronics is taken a good example to illustrate advantages and disadvantages of international diversification.
Consumer electronics huge Samsung Electronics is an international corporate, It is the flagship subsidiary of the Samsung Group. Samsung Consumer electronics the largest electronics industry in South Korea, involved in LCD, semiconductor, cell phones, digital mass media business, it is the biggest sales of the gadgets industry manufacturers in the worth. "Inspire the entire world, Create the Future. " is the perspective of Samsung Electronics. In the cellular phone market, Samsung Gadgets is the main of the marketplace share on earth, successfully beat a traditional mobile phone manufacturers such as: Nokia, Motorola, Sony. Sights on future market trends to touch smartphone, Samsung also compete to launch the products corresponded to the challengers, such as Galaxy S2, to equate to the biggest rival Apple's Iphone.
International trade across edges the deals of goods and services, standard transfer and export trade, therefore, it also call import and export trade. International trade immediately have an effect on the gross local product (GDP), it is vital for many countries; it can adapt the economic composition of the united states and improve the fiscal earnings.
In order to lessen the creation cost, Samsung Gadgets using global procurement, they looking for the suppliers, is committed to enhance product development, corporate culture, and contributions to the global world. Samsung Consumer electronics and Suppliers as well as the manufacturers can cooperate to help make the best product. Global procurement not only can reduce the creation cost, it can also enhance the productivity. Samsung Electronics has an absolute advantage over another in creating a good in Korea and the other country. It could produce that good using fewer resources than a different country. Samsung Electronics can enjoy the absolute advantages when they execute the international trade. In additional, Samsung Consumer electronics conducted international trade, which also produced of overseas direct investment (FDI), FDI is direct investment into creation in a country by the company internationally, Samsung Electronics investment in China or the other country, the both countries have brought some Advantages.
Now, we can speak about what is the advantages and down sides of Samsung Electronics when the organization diversifying internationally.
Economic of size is the expansion of production range and increase the economic benefits. It is to reflect the relationship between the awareness factors of development and the economical benefits. Economies of scale help producers to lessen their cost by producing massive amount result at lower costs. Samsung Gadgets has came to the realization economies of range in semiconductor production. Semiconductor devices can perform a number of control functions in electronic equipment, such as Samsung touch smartphone. Through the constant improvement, Samsung's semiconductor development successfully extended the R & D centers and production lines to China and other countries, and the products can sell round the world, via mass development to reduce the cost. This is the cost advantage
Can be achieve the harmonization and standardization of the products
high quantity of raw materials, decrease the purchase cost
Easily to regulate the quantity and quality of products
Conducive to management and tech field of expertise and professionalization
It can has strong competitiveness in the countrywide market
This is also a cost edge to make the cost lower to make a range of related products than to create only 1 of the average person products on one company. A firm can grow its selection of products to take full benefit of the value of its existing capacity. Samsung produces various electronic products, such as LCD TV, LCD -panel, semiconductor (DRAM, NAND Display), mobile phones, digital cameras, LCD screens, printers and other related digital business, production of these products may use the same or similar of raw materials, for example, produce it and the computer can use the same type of LCD display, it can be completed in the same stock, and the employees all have same knowledge, produce different products to reach international diversification, totally to adopt the good thing about economies of opportunity.
If a corporate and business diversifying internationally, for example, which part of the products with their alliance's company responsible for, it can learn the expertise and technology from the alliance. Samsung Consumer electronics maintains good marriage with their partners, to learn advanced and unique technology in all of the creation process, also, they barely to study all the knowledge and skills from the other country, including the digital technology from Taiwan and the scientific knowledge from USA. Learning knowledge from difference country can enhance the quality of staff, greatly to help the long-term development of the business. Furthermore, it also can enhance the key competitiveness of the organization in the world.
When access a fresh market in other country, except to learn from advanced technology, Samsung Consumer electronics also gain the experts of expertise, combine different professionals through merger and acquisition. For instance, Samsung Electronics usage of the advanced country, such as USA or UK, it can gain professionals in the locality, to comprehend their professional research and technology. Furthermore, China's population is more than 1. 3 billion, it boasts to have much larger recruiting than other countries. As the increasing of people, China will have the best number of professionals.
Samsung Electronics can enjoy the cheap labors off their country and all producing country, for example, China has 1. 3 billion people and extensively of the work force, compared with the pay of workers far away will be lower, so, to create factories in China or combine with Chinese companies, it can enjoy the low-cost labors and creation as well as the resources and the recycleables are also relatively cheap. Furthermore, the lands and lease are the most put in of the money, China has well Infrastructure, now, it investing in the outsourcing industry. Like the town Chengdu already are planning to have a high-tech zone in areas that are spanning upwards of 1 million square meters. China has the cheaper lands and low lease for build-up the factories, so Samsung Electronics can save additional money upon this part.
Foreign competition can be motivated to enhance the business's productivity. Conducting business in the international market, the firms will continue steadily to improve the quality with their products, to be able to gain market competitive advantage. The facial skin of powerful competitor: Apple Store, Samsung Electronics continuous development and reform the products, for example, Samsung Consumer electronics produce the smartphone, such as Galaxy S2, S3, Notes, to equate to the biggest competitor Iphone from Apple Store, in order to occupy a solid position and bolster competitiveness on earth market.
Samsung Electronics recognized International diversify may add difficulty of the enterprise. Merger or alliances can make management costs climb, thereby increasing the price of production in another country. To entry in to the new market, the biggest barrier is the huge capital requirement, for the established of head office and factories, recruitment, procurement, management etc. Furthermore, it have more management obstacles related to structural complexness with the new administrative set ups, it may increase the information handling when gain access to the new market in the global.
