Multinational Management: A Strategic Approach
-Considers how managers formulate and implement strategies to compete successfully in the global economy.
-Strategies are the maneuvers or activities used to increase and sustain organizational performance
-Multinational strategies must include maneuvers that deal with operating in more than one country and culture.
formulation of strategies and design of management systems to take advantage of international opportunities and respond to international threats.
any company that engages in business functions beyond its domestic borders (includes both large and small companies)
the worldwide trend toward economic integration. Borderless and interlinked business activity.
mature economies with substantial per capital Gross Domestic Product, international trade and investments.
economies that have grown extensively over the past two decades. (Ex: Hong Kong, Singapore South Korea)
countries that have changed from mostly communist systems to market/capitalistic systems. (Czech republic, Hungary, Poland)
those countries that are currently between developed and developing countries and are rapidly growing. (India, China, Brazil, and Russia)
Less developed countries (LDCs)
Have yet to show much progress in the global economy. Most are located in Latin America, Africa and the Middle East.
Benefits and Costs of Globalization
-Lower prices in many countries as multinationals
become more efficient.
-Emerging markets such as India and China enjoy greater
availability of jobs and better access to technology
-Not all world economies benefit or participate equally in the process
-Terrorism, wars, and a worldwide economic stagnation have
limited or reversed some aspects of globalization
-Scarcity of natural resources, environmental pollution, negative social impacts
-Widening the gap between rich and poor countries
European Union (EU)
Includes a large number of European countries and allows free movement of goods and services and a common currency
North American Free Trade Agreement(NAFTA)
Links United States, Canada, and Mexico in an economic bloc and allows freer exchange of goods and services
Asia-Pacific-Economic Cooperation (APEC)
looser confederation of 19 Asian nations with less specific agreements on trade facilitation
Foreign Direct Investment (FDI)
occurs when a multinational company from one country has an ownership position located in another country
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 managers – significant opportunities around the world
Multinational managers should look at risk rating of countries
considers all factors of a nation’s economic climate that may affect a foreign investor
anything a government might do or not do that might adversely affect a company
Factors Outside of The Control of The Multinational
The recent increases in oil prices have the potential to slow down global trade
E-mail, World Wide Web, etc.
Allows multinationals to communicate with company locations throughout the world
Information technologies make available many new tools that facilitate business operations
e.g., Voice-Over-Internet Protocol (VOIP) such as Skype; instant messaging through MSN Messenger and AOL
Information technology is spurring a borderless financial market
The Rise of Global Products and Global Customers
Global customers search the world for their supplies without regard for national boundaries.
70% of e-commerce comes from business-to-business transactions
Free market reforms are creating a potential group of new competitors
Multinationals facilitate the transfer of technology when developing countries are used as low-wage platforms for high-tech assembly
Aggressive multinationals from emerging-market countries are also expanding beyond their own borders
The Rise of Global Standards
Competitive pressure drives companies to save costs by making only one or a few versions of product for the world market
Consistency in quality also an important requirement of doing business in many countries
The company that develops a technology standard may have a strategic advantage
International Organization for Standardization (ISO) technical and environmental standards
Characteristics Needed for the Next Generation of Multinational Managers
-Talent to motivate all employees to achieve excellence
-Accomplished negotiation skills
-Willingness to seek overseas assignments
-Understanding of national cultures
-Ability to work with people from diverse backgrounds
-Ability to manage change and transition