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Page 1: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business
Page 2: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

Multinationals and the Global Environment of

Business

© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/IrwinIntroduction to Business

Chapter Four

Page 3: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

1. Describe the role of multinational companies in global production and trade today and the way they affect the countries in which they operate.

2. Discuss how multinationals are affected by the political systems of the countries they operate in and especially by the desire of countries around the world to pursue free trade and reduce or abolish tariff barriers .

3. Describe the nature of the specific forces in the global environment and appreciate why they present so many challenges for multinational companies today.

4. Describe the nature of the general forces in the global environment that affect all companies as they compete in industries or countries around the world.

5. Identify the main challenges facing multinationals in managing global business commerce and business occupations, and choosing a method of global organizing .

Page 4: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Multinational companies• Are operating in a global environment and conditions

such as opportunities and threats that affect the multinational company’s profitability

Page 5: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

• Review SWOT analysis in Chapter 3

• The giant multinationals can dominate business activity in most industries

Page 6: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Significance of Multinationals• In business commerce, multinationals control the giant

production and distribution of products that handle the majority of world trade

Page 7: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Significance of Multinationals Production is worldwide and tends to countries where

labor costs are low and therefore higher productivity

Page 8: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Significance of Multinationals Multinationals have grown so large they can affect the

well being of the countries they do business in as the role of the government may be to control the relationship of this company and the people

Page 9: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Significance of Multinationals Company and individual behavior are affected by a

country’s choice of property rights and is a main determinant of its political system

Page 10: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Capitalism Capitalism as a business system ( private ownership

of the means of production and distribution -- is most commonly found in representative democracies and may be illustrated as a continuum or a range

Page 11: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Capitalism At your left is “strong” capitalism where individuals

are ultimately responsible for their own future success – “strong” property rights

Page 12: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Capitalism At you move right capitalism becomes “weaker” as

the government and/or welfare capitalism establishes a social support framework to aid citizens who don’t support themselves

Page 13: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Capitalism Capitalism varies as to the amount of a government

social support by country

Canada is a “stronger” capitalist country compared to Sweden

Page 14: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Totalitarian government One person, usually a dictator, or party exercises

absolute control over all business and social activity

Page 15: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Communism Not only totalitarian but all property is owned by the

state (no property rights.) or government and distribution is totally controlled by the state

Page 16: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Communism Controls the creation of wealth as there isn’t any

motivation to produce more product

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Chapter 4Multinationals and the

Global Environment of Business

Free trade agreements Established by countries to reduce or eliminate price

barriers to and are designed to increase the flow of products among countries

Page 18: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Tariffs Taxes on imported products that raises the price and

may make them uncompetitive with the local product

Page 19: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Free Trade Zones The establishment of free trade areas creates an

opportunity for global manufacturing companies as it minimizes the cost and barriers to trade

Page 20: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Free Trade Zones Free trade areas increase competition and some

multinationals consider this a threat rather than an opportunity

Page 21: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Global Environment You may want to think of the global environment as a

worldwide marketplace and as the set of forces surrounding you that determine the ability to obtain productive resources of land, labor, capital, and enterprise

Page 22: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Global Environment Every product goes through three stages: Input Conversion Output In the process of making and selling of goods and

services

Page 23: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Forces in the Global Environment The specific forces directly affect the company’s

business model while general forces affect all multinationals

Specific forces are directly related to profitability and are suppliers, distributors, competitors, and customers

Page 24: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Forces in the Global Environment Customers and competitors are also specific forces and

both affect the company’s market share or that portion of a product sold in a market by one company

Page 25: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Forces in the Global Environment General forces in the global environment affect

multinationals access to resources and determine worldwide demand and include, economic, socio-cultural, demographic, and legal forces

Page 26: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Forces in the Global Environment These forces are general because they affect all

multinationals and their suppliers, distributors and customers

Page 27: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Global outsourcing of suppliers is not only a very controversial issue as it

is the process by which companies purchase supplies, labor or raw materials throughout the world

Page 28: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Global outsourcing An intermediary such as a agent, broker, or

wholesaler is a company that distributes or supplies a product to another company

Page 29: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Challenges of global commerce Building a global competitive advantage, Integration

of the Internet into the business models

Page 30: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Challenges of global commerce Managing ethically Incorporating the differing cultures into global

planning and organizing

Page 31: Multinationals and the Global Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

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Chapter 4Multinationals and the

Global Environment of Business

Globalization Has led to the development of a diverse supply of IT

workers in both Europe and Asia as these workers are linked through the Internet as a part of the global workforce


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