Company Profile Group Project

MAN 4633 – MNC STRATEGY

COMPANY PROFILE GROUP PROJECT GUIDELINES

I.             GENERAL INSTRUCTIONS:

1.         Each group must select an MNE from the Fortune 500 list, but NOT one that is in the top 100.

2.         Prepare a 7-8 page narrative report as detailed in Section II.  The page count excludes the cover page, reference list, pictures, and graphs.

II.            REPORT CONTENT:

1.         Company Overview:

            Describe:

a.  The company’s history

                    b. Its product(s)

2.         Chapter 1:

                    a.  What was(were) the company’s motivation(s) to internationalize?

                    b. What market entry method did it use?

                        c.  How would you classify the company’s evolutionary stage of internationalization (i.e., its mentality)?  Why?

3.         Chapters 2 and 3:

Of the types of industries mentioned in Chapter 2 (i.e., global, international, multinational, transnational), which would you say best describes the company?  Why?  Be sure to use the types of strategies described in Chapter 3 to support your answer.

                        4.         Chapter 4:                     

        What type of organizational model would you say is used by the company?  Why?

                        5.         Chapter 5:

What type of innovation model would you say is used by the company?  Why?

                        6.         Chapter 6:

Briefly describe any strategic alliances if applicable. Would you consider them to be “traditional” alliances, or are they “modern forms” of alliances?

                        7.         Chapter 7:

Using the categories discussed in Chap 7 (i.e., global business manager, worldwide functional manager, geographic subsidiary manager, top level corporate manager), classify some of the management personnel in the organization.

(Continued)  

8.         Chapter 8:

     Describe the company’s relationship with outside entities such as NGOs, host governments, etc.  How would you classify these relationships, according to the categories covered in Chapter 8?  Cite examples.

III.          RESEARCH/SOURCES:

       Although not the norm for conducting research, you are to use only Internet sources, along with the notes and the textbook.  All websites used MUST be in English and MUST be those of reputable organizations and companies.

       HINT: After going to the Fortune website, a good place to continue your search is your company’s website.  Also, use the textbook as a source. 

IV.          REPORT FORMAT:

1.         The report must be double-spaced, using a Times New Roman, 12-point font.

2.         Be sure to include a title page, listing the names of each group member, along with the name of the company being analyzed.

3.         Be sure to cite your sources (in-text) and in a reference list, preferably using APA format.

Below I have attached the chapters summaries which the professor wants us to use when answering the questions.

CHAPTER 1- EXPANDING ABROAD: Motivations, Means, Mentalities

  1.            FEATURES OF THE MNE 1.         Definition
    1. Must have “substantial direct investment” in foreign countries.
  • Must have “active management” of overseas operations.
  • Scope
  1. “Active, coordinating management of operations” is key differentiating characteristic of an MNE (from other organizations)
  • True MNEs have systems in place to handle cross-border tasks internally.
  • Influence
  1. Some statistics according to the UN:
  1. Over 65,000 MNEs
    1. Approx $16 trillion in revenues
  • MOTIVATIONS  TO  INTERNATIONALIZE

Some reasons why companies are motivated to expand overseas

  1. Traditional Motivations – historical motivations (pre-1980s) include:
  1. Secure key supplies – e.g., aluminum companies seeking bauxite.
  • Market-seeking behavior

1.    To exploit an intrinsic advantage (e.g., technology, brand recognition, R&D capabilities)

11.    To seek additional sales to exploit economies of scale and scope

  • Access low-cost factors of production, especially:
  1. Labor

11. Capital

B.       MOTIVATIONS TO INTERNATIONALIZE (continued)

NOTE: Prior to the 1980s, the product life cycle (PLC) theory could explain much of a company’s motivation to internationalize.

2.     Emerging Motivations (i.e. motivations post-1980s)

a.   Foreign operations no longer seen as only strategic and organizational “appendages” to domestic operations

b.   Factors influencing a company’s motivation to internationalize (i.e. why overseas operations became more important):

i.    Increasing scale economies, R&D investments, and a shortened PLC.

ii.    The MNE’s global scanning and learning capabilities – alternatives regarding labor, technology, etc.

iii.   Increased competitive positioning allowing cross-subsidization of markets

      Note: Cross-subsidization of markets – using profits of a subsidiary in one market to subsidize an unprofitable subsidiary in another.

