Which of the following are two important reasons for businesses to operate globally?

• A. Access to larger markets and diversification of risk
• B. Decreased innovation and limited resource availability
• C. Reduction in domestic competition and increased government regulation
• D. Lower consumer demand and higher production costs

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of why businesses choose to operate globally. Businesses expand internationally primarily to enhance their growth opportunities and manage risks more effectively.
2. Step 2: Identify the benefits of accessing larger markets. Operating globally allows businesses to sell their products or services to a broader customer base beyond their domestic market, increasing potential sales and profits.
3. Step 3: Recognize the importance of diversification of risk. By operating in multiple countries, businesses can reduce their dependence on any single market, which helps mitigate risks related to economic downturns, political instability, or other local disruptions.
4. Step 4: Evaluate the other options given. Decreased innovation, limited resource availability, reduction in domestic competition, increased government regulation, lower consumer demand, and higher production costs are generally not reasons businesses seek global operations; some are actually challenges or disadvantages.
5. Step 5: Conclude that the two important reasons for businesses to operate globally are access to larger markets and diversification of risk, as these provide strategic advantages for growth and stability.