Cullen 4e PPT_CH01

Chapter

Copyright© 2007 Thomson Learning All rights reserved

1Multinational Management in a Changing World

Copyright© 2007 South-Western/Thomson Learning All rights reserved

Learning Objectives

• Define multinational management• Understand the characteristics of a multinational

company• Understand the nature of the global economy and the

key forces that drive globalization• Know the basic classification of the world’s economies• Identify the characteristics of the next generation of

multinational managers

• Define multinational management• Understand the characteristics of a multinational

company• Understand the nature of the global economy and the

key forces that drive globalization• Know the basic classification of the world’s economies• Identify the characteristics of the next generation of

multinational managers


Multinational Management

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

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


The Nature of The Multinational Company

• Any company that engages in business functions beyond its domestic borders

• Includes both large and small companies

• Any company that engages in business functions beyond its domestic borders

• 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 the world becoming borderless and interlinked.

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


Negatives of Globalization

• Not all economies of the world are benefiting equally or participating equally in the process.

• Terrorism, wars, and a worldwide economic stagnation have limited or reversed some aspects of globalization.

• Producing negative effects such as scarcity of natural resources, environmental pollution, negative social impacts, and increased interdependence of the world’s economies.

• Widening the gap between rich and poor countries

• Not all economies of the world are benefiting equally or participating equally in the process.

• Terrorism, wars, and a worldwide economic stagnation have limited or reversed some aspects of globalization.

• Producing negative effects such as scarcity of natural resources, environmental pollution, negative social impacts, and increased interdependence of the world’s economies.

• Widening the gap between rich and poor countries


The Benefits of Globalization

• Resulting in lower prices in many countries as multinationals are becoming more efficient.

• Benefiting many emerging markets such as India and China as these countries enjoy greater availability of jobs and better access to technology.

• Major reason why many new companies from Mexico, Brazil, China, India, and South Korea are the new dominant global competitors.

• Resulting in lower prices in many countries as multinationals are becoming more efficient.

• Benefiting many emerging markets such as India and China as these countries enjoy greater availability of jobs and better access to technology.

• Major reason why many new companies from Mexico, Brazil, China, India, and South Korea are the new dominant global competitors.


The Globalizing Economy:7 Key Trends

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

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

• 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.


Countries of the World: The Arrived, The Coming, and The Struggling

• Transition economies: countries that have changed from mostly communist systems to market/capitalistic systems• E.g., Czech republic, Hungary, Poland.

• Emerging markets: those countries that are currently between developed and developing countries and are rapidly growing• E.g., India, China, Brazil, and Russia.

• Transition economies: countries that have changed from mostly communist systems to market/capitalistic systems• E.g., Czech republic, Hungary, Poland.

• Emerging markets: those countries that are currently between developed and developing countries and are rapidly growing• E.g., India, China, Brazil, and Russia.


Countries of the World: The Arrived, The Coming, and the Struggling

• Less developed countries: have yet to show much progress in the global economy• Most are located in Central and South America and

Africa.

• Less developed countries: have yet to show much progress in the global economy• Most are located in Central and South America and

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 settling trade disputes among nations.• 1947 Nations met to reduce tariffs from 45% to less

than 7% - resulted in the General Agreement on Tariffs and Trade (GATT).

• 1986 Negotiations began in Uruguay to continue reducing tariffs.

• Formal structure for continued negotiations and for settling trade disputes among nations.• 1947 Nations met to reduce tariffs from 45% to less

than 7% - resulted in the General Agreement on Tariffs and Trade (GATT).

• 1986 Negotiations began in Uruguay to continue reducing tariffs.


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.• Not all countries are participating equally in WTO.

• 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.• Not all countries are participating equally in WTO.


Regional Trade Agreements

• Regional Trade Agreements - agreements among nations to reduce tariffs and develop similar technical and economic standards.

• European Union (EU) - includes a large number of European countries. • Allows free movement of goods and services and a

common currency.

• Regional Trade Agreements - agreements among nations to reduce tariffs and develop similar technical and economic standards.

• European Union (EU) - includes a large number of European countries. • Allows free movement of goods and services and a

common currency.


Regional Trade Agreements

• The North American Free Trade Agreement (NAFTA): links United States, Canada, and Mexico in an economic bloc. • Allows freer exchange of goods and services

• The Asia-Pacific-Economic Cooperation (APEC): looser confederation of 19 Asian nations with less specific agreements on trade facilitation.

