Chapter 1

Chapter 1
Multinational Management in a
Changing World

Copyright© 2007 Thomson Learning All rights reserved

Learning Objectives

•• Define multinational management
Define multinational management
•• Understand the characteristics of a multinational
Understand the characteristics of a multinational
company
company
•• Understand the nature of the global economy and the
Understand the nature of the global economy and the
key forces that drive globalization
key forces that drive globalization
•• Know the basic classification of the world’s economies
Know the basic classification of the world’s economies
•• Identify the characteristics of the next generation of
Identify the characteristics of the next generation of
multinational managers
multinational managers
Copyright© 2007 South-Western/Thomson Learning All rights reserved

Multinational Management

•• Formulation of strategies and management systems to
Formulation of strategies and management systems to
take advantage of international opportunities and
take advantage of international opportunities and
respond to international threats
respond to international threats


The Nature of The
Multinational Company

•• Any company that engages in business functions
Any company that engages in business functions
beyond its domestic borders
beyond its domestic borders
•• Includes both large and small companies
Includes both large and small companies


Exhibit 1.1 – The Largest
Companies in the World


Exhibit 1.2 – The 15 cities With
The Most Fortune Global 500
Companies


The Globalizing Economy

•• Globalization: the worldwide trend of the economies of
Globalization: the worldwide trend of the economies of
the world becoming borderless and interlinked.
the world becoming borderless and interlinked.


Negatives of Globalization

•• Not all economies of the world are benefiting equally or
Not all economies of the world are benefiting equally or
participating equally in the process.
participating equally in the process.
•• Terrorism, wars, and a worldwide economic stagnation
Terrorism, wars, and a worldwide economic stagnation
have limited or reversed some aspects of globalization.
have limited or reversed some aspects of globalization.
•• Producing negative effects such as scarcity of natural
Producing negative effects such as scarcity of natural
resources, environmental pollution, negative social
resources, environmental pollution, negative social
impacts, and increased interdependence of the world’s
impacts, and increased interdependence of the world’s
economies.
economies.
•• Widening the gap between rich and poor countries
Widening the gap between rich and poor countries

The Benefits of Globalization

•• Resulting in lower prices in many countries as
Resulting in lower prices in many countries as
multinationals are becoming more efficient.
multinationals are becoming more efficient.
•• Benefiting many emerging markets such as India and
Benefiting many emerging markets such as India and
China as these countries enjoy greater availability of
China as these countries enjoy greater availability of
jobs and better access to technology.
jobs and better access to technology.
•• Major reason why many new companies from Mexico,
Major reason why many new companies from Mexico,
Brazil, China, India, and South Korea are the new
Brazil, China, India, and South Korea are the new
dominant global competitors.
dominant global competitors.


The Globalizing Economy:
7 Key Trends

•• Disintegrating borders
Disintegrating borders
•• Growing cross-border trade and investment
Growing cross-border trade and investment
•• The rise of global products and global customers
The rise of global products and global customers
•• The internet and information technology
The internet and information technology
•• Privatizations
Privatizations
•• New competitors in the world market
New competitors in the world market
•• The rise of global standards of quality and production
The rise of global standards of quality and production


Countries of the World: The
Arrived, The Coming, and The
Struggling
•• Developed countries: mature economies with
Developed countries: mature economies with
substantial per capita Gross Domestic Product,
substantial per capita Gross Domestic Product,
international trade and investments.
international trade and investments.
•• Developing countries: economies that have grown
Developing countries: economies that have grown
extensively over past two decades
extensively over past two decades
•• E.g., Hong Kong, Singapore, South Korea.
E.g., Hong Kong, Singapore, South Korea.


Arrived, The Coming, and The
Struggling
•• Transition economies: countries that have changed
Transition economies: countries that have changed
from mostly communist systems to
from mostly communist systems to
market/capitalistic systems
market/capitalistic systems
•• E.g., Czech republic, Hungary, Poland.
E.g., Czech republic, Hungary, Poland.
•• Emerging markets: those countries that are currently
Emerging markets: those countries that are currently
between developed and developing countries and
between developed and developing countries and
are rapidly growing
are rapidly growing
•• E.g., India, China, Brazil, and Russia.
E.g., India, China, Brazil, and Russia.

Arrived, The Coming, and the
Struggling
•• Less developed countries: have yet to show much
Less developed countries: have yet to show much
progress in the global economy
progress in the global economy
•• Most are located in Central and South America and
Most are located in Central and South America and
Africa.
Africa.


Exhibit 1.3: Divisions of the
World’s Economies


Exhibit 1.4: Forces Driving
Globalization


Borders are Disintegrating:
The World Trade Organization

•• Formal structure for continued negotiations and for
Formal structure for continued negotiations and for
settling trade disputes among nations.
settling trade disputes among nations.
•• 1947 Nations met to reduce tariffs from 45% to less
1947 Nations met to reduce tariffs from 45% to less
than 7% -- resulted in the General Agreement on
than 7% resulted in the General Agreement on
Tariffs and Trade (GATT).
Tariffs and Trade (GATT).
•• 1986 Negotiations began in Uruguay to continue
1986 Negotiations began in Uruguay to continue
reducing tariffs.
reducing tariffs.


