The document discusses different types of multinational enterprises (MNEs) and their relationships with stakeholders in emerging markets. It identifies four types of MNEs: exploitive MNEs that focus only on profits, transactional MNEs that adhere to laws but also seek advantages, responsive MNEs that are sensitive to stakeholder needs, and transformative MNEs that commit to social change. The document also presents a typology of MNE/stakeholder relationships and provides examples of each type of MNE.

1. Topic 10 : Leading the MNE - Global Strategy
McGraw-Hill/Irwin
Transnational Management: Text and Cases, 6e
Copyright © 2011 The McGraw-Hill Companies, Inc. All rights
reserved.
Difference between a Manager and a Leader
Managers are characterized as those who do things right and are
therefore efficient, whilst leaders do the right things and are
therefore seen to be effective.
Managers utilize existing resources to get things done. Leaders
influence the behavior of those around them, focus their
energies on motivating, inspiring and empowering their
followers to forge a shared vision for the company as a whole
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The Global Leader
Global leadership begins with a global mindset that involves
acquiring knowledge and openness about working across
cultural boundaries.
Global leaders have 3 distinct roles
1) creating a shared vision
2) designing the structure
3) practising servant leadership
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2. National culture and leadership
Study of The GLOBE ( Global Leadership and Organizational
Behavior Effectiveness ) indicates differences in cultural
environments in regards to leadership styles across cultures
Some similarities do exist as in forging and sharing a vision,
establishing and maintaining trust, providing encouragement
and inspiration, dynamism and proactiveness.
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National culture and leadership
According to Deresky and Christopher (2012) amongst the most
important challenges facing international leaders today are :
1) formulating policies consistent with long-term perspectives
2) merging information and communications technologies
3) acknowledging that most global decisions have en ethical
component
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Trust – The essence of leadership

3. According to Schindler and Thomas (1993,p.565) trust includes
the following :
1) integrity - honesty and truthfulness
2) confidence – technical and interpersonal knowledge and
skills
3) consistency - reliability, predictability and good judgement
in handling situations
4) loyalty - willingness to protect a person physically and
emotionally
5) openness - willingness to share ideas and information freely.
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“Organisational excellence and leadership strategies: principles
followed by top multinational executives” by Darling (1999)
What makes executives successful has nothing to do with
intelligence, education, nationality, gender or race but has more
to do with their ability to build effective and meaningful
relations with the people in the organisation
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“Organisational excellence and leadership strategies: principles
followed by top multinational executives” by Darling (1999)
Three keys to successful management by top executive leaders :
1) exceeding customer expectations
2) focuses on product innovation that needs the primary
demands of customers
3) their ability to surround themselves with committed people
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4. “Organisational excellence and leadership strategies: principles
followed by top multinational executives” by Darling (1999)
Successful leadership strategies includes :
1) attention through vision
2) meaning through communication
3) trust through positioning
4) confidence through respect
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“The effects of top management team pay and firm
internationalisation on MNC performance” by Carpenter and
Sanders (2004)
As the size of the firm increases CEOs are typically paid more
The degree of internationalism ( DOI ) also influences the
compensation to top management team ( TMT )
TMT rewarded for longer term commitment more likely to
function better as part of an integrated team
Larger gaps in pay between CEO and TMT will lower
performance levels while smaller gaps will be associated with
higher levels of performance
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“A theoretical consideration of leadership and the global

5. hierarchy” by Sosik and Jung (1994)
Global hierarchy refers to an organisational structure that
contains multiple operational centers, encourages bottom-up
management and exerts control through strong corporate culture
Global hierarchies tend to engage in a number of inter
organisational alliances as well as exhibiting a radical problem-
solving orientation
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“Complexity leadership theory : shifting leadership from the
industrial age to the knowledge era” by Uhl-Bien, Marion and
McKelvey (2007)
The new 21st Century organisations find themselves concerned
with adaptability, knowledge acquisition and fast learning
In this new knowledge era, there is a need to act decisively and
flexibly if the outcomes of new learnings and innovations are to
be diffused throughout the organisation and maintain a
competitive advantage
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“Complexity leadership theory : shifting leadership from the
industrial age to the knowledge era” by Uhl-Bien, Marion and
McKelvey (2007)
Complexity Leadership theory ( CLT )
Traditional leadership model or Administrative leadership - top
down function based on authority and possessing the power to
make organisational decisions

