1 mncs overview

8/8/2019 1 MNCs Overview

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Chapter 1Multinational Management in a

Changing World


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MultinationalManagement

Formulation of strategies and managementsystems to take advantage of international

opportunities and respond to international threats


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The Natureof the Multinational Company

Any company that engages in business functionsbeyond its domestic borders

Includes both large and small companies


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The Largest Companies in the World


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Globalization

Worldwide trend of the economies of the worldbecoming borderless and interlinked.

Not all economies are participating or benefitingequally in the process.

Important forces are driving globalization.

It is also important to look at classifications of theworlds economies.


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Countries of the World:The Arrived,the Coming, and the Struggling

an r ca.

Developed countries: mature economies, substantial percapita Gross Domestic Product, international trade, and

investments. Developing countries: economies grew extensively over

past two decades, e.g., Hong Kong, Singapore, SouthKorea.

Transition economies: countries that have changed tomarket/capitalistic systems, e.g., Poland, Czech, Hungary.

Less developed countries: No significant economicprogress and mostly located in Central and South America

and Africa.


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Selected Economies of the World


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The Globalizing Economy


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The Globalizing Economy:Seven Key Trends

Disintegrating borders

Growing cross-border trade and investment

The rise of global products and global customers

Privatizations

New competitors in the world market

The rise of global standards of quality andproduction

The Internet and information technology


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Sell Anywhere, Locate Anywhere

World trade growth: average 6.5%/year (1990-2000).

Nearly half of the $5+ trillion in world trade is among theEuropean union, the U.S., and Japanthe TRIAD.

Foreign Direct Investment (FDI): a multinational companyin one country has an ownership position in anothercountry.

FDI increased by more that 36% between 1996 and 2000.

Post 9/11 has seen a decline in FDI.


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Top 25 Companies by ForeignAsset Ownership


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Foreign Direct Investment

Developed countries get the bulk of FDI (69%)while developing countries get around 30%.

Least developed countries get minimal FDI. Implications for managerssignificant

opportunities around the world.

Multinational managers should look at risk ratingof countries.


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The Internet and InformationTechnology

Electronic Communication E-mail, WWW, etc.

Allows multinationals to communicate with

company locations throughout the world. Multinationals can also monitor worldwide

operations.

Information technology is spurring a borderlessfinancial market.


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The Rise ofGlobal Products andGlobal Customers

The needs of customers for many products andservices are growing more similar,

e.g., McDonalds, Boeing, Toyota. Global customers search the world for their

supplies without regard for national boundaries.


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Privatization

Sale of government-owned businesses to privateinvestors,

Usually through stock or direct sale to othercompanies.

Two types of privatization contribute to the globaleconomy

Developed Countries

Make formerly government-controlled enterprisesmore competitive in the global economy.

Developing Countries


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New Competitors

Free market reforms are creating a potential groupof new competitors.

Korean, Russian, Taiwanese, and Mexicancompanies are all emerging.

Chinese companies are also on the move.


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Top 25 Emerging MarketEconomies


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New Competitors are Emerging

Global trade has two important effects indeveloping new competitors:

When developing countries are used as low-wage platforms for high-tech assembly,multinationals facilitate the transfer of

technology. Aggressive multinationals are also expanding

beyond their own borders.


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The Rise ofGlobal Standards

Companies can make one or only a few versions ofproduct for the world market.

This is cheaper than making different versions fordifferent countries.

Drive to develop common standards to save

money.


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Global Standards

Consistency in quality also an importantrequirement of doing business in many countries.

International organization for standardization (ISO)in Geneva, Switzerland

Developed a set of technical standards (ISO

9001:2000 series).


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Characteristics of Next Generation ofMultinationalManagers

n ers an ng o na ona cu ures

Global mindset

Ability to work with people from diverse backgrounds

Long-range perspective Ability to manage change and transition

Ability to create systems for learning/changingorganizations

Talent to motivate all employees to achieve excellence

Accomplished negotiation skills

Willingness to seek overseas assignments

Understanding of national cultures

1 mncs overview

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