1 Chapter Multinational Management in a Changing World Copyright© 2004 Thomson Learning All rights reserved Learning Objectives •• •• •• •• Define Define multinational multinational management management Understand Understand the the characteristics characteristics ofof aa multinational multinational company company Understand Understand the the nature nature ofof the the global global economy economy and and the the key key forces forces that that drive drive globalization globalization Know Know the the basic basic classification classification ofof the the world’s world’s economies economies Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives •• Identify Identify the the characteristics characteristics ofof the the next next generation generation ofof multinational multinational managers managers Copyright© 2005 South-Western/Thomson Learning All rights reserved Multinational Management •• Formulation Formulation ofof strategies strategies and and management management systems systems toto take take advantage advantage ofof international international opportunities opportunities and and respond respond toto international international threats threats Copyright© 2005 South-Western/Thomson Learning All rights reserved The Nature of the Multinational Company •• Any Any company company that that engages engages inin business business functions functions beyond beyond its its domestic domestic borders borders •• Includes Includes both both large large and and small small companies companies Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 1.1 – The Largest Companies in the World Copyright© 2005 South-Western/Thomson Learning All rights reserved Globalization •• Worldwide Worldwide trend trend ofof the the economies economies ofof the the world world becoming becoming borderless borderless and and interlinked interlinked •• Not Not all all economies economies are are participating participating or or benefiting benefiting equally equally inin the the process process •• Important Important forces forces are are driving driving globalization globalization •• ItIt isis also also important important toto look look atat classifications classifications ofof the the world’s world’s economies economies Copyright© 2005 South-Western/Thomson Learning All rights reserved Countries of the World: The Arrived, the Coming, and the Struggling •• Developed Developed countries: countries: mature mature economies economies with with substantial substantial per per capita capita Gross Gross Domestic Domestic Product, Product, international international trade, trade, and and investments investments •• Developing Developing countries: countries: economies economies that that have have grown grown extensively extensively over over past past two two decades, decades, e.g., e.g., Hong Hong Kong, Kong, Singapore, Singapore, South South Korea Korea Copyright© 2005 South-Western/Thomson Learning All rights reserved Countries of the World: The Arrived, the Coming, and the Struggling •• Transition Transition economies: economies: countries countries that that have have changed changed from from mostly mostly communist communist systems systems toto market/capitalistic market/capitalistic systems, systems, •• e.g., e.g., Czech Czech republic, republic, Hungary, Hungary, Poland Poland •• Less Less developed developed countries: countries: have have yet yet toto show show much much progress progress inin the the global global economy economy •• most most are are located located inin Central Central and and South SouthAmerica America and and Africa Africa Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 1.2: Selected Economies of the World Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 1.7 – Top 25 Companies by Foreign Asset Ownership Copyright© 2005 South-Western/Thomson Learning All rights reserved Foreign Direct Investment •• Developed Developed countries countries get get the the bulk bulk ofof FDI FDI (69%) (69%) while while developing developing countries countries get get around around 30% 30% •• Least Least developed developed countries countries get get minimal minimal FDI FDI •• Implications Implications for for managers—significant managers—significant opportunities opportunities around around the the world world •• Multinational Multinational managers managers should should look look atat risk risk rating rating ofof countries countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 1.8: Risk Ratings of Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved The Internet and Information Technology •• Electronic Electronic Communication Communication — — E-mail, E-mail, World World Wide Wide Web, Web, etc etc •• Allows Allows multinationals multinationals toto communicate communicate with with company company locations locations throughout throughout the the world world •• Multinationals Multinationals can can also also monitor monitor worldwide worldwide operations operations •• Information Information technology technology isis spurring spurring aa borderless borderless financial financial market market Copyright© 2005 South-Western/Thomson Learning All rights reserved The Rise of Global Products and Global Customers •• The The needs needs ofof customers customers for for many many products products and and services services are are growing growing more more similar, similar, •• e.g., e.g., McDonald’s, McDonald’s, Boeing, Boeing,Toyota Toyota •• Global Global customers customers search search the the world world for for their their supplies supplies without without regard regard for for national national boundaries boundaries Copyrightâ 2005 South-Western/Thomson Learning All rights reserved