World Trade Organization

•• 1997 – Trade ministers from countries representing 92
1997 – Trade ministers from countries representing 92
% of world trade agreed to eliminate tariffs on
% of world trade agreed to eliminate tariffs on
software, computer chips, telecommunication
software, computer chips, telecommunication
equipment and computers.
equipment and computers.
•• WTO has some critics.
WTO has some critics.
•• Not all countries are participating equally in WTO.
Not all countries are participating equally in WTO.


Regional Trade Agreements

•• Regional Trade Agreements -- agreements among
Regional Trade Agreements agreements among
nations to reduce tariffs and develop similar technical
nations to reduce tariffs and develop similar technical
and economic standards.
and economic standards.
•• European Union (EU) -- includes a large number of
European Union (EU) includes a large number of
European countries.
European countries.
•• Allows free movement of goods and services and a
Allows free movement of goods and services and a
common currency.
common currency.


Regional Trade Agreements

•• The North American Free Trade Agreement (NAFTA):
The North American Free Trade Agreement (NAFTA):
links United States, Canada, and Mexico in an
links United States, Canada, and Mexico in an
economic bloc.
economic bloc.
•• Allows freer exchange of goods and services
Allows freer exchange of goods and services
•• The Asia-Pacific-Economic Cooperation (APEC):
The Asia-Pacific-Economic Cooperation (APEC):
looser confederation of 19 Asian nations with less
looser confederation of 19 Asian nations with less
specific agreements on trade facilitation.
specific agreements on trade facilitation.


Sell Anywhere, Locate
Anywhere

•• World trade growth: average of 6.5% per year between
World trade growth: average of 6.5% per year between
1990 and 2000.
1990 and 2000.
•• Nearly half of the over $5 trillion in world trade is
Nearly half of the over $5 trillion in world trade is
among the European union, the U.S., and Japan – the
among the European union, the U.S., and Japan – the
TRIAD.
TRIAD.


Exhibit 1.6 – Leading Exporting
and Importing Countries


Sell Anywhere, Locate
Anywhere

•• Foreign Direct Investment (FDI) :: occurs when a
Foreign Direct Investment (FDI) occurs when a
multinational company from one country has an
multinational company from one country has an
ownership position located in another country.
ownership position located in another country.
•• FDI increased by more that 36% between 1996 and
FDI increased by more that 36% between 1996 and
2000.
2000.
•• Post 9/11 has seen a decline in FDI.
Post 9/11 has seen a decline in FDI.
•• Nevertheless, it remains a significant factor.
Nevertheless, it remains a significant factor.


Exhibit 1.7: The Growth of FDI in a
Few Emerging Markets and
Selected Developed Countries


Foreign Direct Investment

•• Developed countries get the bulk of FDI (69%) while
Developed countries get the bulk of FDI (69%) while
developing countries get around 30%.
developing countries get around 30%.
•• Least developed countries get minimal FDI.
Least developed countries get minimal FDI.
•• Implications for managers -- significant opportunities
Implications for managers significant opportunities
around the world.
around the world.
•• Multinational managers should look at risk rating of
Multinational managers should look at risk rating of
countries.
countries.


Two Types of Risks

•• Economic risk: considers all factors of a nation’s
Economic risk: considers all factors of a nation’s
economic climate that may affect a foreign investor.
economic climate that may affect a foreign investor.
•• Political risk: anything a government might do or not do
Political risk: anything a government might do or not do
that might adversely affect a company.
that might adversely affect a company.


Factors Outside of The
Control of The Multinational

•• The recent increases in oil prices have the potential to
The recent increases in oil prices have the potential to
slow down global trade
slow down global trade
•• Natural disasters
Natural disasters
•• International terrorism
International terrorism


The Internet and Information
Technology

•• Electronic Communication -- E-mail, World Wide
Electronic Communication E-mail, World Wide
Web,etc.
Web,etc.
•• Allows multinationals to communicate with company
Allows multinationals to communicate with company
locations throughout the world.
locations throughout the world.
•• Multinationals can also monitor worldwide
Multinationals can also monitor worldwide
operations.
operations.
•• Information technology is spurring a borderless
Information technology is spurring a borderless
financial market.
financial market.

The Internet and Information
Technology

•• Information technologies make available many new
Information technologies make available many new
tools that facilitate business operations
tools that facilitate business operations
•• E.g., Voice-Over-Internet Protocol (VOIP) such as
E.g., Voice-Over-Internet Protocol (VOIP) such as
Skype, MSN Messenger and AOL, WIKIs
Skype, MSN Messenger and AOL, WIKIs


The Rise of Global Products
and Global Customers

•• The needs of customers for many products and
The needs of customers for many products and
services are growing more similar
services are growing more similar
•• E.g., McDonald’s, Boeing, Toyota.
E.g., McDonald’s, Boeing, Toyota.
•• Global customers search the world for their supplies
Global customers search the world for their supplies
without regard for national boundaries.
without regard for national boundaries.


