CASE STUDY ON DIVERSIFICATION STRATEGIES BY MNCS

PRESENTED BY: AANCHAL NARANG PARUL GUPTA MONICA MAHALWAL

HIGHLIGHTS OF CASE STUDY

HIGHLIGHTS OF THE CASE

The main aspect of the case shows that the international business environment has witnessed unprecedented changes over the past decades and so MNCs have been continously expanding Focuses on the major reasons that has been leading these companies to expand Also main focus has been on the various strategies used by MNCs in order to diversify.

INTRODUCTION TO MNCS

INTRODUCTION TO MNCS

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 MNCS

There are a number of diversification strategies and some of them are here 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
competition .

to enhance their growth and eliminate

Example: Samsung merged with Intels tizen.

Unrelated to businesss
-Taking of those activities which are unrelated to the existing businesses. Example AMWAY (U.S based ) deals in jewllery as well as beauty products

Diversification of the resource base.

-Internationalization of production that substitutes for production at home.

JHGVHG

Example - 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 related technology.

JHGVHG Example- Apple iphone and ipod touch.

Similar product lines

-similar type of product is provided with the help of related technology. Example - L'Oreal total repair shampoo and L'Oreal Paris color protect shampoo.

STRATEGIC SWOT ANALYSIS

STRENGHTS
Continuing growth Ability to create new markets

WEAKNESSES
Not adaptable to changing environment Potential conflicts.eg joint ventures

Allocation of resources

OPPURTUNITIES
Collaboration and strategic alliance

THREATS
Market changes Technological changes

Attacking weak companies

Political disruptions

FUTURE OF MNCs
50 Increasing international competition.
45
40 Global consumer awareness. 35

Technological advancement.
25 20

30

Series 2
Series 1

15 Reduction in friction among nations.

10
5 Growing role of private sector inn developing 0 countries.

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