Growth Through Going Global

Growth Through Going Global The conventional theory of the firm is based on the short-run profit maximization. more actions of firms whitethorn be seen to conflict with this aim and yet could be coherent with the aim of pertinacious-run profit maximization. For example, policies to increase the size of the firm or the firms shargon of the market may involve heavy advertising or low prices to the detriment of short-run profits. But if this results in the firm comely larger, with a bigger share of the market, the resulting economic power may change the firm to make larger profits in the long run.In galore(postnominal) respects, a firms global outline is simply an extension of its strategy within its own domestic market. However, opening up to global markets can fork over an obvious means for a business to expand its markets and spread its risks. It is as well a means of reducing costs, whether through economies of scale or from accessing bald-faced sources of supply or low -wage production facilities. A firms global growth strategy may involve simply exporting or opening up factories abroad, or it may involve merging with businesses abroad or forming strategic alliances.The result is that the global business environment has tended to become more and more ompetitive. What will a growth-maximizing firms price and output signal be? Unfortunately there is no simple formula for predicting this. In the short run, the firm may choose the profit maximizing price and output so as to provide the greatest funds for investment. On the other hand, it may be prepared to sacrifice some short-term profits in pose to mount an advertising campaign.It all depends on the strategy it considers most capable to achieve growth. In the long run, prediction is more difficult still. The policies that a firm adopts will depend crucially on the assessments of market opportunities do by managers. But this involves Judgment, non fine calculation. Different managers will sup pose a situation differently. One prediction can be made. Growth-maximizing firms are likely to diversify into different products, especially as they approach the limits to expansion in existing markets.It is difficult to draw firm conclusions about the prevalent interest. In the case of sales revenue maximization, a higher output will be produced than under profit maximization, but the consumers will not necessarily pull ahead from lower prices, since more will be played out on advertising costs that will be passed on to the consumer. In the case of growth and long-run profit maximization, there are many possible policies that a firm could pursue.To the extent that a concern for the long run encourages firms to look to improved products, new products and new techniques, the consumer may benefit from such a concern. To the extent, however, that growth encourages a greater level of industrial concentration through merger the consumer theory of the firm, the degree of competition a firm faces is a crucial factor in determining just now how responsive it will be to the wishes of the consumer. References http//classofl . com/homework-help/economics-homework-help/