Identify and discuss the general ways in which companies can increase their profitability and profit growth through global expansion

Answer 1

There are several ways that companies can increase their profitability and profit growth from global expansion. First, companies can take goods or services developed at home and sell them internationally. In so doing, a company instantly expands its market, often by using the same business model. It should be noted that benefits may come from the fact that products are superior, but it is also important that companies use existing competencies in foreign markets as well. Second, companies that expand their sales volume through international expansion can expect to realize savings from economies of scale, thereby increasing profitability through the ability to lower their cost structure. Third, companies can realize location economies by performing value-creation activities in the optimal location for that activity, wherever in the world that may be. Different countries offer opportunities to both lower costs and increase differentiation. Finally, a company can leverage the skills of global subsidiaries by applying best practices and good ideas that may come from anywhere in the organization.