Ch01

Chapter 1
Multinational Management in a
Changing World

Copyright© 2004 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

Copyright© 2005 South-Western/Thomson Learning All rights reserved

Learning Objectives

•• Identify the characteristics of the next generation of
Identify the characteristics of the next generation of
multinational managers
multinational managers


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


Globalization

•• Worldwide trend of the economies of the world
Worldwide trend of the economies of the world
becoming borderless and interlinked.
becoming borderless and interlinked.
•• Not all economies are participating or benefiting
Not all economies are participating or benefiting
equally in the process.
equally in the process.
•• Important forces are driving globalization.
Important forces are driving globalization.
•• It is also important to look at classifications of the
It is also important to look at classifications of the
world’s economies.
world’s economies.


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, e.g., Hong Kong,
extensively over past two decades, e.g., Hong Kong,
Singapore, South Korea.
Singapore, South Korea.


Countries of the World: The
Arrived, the Coming, and the
Struggling
•• Transition economies: countries that have changed
Transition economies: countries that have changed
from mostly communist systems to market/capitalistic
from mostly communist systems to market/capitalistic
systems,
systems,
•• e.g., Czech republic, Hungary, Poland.
e.g., Czech republic, Hungary, Poland.
•• 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 1.2: Selected
Economies of the World


The Globalizing Economy:
Seven 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
•• Privatizations
Privatizations


The Globalizing Economy:
7 Key Trends

•• 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
•• The Internet and information technology
The Internet and information technology


Exhibit 1.3: The Globalizing
Economy


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
1947: Nations met to reduce tariffs from 45% to
less than 5%—resulted in the General Agreement
less than 5%—resulted in the General Agreement
on Tariffs and Trade (GATT).
on 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 software,
of world trade agreed to eliminate tariffs on software,
computer chips, telecommunication equipment, and
computer chips, telecommunication equipment, and
computers.
computers.
•• WTO has, nevertheless, some critics.
WTO has, nevertheless, 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: includes a large number of
European Union: includes a large number of
European countries.
European countries.
•• Allows free movement of goods and services and
Allows free movement of goods and services and
a common currency.
a common currency.


Regional Trade Agreements

•• The North American Free Trade Agreement
The North American Free Trade Agreement
(NAFTA): links United States, Canada, and Mexico
(NAFTA): links United States, Canada, and Mexico
in an economic bloc.
in an 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 1.5 – Leading
Exporting and Importing
Countries


Exhibit 1.5 – Leading
Exporting and Importing
Countries, continued


Exhibit 1.6: Recent
Growth/Decline for Leading
Importers and Exporters


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 – Top 25
Companies by Foreign Asset
Ownership


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.


Exhibit 1.8: Risk Ratings of
Selected Countries


The Internet and Information
Technology

•• Electronic Communication — E-mail, World Wide Web,
Electronic Communication — E-mail, World Wide Web,
etc.
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 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 one or only a few versions of
Companies can make one 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.


Ch01

Recommended

Recommended

More Related Content

What's hot

What's hot (18)

Similar to Ch01

Similar to Ch01 (20)

Ch01