S06 My ppt ch01

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					Chapter 1
Multinational Management in a
Changing World
          Multinational Management &

• Strategies and management systems
   • take advantage of international opportunities and
     respond to international threats
• Multinational Company
   • business functions beyond its domestic borders
• Globalization
   • 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
Globalizing Economy
            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.
           5) Privatization

• 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
        high-tech assembly
    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
          Strategic Approach
• 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
     and culture.
• Managers must understand more then the basics of
  national culture

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