Business Growth: Domestic Expansion & Multinational Operations

Domestic Growth Strategies

Domestic growth involves productive investments within the enterprise to increase productive capacity, also referred to as asset growth. This is achieved in several ways:

Major Domestic Strategies:

1. Market Penetration: Increasing sales by improving product quality, advertising, promotion, and price reductions.
2. Market Development: Introducing the company's current products into new markets.
3. Product Development: Remaining in the current market but developing new products related or complementary to existing ones.

Diversification Strategies

Diversification involves adding new products and new markets, expanding the company's portfolio of businesses. Key types include:

1. Horizontal Diversification: Adding new complementary or substitute products similar to existing ones, aiming to offer a more diverse range to attract new customers.
2. Vertical Diversification: Growing by adding new activities related to existing ones but within the same sector (e.g., acquiring suppliers or distributors).
3. Concentric Diversification: Producing new products, technologically related or not, and selling them in new markets similar or different from traditional ones.
4. Conglomerate Diversification: Adding new products and markets that have no relation to the company's traditional business.

Multinational Enterprises (MNEs)

MNEs consist of a parent company with numerous subsidiaries operating in different countries, all sharing common goals. The parent company controls subsidiaries through capital participation and manages planning and operations.

Advantages of MNEs:

• Achieve lower costs by exploiting economies of scale.
• Benefit from investments in Research, Development, and Innovation (R&D&I).
• Often best positioned for global competition, judged by group performance.

Reasons for Multinational Dimension:

1. Limited Domestic Markets: The narrowness of national markets forces companies to seek outlets abroad.
2. Distribution Control: Establishing operations abroad to control product distribution directly.
3. Overcoming Trade Barriers: Setting up operations within a country to bypass tariffs or quotas.
4. Cost Reduction: Locating different activities in various countries based on cost advantages (e.g., labor, resources).

International Expansion Strategies

1. Exporting: Selling products abroad, either directly or through intermediaries in the host country.
2. Association Systems: Producing or selling in another country through cooperation agreements (e.g., licensing, franchising) with local companies.
3. Direct Investment: Establishing subsidiaries in foreign countries or creating joint ventures with local partners.

Pros and Cons of MNEs in Host Countries

Potential Benefits:

• Can favor the development of emerging economies by facilitating business activity and creating employment.

Potential Drawbacks:

• Can generate technological dependence on foreign entities.
• Risk of overexploitation of natural resources.
• Potential for abusive working conditions.

Note: Reactions against these negative aspects are increasing from international bodies and anti-globalization movements.