Advantages and Disadvantage of Going Global

It is well-known to us that the advantages for a multinational organization are abundant. As far as my knowledge concerned, there are also some drawbacks with expanding the business to different counties. It is better for a company to carefully consider and analysis before deciding whether enter the foreign market.

The first advantage comes to people’s mind of a multinational company must be the reduced labor cost. The ability to source labor cheaply is a tremendous benefit to a company. This not only can quickly maximize a company’s profit but also to build a positive relationship with employees by supplying job opportunity in some depressed areas. The opportunity to access larger market is the second reason for most companies operate aboard. Many companies have demonstrated how important and profitable that able to access a larger market. KFC is one of America’s biggest fast-food chain, but the US isn’t the company’s biggest market, KFC generated more profit in China. (cnbc.com) The third advantage of a multinational organization is tax saving. Companies are able to run independent arms of the business in some places that lower tax rate. For some large companies, a 2% tax saving will give them a major advantage in operation.

On the other side, no one can ignore the disadvantages of multination firms. The multinational’s first concern must be the political environment in that area. An unstable political environment is catastrophic to a multinational firm. According to the article “a corruption scandal at state-run energy giant Petróleo Brasileiro SA, or Petrobras, has the government and banks keeping a close watch on any cash leaving the country.” (Maxwell Murphy &Emuly Chasan) This political scandal result many companies can’t get the money out of Brazil and put them in danger of bankruptcy. The second drawback is economic turmoil. It is obvious that nobody wants to run a business in a country where has a bad economic situation. According to the article, Brazil is facing serious recession. (Maxwell Murphy &Emuly Chasan) This not only make the stock market is bearish, many people are out of work, but also led to decrease value for multinational firms’ investment. For example, depreciation of local currency directly affects the earning in that country, million dollars investment could worth nothing in such an environment. Third issue about multinational companies is tax concern and change in accounting principle. As mention above companies can