Some MNCs operate a single business. However, many MNCs have more than one type of business strategy. What are the basics of multinational diversification? How do they choose their mix of different businesses? Explain both related and unrelated diversification.
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The basics of multinational diversification are that multinational companies seek to divest businesses that are mature or declining and acquire businesses that are in the introduction or growth stage. Multinational companies seek to achieve economies of scale and gain efficiencies by diversification. These multinationals also seek to achieve economies of scope, try to gain market share, and find avenues of investing cash.
Multinationals choose their mix of ...
This solution explains the type of diversification multinationals undertake. The sources used are also included in the solution.
Diversification of a multinational company
Scenario: A multinational organization in China has experienced dramatic growth in the past two years. Recently, the executive staff has been reading about outsourcing costs, and they want to renegotiate their contract with Outsourcing Company. For Outsourcing Company, this is the largest client and the third request to renegotiate the contract and reduce the price. Accepting the offer guarantees a large client but reduces the likelihood to accept new clients because of the demanding workload for the staff. Not accepting the offer to renegotiate the contract could result in releasing a significant number of employees and suffering a loss for the next two years, unless Outsourcing Company can land another large client. So, risk is involved. As the international management team, you have been tasked to consider all of the associated variables and choose the course of action that best supports Outsourcing Company. Should Outsourcing Company accept the offer and maintain the contract, or do you have an alternative suggestion? Negotiate among yourselves, the international management team for Outsourcing Company, for the best solution. Support your negotiations with an explanation.
Goal: To maintain sales numbers at Outsourcing Company.View Full Posting Details