Actually, the language barrier is a significant problem, the coordination, marketing communications and inspiration issues are very important when usage of a fresh market. Samsung Electronics can be an oversea company, when they desires to set up factories or head office in China or the other country, foreigners don't realize Korean, miscommunication might occur, affecting the company's operations. They have to recruit some dialect expert to solve the condition, also, they can recruit the translators or local real estate agents to manage, but it'll increase the management cost.
Globalization made corporations desire to be entry in the major countries internationally. To response the growing need of competitiveness on the planet, many business want to outsourced some of the productions in China, in order to take pleasure from relatively cheap development cost, Samsung Gadgets outsourced elements of its development to China like the battery and the case of Samsung smartphone, actually, China is still at its early on stage to be in the outsourcing industry. the product quality may well not be assured, especially in China, although China has labor resources better than the other country, however the low academic requirements and lack of skills of the workers may be influenced the quality of the merchandise. However, it could be better by training and the technology.
Economic hazards, such as exchange rates, authorities regulation, decrease in per capita gross local product (GDP), inflation and capital flight. In recent years, inflation in China is very serious, inflation reflects Samsung facing the business enterprise crisis, and company may need to save the manpower and recycleables, affecting the yield and quality of its products. In today's financial risk, Samsung Electronics encountered a serious impact on the global business, it has a whole lot of monetary problems, such as inflation, increasing unemployment, these factors will straight affect the business enterprise of Samsung Gadgets.
This is a risk, because you will not know whether there will be changes, before coming into each country, Samsung Gadgets must understand the culture of the united states, such as people's preferences, habits and the consumer behavior, it all arising from cultural differences. Western companies are lack of understanding of Chinese language culture. There is also a perception of corruption and bureaucracy in China. Samsung Consumer electronics is positioned in Korea, far away from China, geography and time variations may require personnel to modify their business methods.
In reality, a great deal of buyers, businesses entering a new market are facing the risk of political risk. Political dangers including systemic risk, procedural risk, distributive risk and catastrophic risk. Such as for example fiscal, economic, trade, investment etc. Rather than the threat of market factors including commercial, income, labor and development, or related to politics instability, such as terrorism, coups, civil warfare, riots, rebellion event. Samsung Consumer electronics is also facing of the problems, China has just started with implementing guidelines on security and intellectual property rights, they remain thought to have poor coverage. This becomes a problem particularly when creation of products are outsourced to their country. Political doubt could also bring sudden costs, which can be substantial. Furthermore, in their own country, South Korea and North Korea continues to be developing a problem, in a anxious confrontation, it could conflict at any time, affecting the operation of the venture.
International trade could cause delays in repayments, for example, Samsung Gadgets sell the merchandise to other country, it could delays in obligations when the products trade between the trading companies, also It has the foreign currency problem, such as RMB and HKD, the pace is difference from Korean, impacting on the cash flow of the organization. Furthermore, the exchange rate of foreign currency may not stable, exchange rate fluctuations and the inflation are also the lifestyle risk. However, in recent years, RMB rising also is the significant hazards faced by Samsung, deterred lots of the supposed development of foreign-funded companies in China. RMB understanding, increasing costs of labors, raw materials and lands, all is the money and exchange risk factors.
In different countries have different laws and standards, the corporation need to adhere to the new standard when gain access to a new market. It could have some factors to improve, to be able to help restructure of the business, it's important to training or retraining of the management, for example, in the creation process, the input and packing, thereby generating additional costs. In order to access to USA market, Samsung Electronics are facing the big problem which is intellectual property of the largest competitor Apple Store. Earlier, Apple sued Samsung and its own Galaxy series smartphone copied the look of the iPhone smartphone, Samsung gets the big fines to Apple Store, thereafter, Samsung sued again to U. S. International Trade Commission and complaint the Apple Store, discussing Apple guilty of Samsung patent such as 3G, wireless technology, prohibit Apple iPhone, iPad and iPod devices sold in america. Plagiarism and infringement of the warfare, Samsung and Apple compete with each other; there's a certain amount of difficulty in entering the U. S. market. This is actually the risk of Samsung Consumer electronics.
Samsung Electronics is a leading consumer electronics brand on the planet, is committed to fulfill consumer's need and reach the international standard, Samsung Electronics came to the realization international diversification, Samsung Gadgets only has the Authorized Partner shop in Hong Kong. To further enhance the customer services and the grade of products, it is recommend to develop the flagship store and even more retail trader all around the world, it could be development the sales network and strengthen the market power. Furthermore, to be able to prove the grade of products, it is recommend Samsung Electronics to help make the modification of the warrantee amount of products. Furthermore, in order to resolve inflation and the risk of China, it is recommended that the vegetable can move to the other place, such as Vietnam, this is a growing country, the price of recycleables and the price of labors and lands are also cheaper than China.
Undeniable, international diversification is correct flexible and efficient for Samsung Consumer electronics. International diversification both have benefits and drawbacks, but relatively, the advantages outweighs the disadvantages, Samsung reached in economies of level and economies of scope, because of their frequent improvement and advancement, successful in the international consumer electronics market accounted for an important position. However, Samsung Electronics are facing a whole lot of risks, such market risk and the exchange risk; lots of the unknown factors can be found. In the long run, Samsung must have a comprehensive intend to package with these problems.
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