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Why do companies frequently expand their business operations into other countries?
Outsourcing - they can access other sources in other countries (Canada for example has many Natural Resources - fresh water, mines, etc...)
Diversification - they can reach different types of people and different cultures to expand sales (for example, creating a line of sun protection in hot, sunny countries)
Reasons for becoming multinational of companies:
- To Broaden Markets-Saturated home markets ...ask for market development abroad ( Coca Cola,Mc Donalds etc.).
- Multinational seek new markets to fill product gap in foreign markets where excess return can be earned.
- To seek raw materials :- Multinational secure the necessary raw materials required to sustain primary business line ( Exxon,Wal-Mart ).Multinationals also seek to obtain easy access to oil exploration ,mining and manufacturing in many developing nations.
- To seek Technologies: - Multination's seek leading scientific and design ideas.
- To Seek Production efficiencies: By shifting to low cost regions like GE.
- To avoid political hurdles such as import quota, regulatory measures of governments, trade barriers etc.
- To Diversify : - To cushion the impact of adverse economic events
- To postpone the payment of domestic taxes
- To counter foreign investments by competitors
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