Motivations and Mentalities of IB and MNCs Multinational Strategies.

Why is International Management Different –Multiple operating environments –Diverse pattern of consumer preferences, distribution channels, legal frameworks, cultural characteristics, and financial infrastructures –Political demands and risks –Mesh corporate strategy with host country industrial development policies—always the potential for conflict –Global competitive game –Multiple market access and various global scale economics allow companies new competitive strategic options. –Currency fluctuation risks –Economic performance is measured in multiple currencies which result in accounting and economic exposure

Why is International Management Different –Organization complexity and diversity –Need to manage these complex and diverse demands across barriers of distance, time, language, and culture.

Mentalities and Motivations for International Expansion. Resource Seeking Sales/Market Expansion Economies of Scale/Scope e.g. MNCs from Europe Diversification

Mentalities and Motivations for International Expansion To exploit competitive capability –(Product Cycle Theory) To defend competitive capability –(Oligopolistic Behaviour Theory) –Oligopoly – market in which the actions of an individual firm materially affect the industry price level To build competitive capability –(Location and Oligopolistic Theories) –(Institutional theory)

Multinational Strategic Approaches. Global Coordination Integration High Low Global International Transnational Multinational Local Responsiveness

Multinational Strategies International Approach –Domestic companies with foreign appendages –Opportunistic approach to FDI –Portfolio approach to management of foreign operations

Multinational Strategies Multi-national Approach –AKA: Multidomestic –Increased realization of importance of international markets –Manage overseas operations as a federation of independent companies

Multinational Strategies Global Approach –Growing concern about international competition and inefficiencies of multi-national response –Drive for cost competitiveness through product standardization and organizational centralization –Manage worldwide operations as a single entity

Multinational Strategies Transnational Approach: –Need to respond to host country pressures and global competitive demand simultaneously –Management challenge to coordinate responsive national units in a globally efficient system –Developing capability for Worldwide Learning.

Process of Internationalization Learning Model of Internationalization –Market Knowledge –Commitment Decisions –Current Activities –Market Commitment Level Of Commitment/Level of Control –Indirect Export, Direct Export, Licensing, Franchising, Joint Venture, Wholly Owned FDI

Process of Internationalization International Expansion no longer incremental? Short PLC, advancement of technology High cost of R&D Need for Economies of Scale Competitive Positioning, cross- subsidization of markets Combination of above

Conditions for Success in Global market Overseas/location specific advantages e.g... govt.. incentives, raw materials Strategic competency to overcome disadvantages Organizational capability to leverage strategic assets Transnational mentality i.e. responsiveness to local needs while maintaining global scale efficiency (as opposed to International, Multinational and Global mentalities)