Privatization

•• Sale of government-owned businesses to private
Sale of government-owned businesses to private
investors,
investors,
•• usually through stock or direct sale to other
usually through stock or direct sale to other
companies.
companies.
•• Two types of privatization contribute to the global
Two types of privatization contribute to the global
economy – the developed world and the developing
economy – the developed world and the developing
world.
world.


Privatization - Types

•• The Developed Countries
The Developed Countries
•• Use privatization to make formerly government-
Use privatization to make formerly government-
controlled enterprises more competitive in the global
controlled enterprises more competitive in the global
economy.
economy.
•• The Developing Countries
The Developing Countries
•• Use privatization to jump-start their economies or to
Use privatization to jump-start their economies or to
speed the transition from a communist to a capitalist
speed the transition from a communist to a capitalist
system.
system.

New Competitors

•• Free market reforms are creating a potential group of
Free market reforms are creating a potential group of
new competitors.
new competitors.
•• Korean, Russian, Taiwanese, and Mexican companies
Korean, Russian, Taiwanese, and Mexican companies
are all emerging.
are all emerging.
•• Chinese companies are also on the move.
Chinese companies are also on the move.


Exhibit 1.9: Top 25 Emerging
Market Economies


New Competitors are
Emerging

•• Global trade has two important effects in developing
Global trade has two important effects in developing
new competitors:
new competitors:
•• When developing countries are used as low-wage
When developing countries are used as low-wage
platforms for high-tech assembly, multinationals
platforms for high-tech assembly, multinationals
facilitate the transfer of technology.
facilitate the transfer of technology.
•• Aggressive multinationals are also expanding
Aggressive multinationals are also expanding
beyond their own borders.
beyond their own borders.


The Rise of Global Standards

•• Companies can make 1 or only a few versions of
Companies can make 1 or only a few versions of
product for the world market.
product for the world market.
•• This is cheaper than making different versions for
This is cheaper than making different versions for
different countries.
different countries.
•• Drive to develop common standards to save money.
Drive to develop common standards to save money.


Global Standards

•• Consistency in quality also an important requirement of
Consistency in quality also an important requirement of
doing business in many countries.
doing business in many countries.
•• International organization for standardization (ISO) in
International organization for standardization (ISO) in
Geneva, Switzerland
Geneva, Switzerland
•• Developed a set of technical standards (ISO
Developed a set of technical standards (ISO
9001:2000 series).
9001:2000 series).


Next Generation of
Multinational Managers:
Characteristics
•• Global mindset
Global mindset
•• Ability to work with people from diverse backgrounds
Ability to work with people from diverse backgrounds
•• Long-range perspective
Long-range perspective
•• Ability to manage change and transition
Ability to manage change and transition
•• Ability to create systems for learning and changing
Ability to create systems for learning and changing
organizations
organizations


Next Generation of
Multinational Managers:
Characteristics
•• Talent to motivate all employees to achieve excellence
Talent to motivate all employees to achieve excellence
•• Accomplished negotiation skills
Accomplished negotiation skills
•• Willingness to seek overseas assignments
Willingness to seek overseas assignments
•• Understanding of national cultures
Understanding of national cultures


Multinational Management: A
Strategic Approach

•• Considers how managers formulate and implement
Considers how managers formulate and implement
strategies to compete successfully in the global
strategies to compete successfully in the global
economy.
economy.
•• Strategies are the maneuvers or activities used to
Strategies are the maneuvers or activities used to
increase and sustain organizational performance.
increase and sustain organizational performance.
•• Multinational strategies must include maneuvers that
Multinational strategies must include maneuvers that
deal with operating in more than one country and
deal with operating in more than one country and
culture.
culture.


Trends Shaping Future
Business Environment

•• Blurring of industry boundaries
Blurring of industry boundaries
•• Flexibility matters more than size
Flexibility matters more than size
•• Focusing on niche
Focusing on niche
•• Hyper-competition
Hyper-competition
•• Emphasis on innovation and the learning organization
Emphasis on innovation and the learning organization


Conclusion

•• Chapter provides key background information to
Chapter provides key background information to
support study of multinational management
support study of multinational management
•• Chapter also provides the foundation to understand the
Chapter also provides the foundation to understand the
latest challenges and practices of multinational
latest challenges and practices of multinational
management
management
•• Field is dynamic and learning never stops
Field is dynamic and learning never stops


Chapter 1

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (18)

En vedette

En vedette (20)

Similaire à Chapter 1

Similaire à Chapter 1 (20)

Plus de Dreams Design

Plus de Dreams Design (20)

Chapter 1