IB Business Management SL 1.6 Multinational companies (MNCs) Question Bank

3. Top Star (TS)
Top Star (TS) manufactures sports footwear. Its products are sold through retail outlets and online. Sales of TS' footwear in retail outlets are falling. However, because e-commerce is growing rapidly, online sales are increasing. In 2018, TS' total domestic sales were $ 5000000 and total domestic market sales for the same time period were $ 50000000.
TS must consider several challenges:
- Some businesses in the sports footwear industry are finding that selling online leads to many problems and higher costs
- TS' website is not user friendly. Customer complaints about the website and ordering problems are increasing
- TS' presence in international markets is weak and its product range is limited. The directors of TS want to develop a new line of running shoes but the company has insufficient finance for research, development and creating brand awareness.
The directors think that T S should follow an external growth strategy. Two options are being considered:
- Option 1: Some directors propose a merger with a footwear manufacturer, the multinational company All Champion, which would allow TS to be more competitive
- Option 2: Other directors propose a merger with a footwear retailer that has a strong presence in domestic and international markets.
The finance manager believes that merging with All Champion could hurt TS' reputation. TS' factories may have to close, which the local population may resent.

3. Jacob Strutz (JS)
Jacob Strutz (JS) is an American multinational company that produces jeans. Founded in 1860, for 100 years JS enjoyed steady growth in sales, mostly in the United States and then in Canada and Mexico. In the 1960s and 1970s, when teenagers worldwide began wearing jeans, JS's sales increased significantly. JS's premier product is Strutz's No. 5 jeans, one of the best-known brands in the world.
In the late 1970s, JS operated 71 factories in the United States. In 1994, its sales peaked at $ 7.6 billion worldwide, but then began to decline. In 2002, JS made the decision to close its last remaining factories and outsource manufacturing to foreign manufacturers, whose quality was more difficult to control. By 2017, annual sales were only $ 4.5 billion. Even sales of Strutz's No. 5 jeans declined, and JS faced intense competition, including foreign competition.
JS briefly experimented with fast fashion, an industry practice developed in the United States in response to cheap, foreign imports. In fast fashion, new design concepts are quickly manufactured once they have been tested at fashion shows. Unfortunately, fast fashion worked against JS's brand identity. Surveys indicated that JS's brand has value and inspires loyalty, though focus groups of young consumers did not perceive JS as cool.
JS has been a leader in corporate social responsibility (CSR). Since the 1890s, it has pursued profits through values. More recently, JS introduced Strutz's chemical-free jeans. Because many of JS's suppliers operate in areas with few pollution regulations, to remain consistent with its image of CSR, JS is insisting that suppliers follow innovative but expensive chemical-free processes.

3. Anigam
Anigam is one of the biggest multinational companies operating in the animal drugs industry. In many countries, Anigam is well known for its promotional campaigns. It uses both above the line and below the line promotion.
Anigam has a portfolio of animal drugs at different stages of their product life cycle:
- Anitox is the first animal drug that Anigam developed and sold. It is a business-to-business (B2B) product used in veterinary clinics worldwide. Anitox has a high 25 % share of the global market. That figure has been stable for the last 10 years. Anitox is a well-established product in a market that is saturated and growing very slowly.
- A range of animal drugs was launched four years ago. One of them, Anisan, helps prevent heart attacks in aging animals; it already has a high 15\% share of a rapidly growing market. Some other animal drugs, however, are not performing as well: for example, Aniplus, which is designed to strengthen animals' immune systems against the flu and other contagious diseases. The market for products such as Aniplus is growing rapidly, but it is very competitive.
- Last year, Anigam launched a new drug called Anislim which helps to reduce obesity in domestic animals. Thanks to significant introductory marketing efforts and an appropriate promotional mix, the first sales results were good. It is, however, too early to forecast whether present sales for Anislim will be maintained.

