Rahul Ganji
Business, Mr.Hounsell
Case Study: What price coffee?
- Why might coffee businesses be described as multinational companies?
A multinational corporation (MNC) is an organization that operates its production and delivers services in 2 or more countries. Similarly, coffee business such as Kraft, Nestle, Procter & Gamble, Sara Lee and Tchibo are described as multinationals because they have a single international base (head office) in the home country, and manages its operations in several other countries.
- Explain reasons why multinational companies in the coffee business operate on a global basis.
Multinational companies in the coffee businesses operate on a global basis in order to widen customer base, avoid protectionist policies, benefiting from cheaper production costs, spread risks and globalization of markets. By operating on a global basis, multinationals have the ability to increase their sales turnover, as a result of widening their customer base. Many companies often adopt global marketing strategies to in order to benefit from brand recognition. This also means that the business will have to face increase production levels, therefore benefiting from economies of scale. Multinationals usually expand overseas due to cheap production/labor costs, and also getting financial incentives from the host country’s government. Sometimes, multinationals also have the opportunity in avoiding protectionist polices such as tariff, quotas and embargoes that a country may impose. By being global, a multinational also spread its risks because if a market is international, then it doesn’t get affected to that much extent if a recession or disaster occurs in a particular/host country. Finally, a globalized business is very efficient due to improvement in technology and converging lifestyles and tastes in throughout the world economy.
