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Running head: GLOBAL EXPANSION
Global Financial Management
Companies always target increased market shares to improve their access to more
consumers so that their products can be more helpful to a more significant number of people and
also to expand the company's net profits. Expansion of a business usually occurs at both local
and international levels, but the latter is the primary focus of the study. While most companies
would prefer development at local market levels, their targets and scopes may not be achievable
in the local markets and for that reason seeks to find alternative markets which in most cases,
refer to the global market. Global market expansion relates to the activities of a company in
markets that are different from its mother country and may be caused due to some factors like
challenges of operations in mother country or the saturation of the market in the company's
country of origin.
Expansion into European Markets or not?
In comparison to other markets outside of Europe that is the third world and Asia to be
precise, Europe still sways American investors to set shop in their countries. The advantages held
by the other markets are limited to minimum labor expenditure based on exploitation tendencies
of the said countries. Other countries like China and Japan are too competitive with trade
regulations too biased in favor of local companies to provide space for multinationals to thrive.
Many companies in the United States are torn on whether to base their global expansion into
Europe or to other commercial areas of the world. The European market constitutes 28% of the
worldwide GDP and hence is a significant operator in world business. On top of that, it boasts of
one of the world's most stable political situations, more so in continental Europe as well as a
steady purchasing power among its citizens based on its economic strength and the rates of
unemployment which are relatively lower than other countries. The icing on the cake for
companies that choose operations in Europe is the trade tariffs, and barriers that have been lifted
in cross-country interactions within the European Union provides a platform for minimal
expenditure in business operations (Mendiluce, 2018).
Advantages of expansion into Europe
Brand expansion is the most obvious benefit that comes from international development
and the case with Europe is not different in any way. Having a company's product in Europe let's
say in Britain makes the British people aware of the existence of the product brand. Then there is
the issue of language barriers which is almost non-existent for cases of American businesses
expanding into Europe. The additional factors include friendly trade regulations not only
amongst European countries themselves but also with America. Once a company has established
an outlet in any of the countries in Europe, the operations within other countries of Europe are
guided by EU regulations which lift trade barriers and tariffs for trade amongst member states.
Infrastructural developments in the region are also up to date thereby easing the logistical aspects
of a business.
Disadvantages of European expansion
In as much as there is a commercial policy that regulates trade based on a shared
understanding of the countries on continental Europe, the administrative and social laws still
vary from state to country. Therefore in cases of multinational expansions within Europe, a
company has to adhere to the diversely different rules and regulations in the member countries
which is a relatively time-consuming and challenging task. For instance, Germany has stringent
privacy policies and thereby always pits them in clashes with social media platforms Facebook
and Google. As for tax rates for corporation tax, Malta charges 35% while Ireland's stands at
12.5% just to quote but a few of the individual discrepancies.
Though Europe has the cultural advantage on other potential are...
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