3. Khumalo Pottery (KP)
Lungile Khumalo owns a small company called Khumalo Pottery (KP) in Johannesburg, South Africa. K P manufactures plates and bowls that are sold to small shops. K P has a unique selling point (USP) based upon traditional African designs and patterns decorating the pottery. K P does not pay its workers high wages and has never made anyone redundant, even during difficult economic times. Lungile always repeated to his workers that beauty was more important than quantity. Workers at K P could take time to produce beautiful pottery. They also developed great pride in the company and in their work.
Across the Atlantic, in the United States (US), pottery with African designs was becoming increasingly popular. As a result, several large American pottery manufacturers, operating on a very large scale, began to mass produce pottery with African-looking patterns. Thanks to their economies of scale, these American manufacturers sold their products at a very low price.
In 2013, one large American company opened a highly automated factory in Johannesburg. The aim was to produce and sell African-looking pottery to large retailers across sub-Saharan Africa. If successful, the American company would employ up to 150 South Africans. These jobs would not require much creativity: the pottery would not be hand-made, but the company would offer good wages with fringe payments (benefits).
The American company used penetration pricing in South Africa, and large retailers eagerly stocked their shelves with the pottery. K P 's sales started to decline almost immediately, as the small shops selling K P 's pottery were losing customers to the large retailers with lower prices.

5. FrioAire Appliances (FA)
FrioAire Appliances (FA) manufactures medium-priced and medium-quality refrigerators. It is a multinational public limited company. Its factory is located in a less economically developed country that has high unemployment, a tradition of autocratic leadership and labour costs lower than FA's home country. The factory is profitable, and FA pays consistently good dividends. Market growth for medium-priced and medium-quality refrigerators is limited.
As part of a strategic objective to increase productivity and to enter a fast-growing market for high-priced and high-quality refrigerators, F A is considering building a new factory in and relocating production to Germany. This would require closing the factory in the less economically developed country. The new factory will:
- use innovative technologies, including advanced robotics and 3D processes
- require fewer employees, but those it does require will need to have better skills and qualifications.
Germany has a highly skilled, qualified and productive workforce. The new factory would allow FA to reposition its products. However, FA would need to raise significant finance to build and equip the new factory.
FA's leadership style at the factory in the less economically developed country is autocratic. Members of FA's board wonder whether this style would be suitable for the new factory in Germany, where workers have more bargaining power because of their high skill level and the labour-friendly cultural traditions. In Germany, FA would have to follow more regulations regarding the environment, health and safety, and employee rights.
FA workers in the less economically developed country are very loyal to F A, which has continued operation through a civil war at significant cost to itself (for security). If FA were to close in the less economically developed country, the workers would not find such good jobs.

5. Coca-Cola India
The American company Coca-Cola is investing financially and strategically in India. Thirteen Indian businesses have received contracts to prepare and package Coca-Cola drinks across India. Over 7000 distributors and 2.2 million retailers, supermarkets and restaurants are selling Coca-Cola drinks. For Coca-Cola, success in India is an important part of the business's strategy, as India has a population of over 1 billion people. A question faced by Coca-Cola is whether it should use market development or market penetration strategies.
Coca-Cola India has a wide product portfolio including Coca-Cola and other brands such as Limca and Sprite. Coca-Cola India directly employs over 25000 people and has created indirect employment for more than 150000 people through its vast logistics, supply and distribution.
Coca-Cola India has recently piloted an online store for the growing e-commerce market through the website Coke2Home.com. The online store will provide consumers with an alternative channel to buy Coca-Cola drinks. Consumers can also learn about the full range of Coca-Cola's drinks on the website and sign up to receive special promotions via email or mobile phone message.
Although the online store is working very well in some cities, there are still some difficulties:
- Because delivery costs are high, Coke2Home.com accepts only large orders such as for parties and celebrations.
- Many Coca-Cola retailers and supermarkets fear that Coke2Home.com will create a new form of competition. and S Sharma, (31 May 2013), Mumbai Times Business, Times of India]