This document discusses entry strategies and organizational structures for multinational corporations (MNCs). It covers common entry strategies like wholly owned subsidiaries, mergers and acquisitions, alliances, joint ventures, licensing, and franchising. It also discusses basic organizational structures for MNCs such as initial division structures, international division structures, and global structures. Additionally, it covers nontraditional structures like strategic alliances and keiretsus. Key characteristics of MNC organizational structures like formalization, specialization, and centralization are discussed. The document includes examples, advantages and disadvantages of different strategies and structures.

1. Chapter 9:Entry Strategies and Organizational StructuresPaul TaylorHannah SmithJeremy Bourne

2. First of all…Please refrain from using your laptops (Mike)

3. AgendaEntry Strategies and Ownership StructuresBasic Organizational StructuresNontraditional Organizational ArrangementsOrganizational Characteristics of MNCsCase Study

4. ObjectivesIdentify common entry strategies for MNCs, such as joint ventures and fully owned subsidiariesExplore business organizational chartsDefine keiretsus and describe their advantagesDiscuss formalization, specialization and centralization in the context of organizational structures

5. Entry Strategies and Ownership StructuresWholly owned subsidiaryMerger/acquisitionAllianceJoint venture (JV)LicensingFranchisingChart p. 288

6. Export/ImportAdvantages:Easy way to go internationalRequires minimum investmentDisadvantages:Regulations in other countriesMore transitional in nature

7. Wholly Owned SubsidiaryOverseas operation that is totally owned and controlled by an MNCAdvantages:Avoid transaction costsFull control, managerial efficiencyHigh profitsDisadvantages:High risk in one areaNot efficient entering multiple countriesHost countries feel MNC trying to take controlHome country see this as exporting jobsEx: Mizuho Financial Group

8. Mergers/AcquisitionsCross-border purchase or exchange of equity involving two or more companiesAdvantages:Quickly expand resourcesConstruct high-profit products in new marketsDisadvantages:Cultural differencesTime constraintsTransaction costsEx: Proctor and Gamble acquired Gillette, British Petroleum acquired AmocoMergers

9. Alliances and Joint Ventures (JV)Alliance – any type of cooperative relationship among different firmsJV – a specific alliance where two or more partners own or control a businessNonequity venture – one group’s merely providing a service for another (consulting, construction, mining)Equity joint venture – involves a financial investment by MNC in a business with local partnerEx: Area Energy (Exxon Mobil and Royal Dutch Shell)

10. Alliances and JV(cont.)Advantages:Improvement of efficiency (economies of scale & scope, spread risk)Access to local partners’ knowledge of customers, marketLocal partner can help deal with political factorsOvercome limits on foreign competitionDisadvantages:Market may not be large enough for desired goods and servicesParties may not be on same page, not all in agreementAdvice:Know partners well, work on relationship to build trustExpect differences in objectives among partners in different countriesA company having the desired resource profile may not be best partnerBe sensitive to partner’s needs

11. LicensingAn agreement that allows one party to use an industrial property right (patent, trademark, logo, etc.) in exchange for payment to the other party (usually based on sales)Advantages:Avoid entry costsDon’t need lots of financial or managerial resourcesDisadvantages:Time limit on licenseLicense may become obsolete due to competition

12. FranchisingA business arrangement under which one party allows another to operate using its trademark, logo, product line, and methods of operation in return for a fee.Advantages:New stream of income for franchisorQuickly brought to market for franchiseeDisadvantages:Franchisor will impose restrictions on franchisee

13. Discussion QuestionOne of the most common entry strategies for MNCs is the joint venture. Why are so many companies opting for this strategy? Would a fully owned subsidiary be a better choice?