C.       MEANS OF INTERNATIONALIZATION

          Examines the requirements and processes of going international (i.e. how)            

                    1.       Domestic Firms vs. MNEs (advantages/disadvantages)

                                        a.       Advantages of domestic firms

                                                            i.        Know national culture, structure of industry, etc

ii.    Have existing relationships with suppliers, customers, regulators

                                        b.       Advantages of MNEs

                                                            i.        Likely has advanced technology

                                                            ii.        Scale economies (in R&D, production, etc)

NOTE: Above listed advantages of MNEs does not mean they will enter the market through their own offshore operations.

                    2.       Prerequisites for Becoming an MNE (3 conditions)

                                        a.       Must have motivation to invest overseas

                    2.       Prerequisites for Becoming an MNE (continued)

b.   Must have strategic competencies/ownership-specific advantages (see advantages above)

c.   Must have internal organizational capabilities

                    3.       Process of Internationalization

                                        a.       The Learning Process of foreign market entry (1977)

                                                            i.        Firm makes initial commitment of resources

                                                            ii.        Gains knowledge of local mkt, customers, etc

iii.   Improved ability to evaluate current operations and opportunities

iv.   Able to make additional investments thus increasing effectiveness

                                        b.       Other market entry processes:

                                                            i.        Purchasing existing facilities/firms

                                                            ii.        Subcontracting to others (e.g. licensing)

iii.   Increasing commitment (from exporting, to joint ventures, to FDI (See Fig 1-2).

D.       EVOLVING MENTALITY: INTERNATIONAL to TRANSNATIONAL

          Four evolutionary stages (mentalities) of internationalization:

1.     International Mentality

a.   Overseas operations seen as “outposts.”

b.   Heavily influenced by the PLC

2.     Multinational Mentality

a.   Overseas operations increase in importance as sales/profits increase.

                        b.       Products/technology modified to suit specific foreign mkt.

3.     Global Mentality

a.   Reduce inefficiency in multinational mentality by producing for a “world market”

b.   Assumes national tastes are somewhat similar

c.    Requires increase levels of coordination

4.     Transnational Mentality

a.   Emerged due to the need to be locally responsive while developing global products

CHAPTER 2 – Understanding International Context

  1. FORCES FOR GLOBAL INTEGRATION AND COORDINATION Globalization is the continuation of a trend that began over 100 years ago.
  1. Forces Leading to Change
  1. Economies of Scale
  1. Achieved through high volume production
  1. Use of large-batch or continuous-process technologies
  1. Production levels exceed domestic sales.
  • Economies of Scope

1.      Possible due to improved communications and transportation networks

11.  Rise in use of large trading companies (e.g. Panasonic)

  • Factor Costs

1.      need to find cheaper sources of factors (i.e. raw materials, labor, capital)

11.     Finding cheap labor – a constant challenge. Labor cost/wage rates increase as labor force becomes educated.

NOTE: Typical life cycle of a country as a cheap source of labor is 5 years.

  • Liberalization of World Trade Agreements

1.     Agreements facilitate of global expansion (i.e. through WTO, EU, NAFTA)

  • Expanding Spiral of Globalization
  1. External triggers
    1. Major technological innovations (semiconductors, etc.) resulting in changes in industry’s economics (e.g. cell phones)

2.     Expanding Spiral of Globalization (continued)

b.   Internal restructuring

                                i.        Done by firms lacking external forces for change

ii.    Firms go global to take advantage of economies of scale (e.g. automobiles)

iii.   Achieved by use of rationalized production, streamlined/standardized products

                    3.       Global Competitors as Change Agents

a.   “Global Chess”

i.    Defined as: A competitive strategy where a firm’s worldwide operations are managed as interdependent units using a coordinated global strategy.

ii.  Use of cross-border subsidization is common

B.       FORCES FOR LOCAL DIFFERENTIATION AND RESPONSIVENESS

1.   Management’s strategic task: How to sense (identify), respond to, and/or exploit differences in environments.

2.   Current trend: Global companies now recognizing importance of being “local”

3.   Factors driving current trend towards localization:

        a.       Cultural differences – nationality still plays important role

        b.       Government demands – especially those of host governments

                            i.        “Positives” of MNE/Host Government relationship:

