Question

Discuss why firms globalize and establish international production facilities.

Answer 1

Ans- Globalization of firms and establishing international production facilities is bountiful in several ways, some of them are as follows:

• Globalization open the door for expansion of the organization and access to new market. As its sole purpose of every organization to become as large as possible, so globalization helps.

• Globalization helps to gain edge over firm's competitiors. As, in the country where the firm is going to establish before it's competitiors then it may prove to gain competitive advantage of this.

• Globalization and establishing international production facilities helps in cost cutting. Due to easy availability of required resources and labour companies establish it's production unit in particular country to get advantage of this. Example: Most of the companies establish it's production unit in China, as it's government provides access to it's resources and it's labour are cheap.

• This way firms can use local talented people. Every country has pool of talented people, some of them migrate and some don't. So, by establishing production unit firms can use these talented people. It's will be cost efficient too.

• Government of many countries offers some incentives in term of tax leverage, easy availability of finance etc. So, by establishing production unit firms can increase it's revenue and wealth too.