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The Multinational Enterprise (MNE)Pushpakaran, KMBA (SJP), PhD(Reading)

12th March, 2012

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The Multinational Enterprise (MNE)

Objective

The nature of multinational enterprises

Strategic management and multinationalenterprises

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Objectives

Characteristics of MNEs

Internationalization process

Why firms become MNEs?

Strategic philosophy of these firms

Introduction to a country/firm framework forexamining a firms competitiveness

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The Multinational Enterprise (MNE)

A company headquartered in one country butwith operations in one or more othercountries

MNEs often represent the fact that they areforeign-held.

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Table 1. 1: The Worlds Largest 500 Multinational Enterprises, 2010

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The Worlds Largest 500 Multinational Enterprises, 2011Fortune 2011

http://money.cnn.com/magazines/fortune/global500/2011/maps/index.html

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http://money.cnn.com/magazines/fortune/global500/2011/maps/profits25.html

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The Worlds Largest 50 Multinational Enterprises, 2011Fortune 2011

http://money.cnn.com/magazines/fortune/global500/2011/maps/top50.html

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Characteristics of MNES

Affiliates must be responsive to a number ofimportant environmental forces, includingcompetitors, customers, suppliers, financialinstitutions, and government

Draw on a common pool of resources,including assets, patents, trademarks,

information, and human resources

Affiliates and business partners are linkedtogether by a common strategic vision

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Figure 1.1 The Multinational Enterprise and Its Environment

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The Internationalization Process

Internationalization: The process by which acompany enters a foreign market

Not all international business is done by

MNEs. Indeed, setting up a wholly-ownedsubsidiary is usually the last stage of doingbusiness abroad

Why do businesses wait to set up wholly-owned subsidiaries?

Foreign markets are risky

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Figure 1.2 Entry into Foreign Markets: the Internationalization Process

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Figure 1.3 Entry into Foreign Markets: the Internationalization Process

License

Exportvia Agent / Dealers

via Own Sales Reps

Local Packaging & Assembly

FDI Mergers & JVs Acquisitions

Greenfield (Totally New)

http://www.kfc.com/about/history.asphttp://www.bmwgroup.com/bmwgroup_prod/e/nav/index.html?http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/unternehmen/historie/meilensteine/meilensteine.htmlhttp://www.tata.com/htm/Group_milestone.htm?sectid=0Xw9Kk6LW6s=http://www.samsung.com/ca/aboutsamsung/corporateprofile/history02.htmlhttp://heritage.coca-cola.com/

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Why do Firms become MNEs?

to diversify themselves against the risks anduncertainties of the domestic business cycle

to tap the growing world market for goods andservices

in response to foreign competition

to reduce costs

to overcome barriers to entry into foreign markets

to take advantage of technological expertise bymanufacturing goods directly

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Why do Firms become MNEs?

A few examples:Pakistan starts onion exports to India

Canada food imports

Chinese Geely buys Volvo form Ford for $1.8b

Tata Motors buys Jaguar, Land Rover

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Strategic management and MNEs

Figure 1.4 The Strategic Management Process in Action

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Analysis of the External andInternal Environment

The goal of external environmental analysisis to identify opportunities and threats thatwill need to be addressed

The purpose of an internal environmentalanalysis is to evaluate the companys

financial and personnel strengths andweaknesses

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Formulation of Objectivesand Overall Plan

Internal and external analyses will helpidentify long-term (25 years) and short-term (< 2 years) goals

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The Implementation Process

Once goals have been established, the plan is

then broken into major parts and each affiliateand department is assigned goals andresponsibilities

E l ti d C t l f

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Evaluation and Control ofOperations

Progressis periodically evaluated and changesare made in the plan to accommodate changingcircumstances and new information

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Framework for Global Strategies:

the / Matrix

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Building Blocks inour International Business

There are two basic building blocks in aninternational business course

a uniquecapability proprietary to the organization

It may be built upon product- or processtechnology, marketing- or distributional skills.

countryfactors

Natural resource endowments (minerals,energy and forests), the labour force and

associated cultural factors, etc.

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Figure 1.5 The Basic Components of International Business

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Figure 1.6 The FSA-CSA Matrix

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The Competitive Advantage Matrix

resource-based and/or mature,globally-oriented firms producing acommodity-type product (Improving FSA can make them move toquadrant 3.)

inefficient, floundering firms noalternative but to restructure

follow any of the generic strategies both

differentiated firms with strongFSAs in marketing and customization

(the CSA is not relevant)

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Organization should come first

Professionalized a group that should have loyalty

over competence

Focus on long-term value

Succeed acquisitions in Sri Lanka and abroad

Gear the group to compete in a global marketplace

Taking Sri Lanka to the World

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