Question

- Please identify 2 companies - in separate industries - that have chosen to compete globally or in foreign markets. Identify which of the three main approaches to international strategy they might employ.  

- Why do companies in one industry choose to diversify into other industries?

Answer 1

Solution:

a)
The 2 chosen companies are Apple and Amazon. Both the companies operate in different industries and they have operations that differ from each other. Both the companies operate worldwide and have their operations in major markets across the world. The three main approaches that these companies might employ to their intrnational strategy are as follows,

• Joint Venture
  This is one of the widely used strategy toexpand theoperations ina foreign market. With joint venture we utilise the resources of the domestic company to set up our operations and until then use the resources of the JV company. This helps in expanding to international markets effectively because of using the domestic expertise of joint venture.
  
• Merger/Acquisition
  Acquiring a new company in the foreginmarket and then settingup the operations in the foreignmarket is another strategy that is used by the companies to expand into international markets.
  
• Outsourcing:
  Many companies outsource their operations in a foreign market with appropriate supliers. Outsourcing is used when the firm does not intent to spent too much on a singlemarket. The outsourcing is generally used to test the markets.

Hence, these are 3 possible ways in which these companies can expand their operations internationally.

b)
Companies choose to diversify into other industries simply to spread the risk. By operating within one industry the company has all the balls in onebasket. Hence, this is very rosky because if the industry goes down the business as well goes down. HEnce, to diversify this risk companies generally prefer to invest into other related or unrelated industries to diversify their risks and mitigate the dangers to business because of such risks.