• The North American Free Trade Agreement (NAFTA): links United States, Canada, and Mexico in an economic bloc. • Allows freer exchange of goods and services

• The Asia-Pacific-Economic Cooperation (APEC): looser confederation of 19 Asian nations with less specific agreements on trade facilitation.


Sell Anywhere, Locate Anywhere

• World trade growth: average of 6.5% per year between 1990 and 2000.

• Nearly half of the over $5 trillion in world trade is among the European union, the U.S., and Japan – the TRIAD.

• World trade growth: average of 6.5% per year between 1990 and 2000.

• Nearly half of the over $5 trillion in world trade is among the European union, the U.S., and Japan – the TRIAD.


Exhibit 1.6 – Leading Exporting and Importing Countries


Sell Anywhere, Locate Anywhere

• 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.

• Post 9/11 has seen a decline in FDI.• Nevertheless, it remains a significant factor.

• 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.

• Post 9/11 has seen a decline in FDI.• 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 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.

• 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.


Two Types of Risks

• Economic risk: considers all factors of a nation’s economic climate that may affect a foreign investor.

• Political risk: anything a government might do or not do that might adversely affect a company.

• Economic risk: considers all factors of a nation’s economic climate that may affect a foreign investor.

• Political risk: 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

• Natural disasters• International terrorism

• The recent increases in oil prices have the potential to slow down global trade

• Natural disasters• International terrorism


The Internet and Information Technology

• Electronic Communication - E-mail, World Wide Web,etc. • Allows multinationals to communicate with company

locations throughout the world.• Multinationals can also monitor worldwide

operations. • Information technology is spurring a borderless

financial market.

• Electronic Communication - E-mail, World Wide Web,etc. • Allows multinationals to communicate with company

locations throughout the world.• Multinationals can also monitor worldwide

operations. • Information technology is spurring a borderless

financial market.


The Internet and Information Technology

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

Skype, MSN Messenger and AOL, WIKIs

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

Skype, MSN Messenger and AOL, WIKIs


The Rise of Global Products and Global Customers

• 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.

• 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.


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 world and the developing world.

• 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 world and the developing world.


Privatization - Types

• 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.

• 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.


New Competitors

• Free market reforms are creating a potential group of new competitors.

• Korean, Russian, Taiwanese, and Mexican companies are all emerging.

• Chinese companies are also on the move.

• Free market reforms are creating a potential group of new competitors.

• Korean, Russian, Taiwanese, and Mexican companies are all emerging.

• 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 new competitors:• When developing countries are used as low-wage

platforms for high-tech assembly, multinationals facilitate the transfer of technology.

• Aggressive multinationals are also expanding beyond their own borders.

• Global trade has two important effects in developing new competitors:• When developing countries are used as low-wage

platforms for high-tech assembly, multinationals facilitate the transfer of technology.

• Aggressive multinationals are also expanding beyond their own borders.


The Rise of Global Standards

• Companies can make 1 or only a few versions of product for the world market.

• This is cheaper than making different versions for different countries.

• Drive to develop common standards to save money.

• Companies can make 1 or only a few versions of product for the world market.

• This is cheaper than making different versions for different countries.

• Drive to develop common standards to save money.


Global Standards

• Consistency in quality also an important requirement of doing business in many countries.

• International organization for standardization (ISO) in Geneva, Switzerland • Developed a set of technical standards (ISO

9001:2000 series).

• Consistency in quality also an important requirement of doing business in many countries.

• International organization for standardization (ISO) in Geneva, Switzerland • Developed a set of technical standards (ISO

9001:2000 series).


Next Generation of Multinational Managers: Characteristics

• Global mindset • 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

• Global mindset • 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


Next Generation of Multinational Managers: Characteristics

• Talent to motivate all employees to achieve excellence• Accomplished negotiation skills• Willingness to seek overseas assignments• Understanding of national cultures

• Talent to motivate all employees to achieve excellence• Accomplished negotiation skills• 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 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.

• 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.


Trends Shaping Future Business Environment

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

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


Conclusion

• Chapter provides key background information to support study of multinational management

• Chapter also provides the foundation to understand the latest challenges and practices of multinational management

• Field is dynamic and learning never stops

• Chapter provides key background information to support study of multinational management

• Chapter also provides the foundation to understand the latest challenges and practices of multinational management

• Field is dynamic and learning never stops

Cullen 4e PPT_CH01

Documents

Transcript of Cullen 4e PPT_CH01