Export Based Strategy Vs Equity Investment Overseas Strategy

Expanding Overseas

Globalization is one of the concept many companies are employing to increase their markets share. Globalization extending the company’s operation level and products or services to foreign or international countries. Normally companies employ different strategies to expand their operations into the international level. Among the employed strategies include the export strategy and equity investment. Export strategy involves shipment of the organization goods and commodities to different country for trade. Equity investment normally refers to the holding and buying of stock shares on a stock market by firms and individuals in income anticipation from capital and dividends gains, as the stock value increases. To manage this, a company needs adhere to all legal requirements employed to control foreign trade indifferent nations. This paper focuses on analyzing the expansion of a Saudi Arabia based company into global level using export strategy and overseas equity investment strategy.

Export Based Strategy

The best type of business to expand to the international level using export strategy is a business that involves the manufacturing of goods or production of goods which can be transported and sold in a different country.  This would include a company producing electronic gadgets, horticultures, farm products, clothing, toys, food products, cosmetics, pharmaceutics products, or furniture among other things. Goods producing companies are selected in this case since it would be easier to produce in Saudi Arabia and ship the goods to the neighboring companies. One of the best products to export include insulated wire and cables. One of the main reason why this is the best product to export is that it is not highly perishable, it does not experience a high level of restriction in different countries and that it can be transported in bulks to different countries in the world (Cavusgil & Shaoming, 1994).

Insulated cables and wires are highly needed in electrical wiring in the new buildings and also in LAN installation in different buildings in the world. Although the company will experience competition from other international companies, the Saudi Arabia based country will have an advantage of reduced cost of production due to low land value and availability of cheap labor as compared to other competitors in the developed nations. In this regard, the company will manage to sell its products in a more reduced cost and thus, emerging to be more competitive than others in the market. However, the company has to maintain high level of quality to be able to compete with internationally known insulated cable and wire companies. Saudi Arabia is strategically located such that it is easy to access a number of countries in Europe, Asia and Africa by use of the sea. In this regard, it would be easy to ship the bulk insulated wires and cables in different parts of the world without incurring so much cost. This will easily make it easy to transport the products to different parts of the world and to enhance the company’s expansion at the international market (Cooper & Elko, 1985).

Expansion via Equity Investment

The best company to expand using equity investment in foreign countries is a service providing company such as Parcel Delivery Company, or Communication Company, and Banking Company, among others. The best Saudi Arabian company to invest through equity in a foreign based nation is a communication company. In this case, the company will buy shares from another stable communication company based in a foreign nation that has expanded internationally. The Saudi Arabia based company should investigate similar or different foreign companies that are financially stable and that signify the potential to grow even further and buy their shares. This will help the company to invest in the international company and to share the profit with well-established companies. To invest in an international company, the Saudi Arabia Company needs to be sure of the financial status of the international company. This include the company’s ability to grow and expand to increase the investors divided in the future (Greenberger, 2008).

Normally, communication companies manage to make constant range of profit based on their infrastructure and quality of signals or the quality of other services. In addition, it can manage to increase its market share by embracing service diversification. For instance, a company offering mobile communication services can also offer digital television signal transmission, and internet services among others. In this regard, the company gets an assurance of ascertain income each year from the company they invested and hope for increase in their yearly return based on the company’s ability to expand in the future. Investment on equity will provide the Saudi Arabia based company to own part of an international company. In this regard, the company can continue adding its ownership of the international company by increasing its shares. This is done by purchasing even more shares when there is a chance. The higher the number of shares the higher the company’s ownership in a foreign company. Although any company can expand through equity, it would be better to expand to similar companies which the company can acquire in case it manages to own more shares in the future (Greenberger, 2008).

Share with your friends
Order Unique Answer Now

Add a Comment