  • MNE seen as source of funds, technology, expertise
  • Host government seen as key to access local markets and resources

Continued

b.   Government demands (continued)

ii.  “Negatives” of MNE/Host Government relationship:

  • Host government belief that MNE operations result in:
    • Social disruption – relocation from rural to urban areas
    • Rising consumerism
    • Rejection of indigenous values
    • Breakdown of traditional community structures
  • Large MNEs seen as political threat to small local governments

iii. Conflicting objectives of MNE vs. Host government

  • MNEs main objectives:
    • Unrestricted access to global markets and resources
    • Freedom to integrate operations across national borders
    • The right to coordinate and control all operations.
  • HOST GOVERNMENT main objectives:
    • Competitive economic development (using “national champion” or flagship companies).

c.   Growing Pressures for Localization

i.    Customers are moving away from global homogenized products to more “local” ones.

ii.    Cost of centralized production involves more than just freight costs.  Administrative costs are also significant.

C.       FORCES FOR WORLDWIDE INNOVATION AND LEARNING

1.   Successful MNEs must have ability to harness access to worldwide knowledge to develop innovative products

Continued

2.   Impact of Worldwide Innovation and Learning

        a.       Companies forced to globalize to amortize R&D costs/investments

        b.       Voluntary transfer of technologies through

i.  Licensing (to raise funds)

ii.  Cross-licensing (to acquire technology)

iii. Strategic alliances (to maintain competitive advantage)

c.   Domestic market may no longer be source of most sophisticated consumer need and advanced technology

d.   Innovation driven by increased importance of global industrial standards – companies setting new standards/platforms for products have competitive advantage.

D.       RESPONDING TO DIVERSE FORCES SIMULTANEOUSLY

                    1.       Global, Multinational, and International industries

                                        a.       Global Industries

i.    Defined as: Industries historically driven by economic forces that require scale economics to remain competitive

ii.    Economic factors more important than environmental factors.

iii.   Use of a global strategy

iv.   Evidenced by:

  • Homogenization of national markets
  • Centralized, scale-intensive manufacturing and R&D
  • Worldwide exports of standardized global products

v. e.g. Consumer electronics up to mid-late 1980’s

                        b.       Multinational Industries

i.    Defined as: Industries in which localizing forces of national, cultural, social and political differences dominate development of industry characteristics.

ii.    Differences in culture etc., require differentiated products/strategies on country-by-country basis.

b.   Multinational Industries (continued)

iii.   Use of multinational strategies which respond to local market sensitivities.

iv.   e.g. food production

                                        c.       International Industries

i.    Defined as: Industries in which technological forces are dominant and the need to develop and diffuse innovations is critical to the firm’s competitive position.

ii.    Competition driven by ability to develop and harness new technology

iii.   Use of international strategy – new products developed at home using new technology then distributed to worldwide affiliates.

                    2.       Transnationality

a.   “Center of Gravity” – the set of environmental forces that have most significant impact on firm’s strategic tasks.

b.   Post 1980’s – industries no longer impacted by a single set of environmental forces.  Now facing multiple sets of forces of equivalent importance (e.g. must meet scale economies while satisfying local tastes).

c.   Transnational industries

i.    Defined as: Industries in which companies respond effectively to all diverse and conflicting forces at the same time to manage efficiency, responsiveness and innovation.

ii.    No longer able to compete on basis of one dominant capability.

iii.   Responsiveness using local, tailor-made products in each overseas market no longer feasible.

iv.   Global customers demand sensitivity simultaneously with lower costs and high quality of global products.

