Multinational Management in a
Multinational Management &
• Strategies and management systems
• take advantage of international opportunities and
respond to international threats
• Multinational Company
• business functions beyond its domestic borders
• trend of the economies of the world becoming
borderless and interlinked
Countries of the World
• Developed countries:
• mature economies with substantial per capita Gross Domestic
Product, international trade, and investments.
• Developing countries:
• economies that have grown extensively over past two decades, e.g.,
Hong Kong, Singapore, South Korea.
• Transition economies:
• countries that have changed from mostly communist systems to
market/capitalistic systems (e.g., Czech republic, Hungary, Poland.)
• Less developed countries:
• have yet to show much progress in the global economy
• most are located in Central and South America and Africa.
Seven Key Trends of the
1) Borders Are Disintegrating
• The World Trade Organization
• Formal structure for continued negotiations and for settling trade
disputes among nations.
• Historical Developments:
• GATT 1947: Nations met to reduce tariffs resulting in the General
Agreement on Tariffs and Trade.
• WTO 1986/1993: Negotiations began in Uruguay to continue
reducing tariffs and established the World Trade Organization.
• 1997: Trade ministers from countries representing 92% of world
trade agreed to eliminate tariffs on software, computer chips,
telecommunication equipment, and computers.
• WTO has some critics and not all countries are participating
Sell Anywhere, Locate
• Regional Trade Agreements
• European Union (EU)
• North American Free Trade Agreement (NAFTA)
• Asia-Pacific-Economic Cooperation (APEC)
• Nearly half of the over $5 trillion in world trade is
among the European union, the U.S., and Japan—the
2) Foreign Direct Investment
• Foreign Direct Investment (FDI) occurs when a multinational
company from one country has an ownership position located
in another country.
• FDI increased by more that 36% between 1996 and 2000.
• 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
3) Internet and Information
• Electronic Communication
• E-mail, World Wide Web, teleconferencing, etc.
• Allows multinationals to communicate with company
locations throughout the world.
• Multinationals can monitor worldwide operations.
• Borderless financial market.
4) Global Products and Global
• The needs of customers for many products and
services are growing more similar,
• e.g., McDonald’s, Boeing, Toyota.
• Global customers search the world for their supplies
without regard for national boundaries.
• Sale of government-owned businesses to private investors.
• usually through stock or direct sale to other companies.
• Two types of privatization contribute to the global economy:
• The Developed Countries - Use privatization to make
formerly government-controlled enterprises more
competitive in the global economy.
• The Developing Countries - Use privatization to jump-start
their economies or to speed the transition from a communist
to a capitalist system.
6) New Competitors are
• Free market reforms are creating a potential group of new
• Korean, Russian, Taiwanese, and Mexican companies
are all emerging.
• Chinese companies are also on the move.
• Global trade has two important effects in developing new
1. Multinationals facilitate the transfer of technology when
developing countries are used as low-wage platforms for
2. Aggressive multinationals from emerging markets are
also expanding beyond their own borders.
7) Global Standards
• Companies can make one or only a few versions of product for
the world market.
• This is cheaper than making different versions for different
countries since there is pressure to develop common
standards to save money.
• Consistency in quality also an important requirement of doing
business in many countries.
• International organization for standardization (ISO) in Geneva,
• Developed a set of technical standards (ISO 9001:2000
Characteristics of Next
Generation of Multinational
• Global mindset – understand the world is changing rapidly
• Ability to work with people from diverse backgrounds
• Long-range perspective
• Ability to manage change and transition
• Ability to create systems for learning and changing
organizations (Meet needs of evolving strategies)
• Talent to motivate all employees to achieve excellence
• Accomplished negotiation skills (Cross-cultural)
• Willingness to seek overseas assignments
• Understanding of national cultures
Multinational Management: A
• Considers how managers formulate and implement
strategies to compete successfully in the global
• 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
• Managers must understand more then the basics of