MGT 495 International Management TEST 1; Chapter 1

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.

Multinational Management
formulation of strategies and design of management systems to take advantage of international opportunities and respond to international threats.
Multinational company
any company that engages in business functions beyond its domestic borders (includes both large and small companies)
Globalization
the worldwide trend toward economic integration. Borderless and interlinked business activity.
Developed countries
mature economies with substantial per capital Gross Domestic Product, international trade and investments.
Developing countries
economies that have grown extensively over the past two decades. (Ex: Hong Kong, Singapore South Korea)
Transition economies
countries that have changed from mostly communist systems to market/capitalistic systems. (Czech republic, Hungary, Poland)
Emerging markets
those countries that are currently between developed and developing countries and are rapidly growing. (India, China, Brazil, and Russia)
Less developed countries (LDCs)
Have yet to show much progress in the global economy. Most are located in Latin America, Africa and the Middle East.
Benefits and Costs of Globalization
Benefits
-Lower prices in many countries as multinationals
become more efficient.
-Emerging markets such as India and China enjoy greater
availability of jobs and better access to technology
Costs
-Not all world economies benefit or participate equally in the process
-Terrorism, wars, and a worldwide economic stagnation have
limited or reversed some aspects of globalization
-Scarcity of natural resources, environmental pollution, negative social impacts
-Widening the gap between rich and poor countries
European Union (EU)
Includes a large number of European countries and allows free movement of goods and services and a common currency
North American Free Trade Agreement(NAFTA)
Links United States, Canada, and Mexico in an economic bloc and allows freer exchange of goods and services
Asia-Pacific-Economic Cooperation (APEC)
looser confederation of 19 Asian nations with less specific agreements on trade facilitation
Foreign Direct Investment (FDI)
occurs when a multinational company from one country has an ownership position located in another country
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

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

Electronic Communication
E-mail, World Wide Web, etc.

Allows multinationals to communicate with company locations throughout the world

Information technologies make available many new tools that facilitate business operations
e.g., Voice-Over-Internet Protocol (VOIP) such as Skype; instant messaging through MSN Messenger and AOL

Information technology is spurring a borderless financial market

The Rise of Global Products and Global Customers
Global customers search the world for their supplies without regard for national boundaries.

70% of e-commerce comes from business-to-business transactions

New Customers
Free market reforms are creating a potential group of new competitors

Multinationals facilitate the transfer of technology when developing countries are used as low-wage platforms for high-tech assembly

Aggressive multinationals from emerging-market countries are also expanding beyond their own borders

The Rise of Global Standards
Competitive pressure drives companies to save costs by making only one or a few versions of product for the world market

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

The company that develops a technology standard may have a strategic advantage

International Organization for Standardization (ISO) technical and environmental standards

Characteristics Needed for the Next Generation of Multinational Managers
-Global mindset
-Emotional intelligence
-Long-range perspective
-Talent to motivate all employees to achieve excellence
-Accomplished negotiation skills
-Willingness to seek overseas assignments
-Understanding of national cultures
-Ability to work with people from diverse backgrounds
-Ability to manage change and transition