HIGHLIGHTS OF THE CASEThe main aspect of the case shows that the international businessenvironment has witnessed unprecedented changes over the pastdecades and so MNC’s have been continously expandingFocuses on the major reasons that has been leading thesecompanies to expandAlso main focus has been on the various strategies used by MNC’sin order to diversify.
INTRODUCTION TO – MNC’S INTRODUCTION TO MNC’S• Multinational corporations (MNCs) are huge industrial organizations having a wide network of branches and subsidiaries spread over a number of countries.• MNCs practices production and provides services to countries other than the home country.• The two main characteristics of MNCs are their large size and the fact that their worldwide activities are centrally controlled by the parent companies.
WHEN SHOULD A MNC DIVERSIFY? It is faced with diminishing growth prospects in present business It has opportunities to expand into industries whose technologies and products complement its present business. It has a powerful brand name it can transfer to products of other businesses to increase sales and profits of these businesses
Need for Diversification Growth and expansion. Risk involved in single business strategy. Contribute towards more profit margins. Powerful brand name. To meet the utmost competition in market.
DIVERSIFICATION STARTEGIES OF MNC’SThere are a number of diversification strategies and some of them arehere under:Strategies for entering new industries Related diversification strategies Unrelated diversification strategies Multinational diversification
ENTERING A NEW BUSINESS Joint Ventures Mergers Acquisitions
Joint venture :- involving two or more companies(domestic or international ) joining temporarily.Example:Nokia with Microsoft in 2011, coco cola with Mc Donalds Takeovers : Microsoft takeover Skype in 2011. Mergers :-Companies unite together to enhance their growth and eliminate competition .Example: Samsung merged with Intel’s tizen.
Unrelated to businesss-Taking of those activities which are unrelated to the existingbusinesses.Example – AMWAY (U.S based ) deals in jewllery as well asbeauty products
Diversification of the resource base. –-Internationalization of production that substitutes for production at home. JHGVHGExample - Tommy Hilfiger(American brand)- outsources its production to countries like India and China.Unrelated technology -A similar type of product is offered with a help of unrelated technology.Example: Nokia shifting its operating system from symbian to android.
New product line-new type of product or service is provided with the help of relatedtechnology. JHGVHGExample- Apple iphone and ipod touch. Similar product lines-similar type of product is provided with the help of related technology. Example - LOreal total repair shampoo and LOreal Paris color protectshampoo.
STRATEGIC SWOT ANALYSISSTRENGHTS WEAKNESSESContinuing growth Not adaptable to changing environmentAbility to create newmarkets Potential conflicts.eg joint venturesAllocation of resourcesOPPURTUNITIES THREATSCollaboration and strategic Market changesalliance Technological changesAttacking weak companies Political disruptions
FUTURE OF MNC’s Increasing international competition.5045 Global consumer awareness.403530 Technological advancement.25 Series 220 Series 1 Reduction in friction among nations.1510 5 Growing role of private sector inn developing 0countries. 1/6/20021/5/2002 1/7/2002 1/8/2002 1/9/2002