6. Enabling leadership – invokes the dynamic of complex adaptive
systems to address problems solving and learning
Adaptive leadership - draws on the dynamic context in which
leadership activities are embedded
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Assignment 1.
Restoring Dell’s competitive Advantage
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7. Topic 9 The MNE and the Wider Political Economy
Chapter 8:
The Future of the Transnational
An Evolving Global Role
McGraw-Hill/Irwin
Transnational Management: Text and Cases, 6e
Copyright © 2011 The McGraw-Hill Companies, Inc. All rights
reserved.
Damaged Reputation of MNEs
Is following the letter of the law sufficient for the court of
public opinion?
Examples;
Nike (use of child labour/sweatshops)
Coca-Cola (acceptance of blame…but too late)
Enron (enforcement of a fraudulent contract)
Pharmaceuticals (patent fight to prevent production of cheap
AIDS drugs)
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“Globalization” or “Exploitation”?
Growing economic wealthbut…Growing economic

8. disparityReduction of trade barriersbut…Many industries most
important to developing countries still closed Less poverty in
rapidly industrializing countriesbut…Absolute levels of poverty
still high in many countries
MNEs as a Model of Success?
Foreign Aid has failed to address the world’s most serious
social problems for the past 50 years
Foreign Investment has illustrated a “win-win” result for both
MNEs and members of developing societies
New emerging partnerships between national/ supra-national
governments, NGOs, and MNEs are replacing previously
adversarial relationships
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“The faster the poor gain wealth,
the faster they become a customer”
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Four Types of MNEs“Exploitive”Views differences in wages,
working conditions and living standards
as exploitable opportunities.“Transactional”Engages in law-
abiding,
non-exploitive,
commercial interactions.“Responsive”Acts in a way that is
sensitive
and responsive to the needs of
all its immediate stakeholders.“Transformative”Commits to
leading initiatives to
bring life-enhancing changes
to the broader society.

9. The Exploitive MNE
Single-minded focus on maximizing profits regardless of social
impact
Attracted to developing countries for lower labor-related costs
including minimum wage, hour, and age restrictions, as well as
lower safety requirements, preferential treatment through
bribery, or uninformed consumers
Response to stakeholder pressures is often to use indirect
channels or move to another exploitable area
An MNE type that is in decline
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Examples of Exploitive MNEs
Jordanian factory producing for Target & Wal-Mart exploiting
workers
United Brands bribing the president of Honduras
ITT working to overthrow the democratic government of Chile
Nestle pushing infant formula on mothers in developing
countries
Union Carbide refusing to be held accountable for gas leak that
killed thousands
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10. 7
The Transactional MNE
Maximizing shareholder return is the primary goal, but other
stakeholder concerns are incorporated that do not conflict with
that goal
Adhere to the “spirit” as well as the “letter” of the law in
developing societies – do no harm
Response to stakeholder pressure can be adversarial, but is
often conciliatory and one of guarded optimism
Most popular type of MNE at the present time
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Examples of Transactional MNEs
McDonald’s and KFC abiding by the laws but encouraging
unhealthy eating
Nike directly engaging in child labor or sourcing from unethical
companies
Nike adopting U.S. standards for activities in developing
countries
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The Responsive MNE
Stakeholder and Shareholder concerns are equally important for
long-term survival
Decisions are based on moral principles rather than legal codes
Attempt to be proactive rather than reactive in dealing with
stakeholder pressures – often incorporate concerns during the
planning process

11. Most rapidly growing type of MNE
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Examples of Responsive MNEs
Hindustan Lever changing products to adapt to rural
communities in India
GE introducing a basic line of CT scanners as well as
refurbished machines
Starbucks offering incentives for suppliers who meet high
ethical standards
Heineken covering AIDS treatment for employees as well as
their families
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The Transformative MNE
Willing to sacrifice potential profits in order to address social
issues at their core
Employee practices are of the highest ethical standard and are
constant regardless of local standards
Actively exerting their own influence on entire societies to
bring about positive change in partnership with NGOs and other
stakeholders
Type of MNE garnering a great amount of international
attention
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Examples of Transformative MNEs