14. Answer:Joint Ventures are so popular because it allows companies to improve efficiency and create economies of scale and scope while spreading the risk between the partners. It also gives the MNC access to the knowledge of its local partner that will help them better understand the market and its customers in that region, as well as the political issues going on in the region. It also lets the MNC overcome limits on foreign companies by becoming part of the insider group.Although a fully owned subsidiary would allow total control by the MNC and may produce higher profits, it is not a better choice because risks are higher, requires more investment, and host and home countries may have negative views of it.

15. Internet Exercise, pg. 309www.ford.comwww.vw.comWhat type of organizational arrangement(s) do you see the two firms using in coordinating their worldwide operations?Which of the two companies’ arrangements is more modern?Does this increase that firm’s efficiency, or does it hamper the company’s efforts to contain costs and be more competitive?

16. Basic Organizational StructuresInitial Division Structure - initial process of entering a market by way of joint ventures or import/export subsidiaries

17. Basic Organizational StructuresInitial Division Structure

18. Basic Organizational StructuresInternational Division Structure - a multinational structural arrangement that combines elements of function, product, and geographic designs, while relying on a network arrangement to link worldwide subsidiaries

19. Basic Organizational StructuresInternational Division Structure

20. Basic Organizational StructuresGlobal Structural ArrangementsGlobal Product Division Structure - a structural arrangement in which domestic divisions are given worldwide responsibility for product groups Global Area Division Structure - a structure under which global operations are organized on a geographic rather than a product basis Global Functional Structure - a structure that organizes worldwide operations primarily based on function and secondarily on product

21. Basic Organizational StructuresGlobal Structural ArrangementsGlobal Product Division Structure

22. Basic Organizational StructuresGlobal Structural ArrangementsGlobal Area Division Structure

23. Basic Organizational StructuresGlobal Structural ArrangementsGlobal Functional Structure

24. Basic Organizational StructuresMixed Organizational Structure - a structure that is a combination of a global product, area, or functional arrangementMultinational Matrix Structure

25. Basic Organizational StructuresMixed Organizational StructureMultinational Matrix Structure

26. Basic Organizational StructuresTransnational Network Structures - a multinational structural arrangement that combines elements of function, product, and geographic designs, while relying on a network arrangement to link worldwide subsidiaries Chart p. 297

27. Nontraditional Organizational StructuresMergers and AcquisitionsJVs and Strategic AlliancesKeiretsusElectronic NetworkProduct IntegrationInformation Technology

28. Mergers & AcquisitionsIn recent years, the annual value of worldwide M&A’s has reached as high as $6 TrillionFirms try and fashion a structural arrangement that attempts to promote synergy while encouraging local initiativeAddresses the needs of both firms

29. KeiretsusDefinition: a large, often vertically integrated group of companies that cooperate and work closely with each other.

30. Keiretsus ExampleMitsubishi Motors3 flagships firms within the keiretsusMitsubishi CorporationMitsubishi BankMitsubishi Heavy Industries

31. Discussion QuestionWhy are keiretsus popular? What benefits do they offer? How can small international firms profit from these structures? Give an example.

32. Discussion QuestionKeiretsus create economies of scale and give you a competitive advantage through vertical integration. Small firms can benefit because they have an increased amount of resources through the MNC.

33. Organizational Characteristics of MNCsFormalizationSpecializationCentralization

34. Discussion QuestionIn what way do formalization, specialization, and centralization have an impact on MNC organization structures? In your answer, use a well known firm such as IBM or Ford to illustrate the effects of these three characteristics.

35. Crossword activityGet excited

36. Case Study: Getting in on the Ground Floor (p. 311)What type of organization design would you recommend that Ruehter use?

37. Case Study: Getting in on the Ground Floor (p. 311)Initial division structureFirst worldwide subsidiary

38. Just starting out, need to approach global market cautiouslyCase Study: Getting in on the Ground Floor (p. 311)If there were joint R&D efforts, would this be a problem?

39. Case Study: Getting in on the Ground Floor (p. 311)NoNo reason to fear joint R&D

40. Dutch company already has strong R&D prowess and seems to have huge potentialQuestions?