1 mncs overview
TRANSCRIPT
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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