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MULTINATIONAL MANAGEMENT CHAPTER 1 MULTINATIONAL MANAGEMENT IN A CHANGING WORLD 1

MULTINATIONAL MANAGEMENT The formulation of strategies and the design of management systems to take advantage of international opportunities and respond to international threats 8

THE MULTINATIONAL COMPANY Any company that engages in business functions beyond its domestic borders Includes both large and small companies 14

Exhibit 1.1 (in Text) Lists The Top Multinational Corporations Ranked By Sales Revenue. 15

WHY IS MULTINATIONAL MANAGEMENT IMPORTANT? Businesses increasingly look to other countries to seek global opportunities to keep an eye on global competition 4

GLOBALIZATION The worldwide trend of businesses expanding beyond their domestic boundaries 5

SEVEN KEY FORCES ARE GLOBALIZING THE WORLD ECONOMY 1. Disintegrating borders 2. Growing cross-border trade and investment 3. The rise of global products and global customers 4. Privatizations 17

5. New competitors in the world market 6. The rise of global standards of quality and production 7. The Internet and information technology

THE GLOBAL 1. Falling Borders ECONOMY

BORDERS ARE FALLING Free trade areas and the world trade organization By 2000, the number of regional trade agreements reached 139, more than double the number existing in 1992 28

TRADE AGREEMENTS Reduce tariffs and restrictions The three largest groups --EU, NAFTA, and APEC World Trade Organization 29

THE 2. Growing Trade GLOBAL and Investment ECONOMY

SELL ANYWHERE, LOCATE ANYWHERE World trade growth: average of 6.5% per year 1990 to 2000 Nearly half of the over $5 trillion in world trade is among the European union, the U.S., and Japan -- the TRIAD 35

Exhibits 1.4 and 1.5 (in text) show the leading countries in terms of import and export size and growth. 36

FOREIGN DIRECT INVESTMENT (FDI) A company from one country has an ownership position in an organization from another country - See Ex 1.6 for top 30 FDI in the developed countries approximately $899 billion 37

EXHIBIT 1.6 TOP FOREIGN ASSET COMPANIES 1. General Electric: USA 2. General Motors: USA 3. Royal Dutch Shell: UK/Netherlands 4. Ford: USA 5. Exxon: USA 6. Toyota: Japan 39

EXHIBIT 1.9 RISK RATINGS FOR SELECTED COUNTRIES (100 = Lowest Risk)

THE 3. Global Products/ GLOBAL Customers ECONOMY

THE RISE OF GLOBAL PRODUCTS AND GLOBAL CUSTOMERS The needs of customers growing more similar Global customers search the world for their supplies without regard for national boundaries 47

THE GLOBAL 4. Privatizations ECONOMY

PRIVATIZATION Privatization is the sale of government owned businesses to private investors

Privatization, continued The developing countries and transition economies use privatization to become capitalistic economies 49

BENEFITS FOR MULTINATIONAL COMPANIES Opportunities for bargain basement investments An easy way to gain access often with local government incentives such as several years of tax free operations 50

THE GLOBAL 5. New Competitors ECONOMY 51

EXHIBIT 1.10: TOP EMERGING MARKET COMPANIES 1. China Telecom: Hong Kong 2. Taiwan Semiconductor: Taiwan 3. Samsung Electronics: Korea 4. Telefonos de Mexico (Telmex): Mexico 51

THE 6. Rise of Global GLOBAL Standards ECONOMY 54

GLOBAL OR REGIONAL PRODUCT STANDARDS Companies can make one or only a few versions of a product for the world market Cheaper than versions for different countries 55

CONSISTENCY AND PREDICTABILITY IN QUALITY The international organization for standardization (ISO) in Geneva, Switzerland - ISO 9000:2000 56

THE 7. IT and the GLOBAL Internet ECONOMY

THE INTERNET AND INFORMATION TECHNOLOGY Allows easy worldwide communication and economic transactions Small companies have more computer power Poorer nations can have technology 57

THE NEXT GENERATION OF MULTINATIONAL MANAGERS A global mindset The ability to work with diverse people A long range perspective The ability to manager change and transition 60

The next generation of multinational managers, continued The ability to create systems for a learning and changing organizations The talent to motivate all employees to achieve excellence Accomplished negotiation skills 61

The next generation of multinational managers, continued A willingness to seek and succeed in overseas assignments An understanding of national cultures 62

MULTINATIONAL MANAGEMENT: A STRATEGIC APPROACH The strategic approach to multinational management considers how managers formulate and implement strategies to compete successfully in the global economy 64

STRATEGY The maneuvers or activities that managers use to sustain and increase organizational performance 65

MULTINATIONAL STRATEGY FORMULATION The process of choosing or crafting a strategy challenge of dealing with opportunities and competitors located anywhere in the world 68

MULTINATIONAL STRATEGY IMPLEMENTATION Includes all the activities necessary to achieve strategic objectives requires complex management systems to carry out the strategies that reach beyond domestic boundaries 69

A FUNDAMENTAL ASSUMPTION OF THE BOOK “When you understand your competitors and yourself, you will always win," Sun Tzu, The art of war 70

CONCLUSIONS Multinational management and the multinational company Forces that drive globalization Key characteristics of successful multinational managers The strategic approach to multinational management