GE’s Key Growth Initiative Globalization is not only striving to grow revenues by selling goods and services in global markets. It also means globalizing every activity of the company, including the sourcing of raw materials, components, and products. Globalization especially means finding and attracting the unlimited pool of intellectual capital - the very best people - from all around the globe. Web Link Web Link

What is MULTINATIONAL MANAGEMENT ? u The formulation of strategies and the design of management systems to take advantage of international opportunities and respond to international threats

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

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

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

GLOBALIZATION The worldwide trend of businesses expanding beyond their domestic boundaries

GLOBALIZATION What are the key trends affecting the global economy?

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

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

1. Falling Borders THE GLOBAL ECONOMY

u Free trade areas and the world trade organization u By April 2003, the number of regional trade agreements reached 146, more than double the number existing in 1992 BORDERS ARE FALLING

u Reduce tariffs and restrictions u GATT negotiations begin in 1947 u World Trade Organization –Purpose? –Is it working? u The three largest groups--EU, NAFTA, and APEC TRADE AGREEMENTS

u Ensure that trade flows as smoothly, predictably and freely as possible u Administering trade agreements, providing a forum for trade negotiations, settling disputes, monitoring national trade policies, assisting developing countries in trade policy, and cooperating with other international organizations u Decisions are made by consensus What’s the purpose of the WTO?

2. Growing Trade and Investment THE GLOBAL ECONOMY

u World trade growth: average of 6.5% per year 1990 to 2000, but slowed in 2001 (2%) u Nearly half of the over $5 trillion in world trade is among the European union, the U.S., and Japan -- the TRIAD SELL ANYWHERE, LOCATE ANYWHERE

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

u A company from one country has an ownership position in an organization from another country u FDI in the developed countries approximately $899 billion FOREIGN DIRECT INVESTMENT (FDI)

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

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

3. Global Products/ Customers THE GLOBAL ECONOMY

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

4. Privatizations THE GLOBAL ECONOMY

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

Privatization, continued u The developing countries and transition economies use privatization to become capitalistic economies. More specifically, u Why do developed countries use privatization? u Why do developing countries use privatization?

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

5. New Competitors THE GLOBAL ECONOMY

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

6. Rise of Global Standards THE GLOBAL ECONOMY

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

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

7. IT and the Internet THE GLOBAL ECONOMY

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

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

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

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

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

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

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

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

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

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