How does globalization impact competitive advantage?

Globalization significantly influences competitive advantage by increasing competition while also opening new markets. As businesses expand their operations internationally, they encounter a wider array of competitors from different regions, each bringing unique strengths and strategies. This heightened competition forces companies to innovate continually, improve their offerings, and seek efficiencies to maintain or enhance their market position.

Furthermore, globalization allows firms to access new customer bases, tapping into previously unreachable markets. By entering these new markets, companies can scale their operations, diversify their revenue sources, and reduce dependence on domestic sales. This dual effect enhances their potential for competitive advantage by combining the need to meet increasing competition with the opportunities to leverage growth in diverse geographic areas.

The other choices do not accurately reflect the comprehensive impact of globalization on competitive advantage. For instance, the assertion that globalization reduces the number of global competitors oversimplifies the competitive landscape, as many firms are actively seeking international expansion. Similarly, the idea that globalization restricts resource allocation across borders contradicts the fundamental principles of global trade, where the free movement of resources is essential. Lastly, while globalization can lead to some standardization of business practices, it is often the case that successful companies adapt their strategies to suit local markets rather than applying a one-size-fits-all approach.