Privatization Sale Sale ofof government-owned government-owned businesses businesses toto private private investors, investors, •• usually usually through through stock stock or or direct direct sale sale toto other other companies companies •• Two Two types types ofof privatization privatization contribute contribute toto the the global global economy economy — — the the developed developed world world and and the the developing developing world world Copyright© 2005 South-Western/Thomson Learning All rights reserved Privatization—Types •• The The Developed Developed Countries Countries •• Use Use privatization privatization toto make make formerly formerly governmentgovernmentcontrolled controlled enterprises enterprises more more competitive competitive inin the the global global economy economy •• The The Developing Developing Countries Countries •• Use Use privatization privatization toto jump-start jump-start their their economies economies or or toto speed speed the the transition transition from from aa communist communist toto aa capitalist capitalist system system Copyright© 2005 South-Western/Thomson Learning All rights reserved New Competitors •• Free Free market market reforms reforms are are creating creating aa potential potential group group ofof new new competitors competitors •• Korean, Korean, Russian, Russian,Taiwanese, Taiwanese, and and Mexican Mexican companies companies are are all all emerging emerging •• Chinese Chinese companies companies are are also also on on the the move move Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 1.9: Top 25 Emerging Market Economies Copyright© 2005 South-Western/Thomson Learning All rights reserved New Competitors are Emerging •• Global Global trade trade has has two two important important effects effects inin developing developing new new competitors: competitors: •• When When developing developing countries countries are are used used as as low-wage low-wage platforms platforms for for high-tech high-tech assembly, assembly, multinationals multinationals facilitate facilitate the the transfer transfer ofof technology technology •• Aggressive Aggressive multinationals multinationals are are also also expanding expanding beyond beyond their their own own borders borders Copyright© 2005 South-Western/Thomson Learning All rights reserved The Rise of Global Standards •• Companies Companies can can make make one one or or only only aa few few versions versions ofof product product for for the the world world market market •• This This isis cheaper cheaper than than making making different different versions versions for for different different countries countries •• Drive Drive toto develop develop common common standards standards toto save save money money Copyright© 2005 South-Western/Thomson Learning All rights reserved Global Standards •• Consistency Consistency inin quality quality also also an an important important requirement requirement ofof doing doing business business inin many many countries countries •• International International organization organization for for standardization standardization (ISO) (ISO) inin Geneva, Geneva, Switzerland Switzerland •• Developed Developed aa set set ofof technical technical standards standards (ISO (ISO 9001:2000 9001:2000 series) series) Copyright© 2005 South-Western/Thomson Learning All rights reserved Next Generation of Multinational Managers: Characteristics •• •• •• •• •• Global Global mindset mindset Ability Ability toto work work with with people people from from diverse diverse backgrounds backgrounds Long-range Long-range perspective perspective Ability Ability toto manage manage change change and and transition transition Ability Ability toto create create systems systems for for learning learning and and changing changing organizations organizations Copyright© 2005 South-Western/Thomson Learning All rights reserved Next Generation of Multinational Managers: Characteristics •• •• •• •• Talent Talent toto motivate motivate all all employees employees toto achieve achieve excellence excellence Accomplished Accomplished negotiation negotiation skills skills Willingness Willingness toto seek seek overseas overseas assignments assignments Understanding Understanding ofof national national cultures cultures Copyright© 2005 South-Western/Thomson Learning All rights reserved Multinational Management: A Strategic Approach •• Considers Considers how how managers managers formulate formulate and and implement implement strategies strategies toto compete compete successfully successfully inin the the global global economy economy •• Strategies Strategies are are the the maneuvers maneuvers or or activities activities used used toto increase increase and and sustain sustain organizational organizational performance performance •• Multinational Multinational strategies strategies must must include include maneuvers maneuvers that that deal deal with with operating operating inin more more than than one one country country and and culture culture Copyright© 2005 South-Western/Thomson Learning All rights reserved ... South-Western/Thomson Learning All rights reserved Multinational Management •• Formulation Formulation ofof strategies strategies and and management management systems systems toto take take advantage advantage...Learning Objectives •• •• •• •• Define Define multinational multinational management management Understand Understand the the characteristics characteristics ofof aa multinational... Seven Key Trends •• •• •• •• Disintegrating Disintegrating borders borders Growing Growing cross- border cross- border trade trade and and investment investment The The rise rise ofof global global