CHAPTER 3 – DEVELOPI NG TRANSNATI ONAL STRATEGI ES

‘A.            WORLDWI DE COMPETITIVE ADVANTAGE

  1. Three Strategic Objectives/goals required of firms for worldwide advantage:
  1. Must build global-scale efficiency in existing activities
  • Must develop multinational flexibility to manage country-specific risks and opportunities.
  • Must create ability to learn from, and exploit its international exposure
  • Sources of global competitive advantage to exploit:
  1. Scale economies
  • National differences
  • Scope economies
  •         THE STRATEGI C GOALS OF WORLDWI DE COMPETITIVE ADVANTAGE
  1. Global Efficiency
  1. Overall efficiency – ratio of value of outputs (revenues) to value of inputs (costs)
  • Efficiency results from either reducing costs and/or enhancing revenues.
  • Multinational Flexibility
  1. Defined as: The ability of a company to manage the risk and exploit the opportunities that arise from diversity and volatility of the global environment.
  • Types of risks in multinational environment (due to diversity and volatility)
  1. Macroeconomic risks – those outside the control of the MNE (price changes, wages rates, effects of war).

b.   Types of risks in multinational environment (due to diversity and volatility) (continued)

ii.    Political Risks – due to actions by national governments.

iii.           Competitive Risks – caused by competitors’ reactions to the MNEs activities.

iv.   Resource Risk – availability of raw materials, capital, management talent, etc.

NOTE: Risks vary over time and from country to country.

                    3.       Worldwide Learning

a.   Diversity of Environments –

i.  A key asset of the MNE

ii.    Allows opportunities for greater learning due to exposure outside its domestic market.

C.       THE MEANS OF ACHIEVING WORLDWIDE COMPETITIVE ADVANTAGE

                    1.       National Differences

                              Firms should exploit:

a.   Differences in costs in input markets due to country-by-country differences in factor endowments (i.e. labor, material, capital)

b.   Differences in output markets due to consumer tastes, government regulations, effectiveness of promotion strategies, etc.

                    2.       Scale Economies

a.   Gaining advantage through high-volume production.

b.   Benefits may be dynamic and will be affected by the learning effect

                    3.       Scope Economies

a.   Cost of the joint production, development, or distribution of 2 or more products can be less that producing/developing/distributing them separately

3.     Scope Economies (continued)

b.   Shared investments across same or different value chains.

c.   e.g. using a common distribution channel

D.       TYPES OF STRATEGIES (4 types) (refer to Table 3-3)

                    1.       International Strategy

a.   Strategic Orientation/Defined as: Exploitation of domestically-developed innovations in overseas markets

b.   Focus on: Use of innovations

c.   Uses all three means (national differences, scale economies, scope economies).

d.   Was common among many US MNEs

                    2.       Multinational Strategy

a.   Strategic Orientation/Defined as: Using primarily one means (i.e. national differences) to achieve strategic goals.

b.   Focus on: Product differentiation

c.   Polycentric strategy

d.   Subsidiaries in each country are primarily self-sufficient

e.   Used by many European firms

                    3.       Global Strategy

a.   Strategic Orientation/Defined as: Developing global efficiency by using all 3 means to achieve best cost and quality positions for the firm’s products

b.   Focus on: best-cost position

c.   Use of centralized global-scale operations

Continued

D.       TYPES OF STRATEGIES (4 types) (continued)

3.     Global Strategy (continued)

d.   Requires high level inter-country shipments (e.g. of parts and supplies)

4.     Transnational Strategy

a.   Strategic Orientation/Defined as: Simultaneous use of all 3 strategies above (international, multinational, global) to achieve competitive advantage.  

b.   All aspects (costs, revenues, innovation etc) managed simultaneously.

c.   Use of both centralized and decentralized processes as needed.

d.   Use of excentralization (a/k/a flexible specialization) – i.e. locating a centralized activity offshore.

E.   STRATEGIC TASKSTasks/challenges facing companies to maintain or achieve worldwide competitive advantage

                    1.       Defending Worldwide Dominance

                                        a.       Faced by established, major worldwide players

b.   Aim: defend dominance while seeking new sources of competitive advantage

                    2.       Challenge Global Leaders

                                        a.       Faced by smaller firms that seek worldwide competitiveness

b.   Aim: tackle industry leaders using internal and external sources (e.g. product development, satisfying certain niches, etc.)

                    3.       Protecting Domestic Niches

a.   Faced by companies focused on their national markets due to unwillingness or inability to expand overseas.

b.   Aim: Protect their national markets from global (outside) competitors.

