Q.4:- Why are global enterprises considered superior to other business organizations?
Global enterprises are large industrial organizations which extend their industrial and marketing operations through a network of their branches or subsidiaries in several countries. These enterprises are considered superior to other private sector companies and public sector enterprises because of certain features which are as follows
(i) Availability of Funds These enterprises can survive in crises and register higher growth as they possess huge financial resources as they have the ability to raise funds from different sources such as equity shares, debentures or bonds. They are also in a position to borrow from financial institutions and international banks as they have high credibility.
(ii) Diversification of Risk Global enterprises usually operate in different countries and enter into joint ventures with domestic firms of the host country. Thus, losses in one country may be compensated by profits in another country. Risk is also shared by the domestic partner in case of joint venture.
(iii) Advanced Technology Global enterprises conform to international standards and quality specifications as they possess superior technologies and methods of production.
(iv) Research and Development (R&D) High quality research involves huge expenditure which only global enterprises can afford. Therefore, these enterprises have highly sophisticated research and development departments which regularly come up with product as well as process innovations making these firms globally competitive.
(v) Marketing Strategies Global companies use aggressive marketing strategies in order to increase their sales. Their market information systems are reliable and up-to-date leading to effective advertising and sales promotion. They manage their brands effectively as they have global brand equity.
(vi) Wider Market Access The operations and marketing of global companies extend to many countries in which they operate through a network of subsidiaries, branches and affiliates. Due to this they enjoy a far wider market access than domestic firms.