Over the past two decades, the economy has increasingly become global in nature. Companies have consistently been able to generate more income from overseas operations. If fact, companies such as General Electric, 3M, and Caterpillar are earning more than half of their annual revenues from overseas operations.
Imagine the following scenario:
You are the director of new business development for your company, and your vice president wants to expand into new markets overseas. Your company's core competency is in the area of constructing, staffing, and operating customer call centers. Your VP reasons that since the cost of labor is cheaper overseas, the company will automatically generate a higher rate of return by investing overseas.
- What is your reaction to the vice president's premise? True? False? Why? Is it really that simple?
- Describe other types of risk that play a role in making such a decision to expand internationally.
- Should you always assume that foreign projects need to generate higher returns when compared with equivalent projects in the U.S.? Why or why not?
- Be sure to support your arguments from the readings and outside research.