12. Nokia creating a durable yet inexpensive cellular phone for
illiterate individuals and harsh climates
Merck & Genzyme providing drugs for River Blindness and
Gaucher disease respectively regardless of their ability to pay
Ikea sourcing from suppliers who do not use child labor
Nokia partnering with NGOs and supra-government agencies to
deliver digital education materials
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13
Drivers of the Current MNE Trends
NGOs have successfully established themselves as the
“watchdog” of MNEs given the inability of national
governments
Supranational agencies, such as the United Nations have served
as mediators of dialogue and voluntary cross-sector initiatives
Corporations themselves have begun to adopt a broader, long-
term perspective to social issues as a means to ensure
sustainable streams of income and maintain their very existence
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The Global Compact Principles

13. MNE/Stakeholder Relationships
in Emerging Markets: A Typology
8-
16StakeholdersEconomicSocietalPolitical/RegulatoryShareholde
rsCustomersEmployees/
SuppliersLocal
CommunitiesGov’t and
Supra-National Agencies/ RegulatorsNGOsMNE
StanceExploitive
Views differences in wages, working conditions and living
standards as exploitable opportunities.Adopts classic Milton
Freedman view: Its only legitimate role is to maximize returns
to shareholders.Sells existing products and services, even if
they have negative social or economic impact.Exploits existing
local wages, working conditions and suppliers, driving them
lower if possible.Accepts no community responsibility for its
social or environmental impact.Seeks concessions and subsidies,
using bargaining power to play national investment boards
against each other. If bribery and corruption exist, engages in
local practices to win benefits.An adversary: NGOs actively
working to force the MNE to change its behavior through
protests, boycotts, political activism, etc.Transactional
Engages in law-abiding, non-exploitive, commercial
interactions.Focus on shareholder returns, but believes a pure
Friedman approach is inconsistent with the long-term interests
of its shareholders.Treats it as any other market. Makes product
adaptations if they are economically viable and can increase
market share.Complies with local labor laws and workplace
regulations. Uses cost efficient local sources, pressuring them
on price.Adopts a Hippocratic Oath approach toward
communities: (i.e., “Do no harm”).Obeys local laws and
regulations, but uses country differences to gain competitive
advantage.A watchdog: NGO monitors the MNE’s actions,

14. urging or pushing it to do more.
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MNE/Stakeholder Relationships
in Emerging Markets: A
TypologyStakeholdersEconomicSocietalPolitical/RegulatorySha
reholdersCustomersEmployees/
SuppliersLocal
CommunitiesGov’t and
Supra-National Agencies/ RegulatorsNGOsMNE
StanceResponsive
Acts in a way that is sensitive and responsive to the needs of all
its immediate stakeholders.Feels a responsibility to be a “good
corporate citizen” in the environments in which it
operates.Invests in potentially significant product or service
developments and/or adaptations to meet local needs.Committed
to caring for its employees and developing their skills.
Actively engages local sources, using its buyer power to
improve working conditions for their employees.Aims to affect
positively those whose lives it touches in communities in which
it operates.Sets its standard of behavior above minimum local
legal requirements. Conforms to higher international standards
(e.g. Set by ILO or UNESCO).An observer: NGO may be
neutral or partially engaged with MNE. Limited mutual
trust.Transformative
Commits to leading initiatives to bring life-enhancing changes
to the broader society.Persuades investors of the need for
companies to be part of the solution by bringing their resources
to bear on the root causes of problems.By helping to move
people out of poverty, it will create stability and good will, and
help grow the world’s customer base. Develops products or
services specifically to meet local needs.Committed to
upgrading the lives of its employees, inside and outside the

15. workplace. Brings work-standard compliant local suppliers into
global supply chain networks.Leads in developing the quality of
life in the broad community (e.g. Upgrading health
education).Actively raises local standards (e.g., by transferring
developed world workplace health and safety standards.)
Supports change agenda of international agencies (e.g. WHO or
UNESCO).A Partner: NGO works with and supports the MNE
working towards the same objectives.
The End
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1. Businesses should support and respect the protection of
internationally
proclaimed human rights.
2. Make sure that they are not complicit in human rights
abuses.
3. Businesses should uphold the freedom of association and the
effective
recognition of the right to collective bargaining.
4. The elimination of all forms of forced and compulsory
labour.
5. The effective abolition of child labour.
6. The elimination of dis crimination in respect of employment
and
occupation.
7. Businesses should support a precautionary approach to
environmental
challenges.

16. 8. Undertake initiatives to promote greater environmental
responsibility.
9. Encourage the development and diffusion of
environmentally friendly
technologies.
10. Businesses should work against all forms of corruption,
including
extortion and bribery.