MULTINATIONAL COMPANIES (TIẾNG ANH KINH tế SLIDE)

UNIT MULTINATIONAL COMPANIES What is a multinational company? • The term ‘multinational’ is used for a company which has subsidiaries or sales facilities throughout the world • Another expression for this type of business enterprise is ‘global corporation’ • Example: Coca Cola, Heinz, Sony, Hitachi, Akzo, General Motors… What are their characteristics? • They control vast sums of money • They operate in countries with widely differing political and economic systems 3.Multinational strategy • A strategy of adapting products and their marketing strategies in each national market ti suit local preferences • Multinational strategy allows companies to closely monitor buyer preferences in each local market and respond quickly and effectively as new buyer preferences emerge • It does not allow companies to exploit scale economies in product development, manufacturing, or marketing Global strategy • A strategy of offering the same products using the same marketing strategy in all national markets • The main benefit of a global strategy is its cost savings due to product and marketing standardization • It allows managers to share lessons learned in one market with managers at other locations • It may cause a company to overlook important differences in buyer preferences from one market to another What are their reasons for going international? • Their national markets become saturated • Some countries set up trade barriers – usually tariffs or quotas – against a company’s products • Cheap labour and natural resources abroad, especially in developing countries • Expand sales • Diversify sales • Gain experience Direct exporting • Direct exporting – A practice by which a company sells its products directly to buyers in a target market • Sales representatives represent only its own company’s products, not those of other companies • Distributors take ownership of the merchandise when it enters their countries Indirect exporting • In direct exporting – A practice by which a company sells its products to intermediaries who resell to buyers in a target market • Agents: Individuals or organizations that represent one or more indirect exporters in a target market • Export Management Companies: Companies that export products on behalf of indirect exporters • Export Trading Companies: Companies that provide services to indirect exporters in addition to those activities directly related to clients’ exporting activities Licensing • Licensing – Practice by which one company owning intangible property (the licensor) grants another firm (the licensee) the right to use that property for a specified period of time • E.g -Hitachi (Japan) licenses from Duales System Deutschland (Germany) technology to be used in the recycling of plastics in Japan -Hewlett-Packard (United States) licenses from Canon (Japan) a printer engine for use in its monochrome laser printers Licensing • Advantages of Licensing: -Licensors can use licensing to finance their international expansion -Licensing can be a less risky method of international expansion for a licensor Licensing helps shield the licensor from the increased risk of operating its own local production facilities in unstable or hard-to-assess markets -Licensing can help reduce the likelihood that a licensor’s product will appear on the black market -Licensees can also benefit from licensing by using it as a method of upgrading existing production technologies 10 Management Contracts • Management Contract – A practice by which one company supplies another with managerial expertise for a specific period of time • E.g -DBS Asia (Thailand) awarded a management contract to Favorlangh Communication (Taiwan) to set up and run a company supplying digital programming in Taiwan -Lyonnaise de Eaux (France) and RWE Aqua (Germany) have agreed to manage drinking-water quality and client billing and to maintain the water infrastructure for the city of Budapest, Hungary, for 25 years 10 Management Contract • Advantages of Management Contract: -A firm can exploit an international business opportunities without having to place a great deal of its own physical assets at risk -Governments can award companies management contracts to operate and upgrade public utilities, particularly when a nation is short of investment financing -Governments can use management contracts to develop the skills of local workers and managers 10 Management Contract • Disadvantages of Management Contract: -Management Contracts require that company managers relocate for given periods of time In nations undergoing political or social turmoil, lives can be placed in significant danger -Expertise suppliers may end up nurturing a formidable new competitor in the local market 11 Turnkey projects • Turnkey (or build-operate-transfer) project – A practice by which one company designs, constructs and tests a production facility for a client firm • E.g -Webster Griffin (UK) installed $150,000 worth of cooking oil bagging machinery to fulfill its turnkey project with Palm-Oleo (Malaysia) -Lubei Group (China) agreed with the government of Belarus to join in the construction of a facility for processing a fertilizer by-product into cement 11 Turnkey projects • Advantages of Turnkey Projects -Turnkey projects permit firms to specialize in their core competencies and to exploit opportunities that they could not undertake alone -Turnkey projects allow governments to obtain designs for infrastructure projects from the world 11 Turnkey projects • Disadvantages of Turnkey Projects: -A company may be awarded a project for political reasons rather than for technological know-how -They can create future competitors 12 Wholly owned subsidiaries • Wholly owned subsidiary – A facility entirely owned and controlled by a single parent companies 12 Wholly owned subsidiaries • Advantages of Wholly owned subsidiaries: - Managers have complete control over dayto-day operations in the target market and over access to valuable technology, processes, and other intangible properties within the subsidiary 12 Wholly owned subsidiaries • Disadvantages of Wholly owned subsidiarieys: -They can be expensive undertakings -Risk exposure is high because a wholly owned subsidiary requires substantial company resources 13 Joint ventures • Joint venture: Separate company that is created and jointly owned by two or more independent entities to achieve a common business objectives • E.g -A joint venture between Suzuki Motor Corporation (Japan) and the government of India to manufacture a small-engine car specifically for the Indian market 13 Joint ventures • Advantages of Joint Venture: -Companies rely on joint ventures to reduce risks -Companies can use joint venture to penetrate international markets that are otherwise offlimit -Companies can gain access to another company’s distribution network -Companies form international joint venture for defensive reasons, avoiding the government interference 13 Joint ventures • Disadvantages of Joint Venture: -Conflict is most common when management is shared equally -Loss of control over a joint venture’s operations can also result when the local government is a partner 14 Strategic Alliance • Strategic Alliance – Relationship whereby two or more entities cooperate (but not form a separate company) to achieve the strategic goals of each • E.g -An alliance between Siemens (Germany) and Hewlett-Packard (United States) to create and market devices used to control telecommunication systems 14 Strategic Alliance • Advantages of Strategic Alliance -Companies share the cost of an international investment projects -Companies use strategic alliances to tap into competitors’ specific strength -Some companies can gain access to a partner’s channels of distribution in a target market Other companies can reduce exposure to the same kind of risks from which joint ventures provide protection 14 Strategic Alliance • Disadvantages of Strategic Alliance -They can create a future local or even global competitor -Conflict can arise and eventually undermine cooperation ... exporters in a target market • Export Management Companies: Companies that export products on behalf of indirect exporters • Export Trading Companies: Companies that provide services to indirect exporters... systems 3 .Multinational strategy • A strategy of adapting products and their marketing strategies in each national market ti suit local preferences • Multinational strategy allows companies to... Advantages of Joint Venture: -Companies rely on joint ventures to reduce risks -Companies can use joint venture to penetrate international markets that are otherwise offlimit -Companies can gain access