Multinational Management in a Changing World

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• Multinational Management in a Changing World

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Multinational Management Globalization

• Strategies and management systems
• take advantage of international opportunities and
  respond to international threats
• Multinational Company
• business functions beyond its domestic borders
• Globalization
• trend of the economies of the world becoming
  borderless and interlinked

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Countries of the World

• Developed countries
• mature economies with substantial per capita
  Gross Domestic Product, international trade, and
  investments.
• Developing countries
• economies that have grown extensively over past
  two decades, e.g., Hong Kong, Singapore, South
  Korea.
• Transition economies
• countries that have changed from mostly communist
  systems to market/capitalistic systems (e.g.,
  Czech republic, Hungary, Poland.)
• Less developed countries
• have yet to show much progress in the global
  economy
• most are located in Central and South America and
  Africa.

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Seven Key Trends of the Globalizing Economy
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1) Borders Are Disintegrating

• The World Trade Organization
• Formal structure for continued negotiations and
  for settling trade disputes among nations.
• Historical Developments
• GATT 1947 Nations met to reduce tariffs
  resulting in the General Agreement on Tariffs and
  Trade.
• WTO 1986/1993 Negotiations began in Uruguay to
  continue reducing tariffs and established the
  World Trade Organization.
• 1997 Trade ministers from countries representing
  92 of world trade agreed to eliminate tariffs on
  software, computer chips, telecommunication
  equipment, and computers.
• WTO has some critics and not all countries are
  participating equally.

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Sell Anywhere, Locate Anywhere

• Regional Trade Agreements
• European Union (EU)
• North American Free Trade Agreement (NAFTA)
• Asia-Pacific-Economic Cooperation (APEC)
• Nearly half of the over 5 trillion in world
  trade is among the European union, the U.S., and
  Japanthe TRIAD

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2) Foreign Direct Investment

• Foreign Direct Investment (FDI) occurs when a
  multinational company from one country has an
  ownership position located in another country.
• FDI increased by more that 36 between 1996 and
  2000.
• 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.

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3) Internet and Information Technology

• Electronic Communication
• E-mail, World Wide Web, teleconferencing, etc.
• Allows multinationals to communicate with company
  locations throughout the world.
• Multinationals can monitor worldwide operations.
• Borderless financial market.

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4) Global Products and Global Customers

• The needs of customers for many products and
  services are growing more similar,
• e.g., McDonalds, Boeing, Toyota.
• Global customers search the world for their
  supplies without regard for national boundaries.

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5) Privatization

• Sale of government-owned businesses to private
  investors.
• usually through stock or direct sale to other
  companies.
• Two types of privatization contribute to the
  global economy
• The Developed Countries - Use privatization to
  make formerly government-controlled enterprises
  more competitive in the global economy.
• The Developing Countries - Use privatization to
  jump-start their economies or to speed the
  transition from a communist to a capitalist
  system.

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6) New Competitors are Emerging

• Free market reforms are creating a potential
  group of new competitors.
• Korean, Russian, Taiwanese, and Mexican companies
  are all emerging.
• Chinese companies are also on the move.
• Global trade has two important effects in
  developing 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 markets
  are also expanding beyond their own borders.

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7) Global Standards

• Companies can make one or only a few versions of
  product for the world market.
• This is cheaper than making different versions
  for different countries since there is pressure
  to develop common standards to save money.
• Consistency in quality also an important
  requirement of doing business in many countries.
• International organization for standardization
  (ISO) in Geneva, Switzerland
• Developed a set of technical standards (ISO
  90012000 series).

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Characteristics of Next Generation of
Multinational Managers

• Global mindset understand the world is changing
  rapidly
• Ability to work with people from diverse
  backgrounds
• Long-range perspective
• Ability to manage change and transition
• Ability to create systems for learning and
  changing organizations (Meet needs of evolving
  strategies)
• Talent to motivate all employees to achieve
  excellence (Leadership)
• Accomplished negotiation skills (Cross-cultural)
• Willingness to seek overseas assignments
• Understanding of national cultures

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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.
• Managers must understand more then the basics of
  national culture