Globalization Of Companies Research Paper Example
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A company may opt to go global with the main aim of increasing its sales. An increase in sales subsequently improves company revenue. If a company is situated in the United States of America, it should recognize that about 96% of the global population resides outside the U.S., a fact that blatantly explains that customers are global. Companies, which globalize their operations enjoy a broad customer base outside the limits of the domestic market (Biggs, 2013).
Globalization increases company profit margins. The global market provides a relatively less competitive environment. Thus, price pressures are reduced. Companies that operate in the U.S. usually face stiff competition, hence globalization of their business operations, services, and products increases their profits. Already developed markets may have high-cost standards hence, in an effort to increase the profit margin; they are compelled to expand their operations to regions that have lower costs of production (Chand, 2015).
An excellent way of increasing a company’s business domain is to expand its operations globally in order to enjoy economies of scale (Biggs, 2013). Globalization can enable companies realize better scales of economy, especially those that formerly operated in smaller domestic markets. Moreover, a company may seek to enjoy its products’ unique differentiating advantage in the global market about its brand, model, or patent rights.
Different countries have different levels of development, potential, and growth rates. A company may expand its business globally in order to spread out risks other than to limit the company’s reach to regions that experience low growth rates and limited customer base (Chand, 2015). A company may venture into globalization of its business products and services to enjoy incentives found in the global market. For example, the U.S. government provides its member companies with incentives. It supports member companies in starting exportation products and services (Biggs, 2013).
The Asia-Pacific Cooperation (APEC) is an open regionalism approach which considers a variety of principles (APEC, 2011). It appreciates the significance of investments in promoting economic development, stimulating growth, creating employment opportunities, and ensuring a continuous flow of technology within the Asia-Pacific region. APEC stresses the need to promote domestic atmospheres that are conducive to entice prospective foreign investors. The environment created should have adequate infrastructure, ample human resources, stable growth rates, and well-enforced laws that safeguard property rights.
The APEC economies engage both reception and provision of foreign investments. The APEC member economies conform to principles that comprise the following;
Transparency of economic laws, investment policies, regulations, and administrative guidelines,
Non-discriminative treatment between the source economies with regards to equity in expansion, establishment and investment operations by investors unless stated otherwise by the domestic laws, regulations, and policies,
Provision of investment incentives to attract foreign investment,
Minimized use of performance requirements that discourage investments and globalization of company operations, and
Liberalization of the investment fund transfers, e.g. profits, dividends, loan payments, and royalties, in freely transferable currency.
Moreover, the member economies suggest and agree that foreign investment disputes should be settled through consultations and negotiations among the parties involved or arbitration procedures accepted by the affected parties. The member countries should strive to reduce risks of double taxation on investments and regulate foreign investments as long as they conform to the host economy’s legal requirements. The APEC member economies are implored to allow entry and sojourning of personnel for foreign investment purposes (APEC, 2011).
In China, all foreign investments are expected to go through three distinct steps that comprise project assessment and approval, registration, and approval of investment contracts and association articles. Other than the Laws of the Chinese government on foreign investments, it also provides room for online application and approval of investment processes to ensure better transparency and simplification of the process. The country provides security through formulation and enforcement of policy rights and conditions for expropriation that creates an attractive investment platform.
The Berne Convention, Madrid Agreement, and Paris Convention are some of the treaties that protect and safeguard properties. In addition to the treaties, the country recognizes the roles played by policies for protecting intellectual properties through patent rights, trademarks, copyrights and anti-unfair competition policies.
China has laws that regulate entry and stay of foreign personnel and firms. The country imposes a 25% taxation rate on a company’s taxable income and subjects dividends to withholding tax. China has signed 93 Double Taxation Agreement (DTA) of which 89 of them is active in an attempt to reduce the risk of double taxation.
The United States of America provides investors with non-discriminate treatment and freedom to invest without screening (APEC, 2011). The U.S. government encourages foreign investment through provisions incentives (e.g. direct loans, grants, and loan guarantees) and policies. The country protects the property rights and regulations for expropriation as a means of attracting foreign investments.
The U.S. government has comprehensive state and federal laws that safeguard trade secrets. It is also a party to Conventions like the Paris Convention for the Protection of Industrial Property and Patent Cooperation Treaty. The State’s exchange rate regime is freely determined in the foreign exchange market with no restrictions on repatriation of investment-related funds. The U.S. does not screen foreign investments and in case a dispute arise; the conflict is settled in domestic courts. Moreover, the U.S. has legal provisions that regulate temporary entry of business personnel (APEC, 2011).
APEC. (2011). 2010 Guide to Investment Regimes of APEC Member Economies (2nd Rev.). Retrieved from http://publications.apec.org/publication-detail.php?pub_id=1158
APEC Secretariat. (2011). Guide to Investment Regimes of APEC Member Economies. Singapore. Retrieved from http://www.economia.gob.mx/files/comunidad_negocios/ied/guia_inversionista.pdf#page=1&zoom=auto,-107,848
Biggs, R., P. (2013). 10 Reasons to Go International. Portland: Atlantic International Growth Consultants. Retrieved from http://www.choosewashingtonstate.com/wp-content/uploads/2013/06/10_Reasons_to_go_International.pdf
Chand, S. (2015). 8 Reasons Why Most Companies Prefer to Go Global – Explained! Retrieved from http://www.yourarticlelibrary.com/business/8-reasons-why-most-companies-prefer-to-go-global-explained/13176/
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