The Advantages and Disadvantages of International Business Diversification
The Advantages and Disadvantages of International Business Diversification - Essay Example
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Extract of sample The Advantages and Disadvantages of International Business Diversification
This paper illustrates that there are fundamental risks associated with a business maintaining a singular posture for serving local markets and only specializing in one category or type of product and service. These risks include sudden or unpredictable changes in consumer behavior and purchasing intention, the ability of the firm to extend the product lifecycle of its singular product, or threats of competitive entry into the servicing market. As such, corporations seek diversification strategies to improve the business position. A company is considered to be diversified when it runs more than one business unit. The terminology business in the case of diversification includes either changing the business structure or launch of new product lines either related or unrelated to the core product that founded the business. The rationale for diversification generally includes stagnation of existing local market or when the market becomes unattractive due to increases in a competitive rivalry. Most diversification occurs through the result of acquisitions, such as in the case of the Walt Disney Company that switched from production of animated films to acquisition and operation of resort vacation properties or the Virgin Group that started with music production and diversified to include mobile telephony through an acquisition of telecommunications companies. There are many risks of servicing only a singular market with one product or service that has been attributed to placing all of a firm’s proverbial eggs in a single basket. Virtually every product or service offered by a corporation has an established life cycle, moving from a growth phase to an eventual decline along the life cycle model in which sales and demand begin to decline. The life cycle of the product is determined by a number of factors, including consumer behavior changes, innovative product releases by competition that outperforms, competitive pricing instances that drive price-sensitive buyers to rival firms, or even new market entrants that increase choice and lower switching costs for consumers to defect to a rival brand.
This essay describes the advantages and disadvantages of international business diversification that will either hinder productive business growth and profitability or cause problems in attempting to recapture the diversification costs and labor…
Beta is used to measure risk. A stocks beta indicates the sensitivity of the stock’s returns to the market returns (Madura 2006, p. 304). Madura (2006, p. 304) states that investors who have a diversified portfolio use beta to determine how well their portfolio reflects movements in the market.
According to the research findings joining any economic institution can have both positive and negative consequences but the key is to be aware of these and work diplomatically to create win-win situations. Considering that EU has agreed to help Ireland in recovering from the recent financial crisis it appears important to remain a member of the EU.
In some cases it involves moving into new areas which are untapped to introduce their products while in some cases the company moves to new countries to reduce effects by the economic and political factors. Diversification happens after great deliberation by the top level management due to high risk involved in moving to areas the company has never been before (Allen and Gorgeon 2007, P.1).
Alternative Dispute Resolution (ADR) is a general term used to describe different methods employed to resolve arising disputes instead of filling for litigation.1 The fundamental principle of ADR is that disagreeing parties should always try to avoid litigation when possible.ADR when applied to internal business, aims to resolve disputed expeditiously and fairly by limiting the process within the business managers together with their legal advisers and avoiding litigating lawyers, judges as well as courts.
Advantages and Disadvantages of Conducting Business Offshore.
Offshore company relates to the incorporation of a company overseas, and it is utilized in a way that investors are able to avoid tax laws imposed to business in their home countries. Moreover, the offshore are legal in any if they are set for the right purpose regarding the business in which they are involved.
International Corporate Diversification.
Many business scholars have provided extensive evidence indicating that, in a globally competitive economic environment, numerous companies worldwide are progressively extending operations to foreign market segments.
The author suggests that if an investor purchases some shares in his home country i.e. and also includes in his portfolio a number of shares from international countries like the United States and European countries, the risk associated with both the investments would be different based upon the various political, economic and investment factors.
when applied to internal business, aims to resolve disputed expeditiously and fairly by limiting the process within the business managers together with their legal advisers and avoiding litigating lawyers, judges as well as courts.
According to the American Bar Association,