?DQ 1: Summarize the most important benefits and risks associated with diversification into global markets. There are benefits and there are risks associated with diversification into global markets. Diversification into global markets means a company is seeking to have the control in one central area instead of in many different areas because ultimately they are seeking to control their costs.
The main advantage of a global market is that a company does not need to make a lot of variations of a product. They can instead just make one quality standardized product, which means it is easier for the company to keep everyone on the same page in regard to any changes or innovations to their products. Ultimately having a global market means that a company can more easily control and filter the knowledge they have down to the different locations.
Global Markets Essay Example
Unfortunately every strategy has its limitations. The risks associated with diversification into global markets are that a company must decide if the costs they will incur because of where they are geographically located are justified and that their geographic location can cause timing issues with their response to changing market conditions and needs.
We all know the market is always changing and being in one single location may mean that a company cannot always respond in a timely manner to a changing market. I found an article that discusses going global in the stock market. There are risks associated with an individual going global with their stock market portfolio just like there are with a company going global.
The article mentions that “since it is nearly impossible to predict which market will be a top performer in a given year, we think it makes eminent sense to hold a portfolio that’s diversified across a number of countries. It seems like people might be leery of having a global portfolio, but ultimately the global portfolios outperformed the domestic ones. If people would do their homework though when trying to decide how to invest, they would see that there is less risk associated with having a global portfolio.