E.       STRATEGIC TASKS (continued)

3.     Protecting Domestic Niches (continued)

                  c.       Methods used:

                                      i.        Use of nationalism

                                      ii.        Seek government assistance (e.g. “national champion”)

                                      iii.       Join forces with other global firms

CHAPTER 4 – DEVELOPI NG TRANSNATI ONAL ORGANIZATIONS

  • STRUCTURAL FIT AND INTERNALIZATION
  1. John Stopford’s Stages Model (see Fig. 4-1):
  1. Overview of model
  1. Organization structure used varies with level of internationalization.
  1. Uses 2 variables:
    1. Foreign product diversity
    1. Foreign sales as 0/o of total sales
  • Types of structures
  1. International Division:
    1. Foreign product diversity – low
      1. Foreign sales as % of total sales – low
      1. Used at early stage of expansion
  1. Area Division:
    1. Foreign product diversity – low
    1. Foreign sales as % of total sales – moderate to high
  1. Worldwide Product Division:
    1. Foreign product diversity – moderate to high
    1. Foreign sales as % of total sales – low
  1. Global Matrix:
    1. Foreign product diversity – moderate to high
    1. Foreign sales as % of total sales – moderate to high
    1. Managers report to 2 bosses
  • Failure of Global Matrix

I.

perspectives

Differences in managers’ priorities and

reporting

I.                   Gridlock and logjams caused by dual

B.       ADMINISTRATIVE HERITAGE

1.   Concept:  An organization’s ability and willingness to change is influenced by its history and embedded management culture

    2.       Types of Organizational Models

a.   Decentralized Federation

                          Characteristics:

  • Uses a multinational strategy
  • Typically European MNEs
  • Products and marketing strategies modified to suit individual country market needs
  • Subsidiaries operate independently of each other
  • Knowledge diffusion: developed and retained in each foreign subsidiary

b.   Coordinated Federation

Characteristics:

  • Uses an international strategy                     
  • Typically US MNEs
  • Foreign subsidiaries free to modify products, etc but dependent on parent company for new products, ideas, etc
  • Ethnocentric management attitude
  • Knowledge diffusion: developed at parent (center) and transferred overseas

                  c.   Centralized Hub

                              Characteristics:

  • Uses a global strategy
  • Typically Japanese MNEs
  • Centralized control over quality, product development and manufacturing
  • Export-based
  • Knowledge diffusion: developed and retained at center.

Continued 

C.  THE TRANSNATIONAL ORGANIZATION – Organizational Characteristics

     Transnational organization should have:

          1.  Multidimensional Perspective, including

                   a.  Strong national subsidiary management – to keep up with changing local tastes, etc.       

                   b.  Global business management – to keep up with global competitors

                   c.  Worldwide functional management – for effective use and transfer of corporate knowledge and expertise.

          2.  Distributed, Interdependent Capabilities

                   a.  Centralization of expertise is not critical.

                   b.  Subsidiaries allowed to become company’s source of expertise

          3.  Flexible Integrative Process

                   a.  Flexibility needed to quickly adapt decision-making roles to changes in product, local tastes, etc.

CHAPTER 5 – CREATING WORLDWI DE INNOVATION AND LEARNING

‘A.    CENTRAL and LOCAL I NNOVATION

Note: MNEs cannot acquire world-class knowledge and expertise by focusing only on their domestic environments or modifying their domestic products.

  1. Types of Innovation Models
  1. Center-for-global innovation (Central)
  1. Innovation developed in home country

11.                New product/process created using centralized resources (e.g. using main R&D center)

111.     Subsidiaries’ role: introduce new product/process to the local market.

1v.   Typical of global and international industries

  • Local-for-local innovation (Local)
  1. New products developed by subsidiary based on local opportunities

11.     Subsidiaries use their own resources to develop products

  • Making Central Innovations Effective
  1. Gain subsidiary input – create linkages between centralized operations (e.g. headquarters) and subsidiaries to reduce market insensitivity of HQ.
  • Create “market mechanisms” – to enable managers of centralized functions (e.g. R&D) to relate to problems faced by subsidiary managers.
  • Manage the transfer of responsibility – enable cross-functional integration by transferring personnel
  • Making Local Innovations Efficient – see next page
  • Making Local Innovations Efficient
  1. Empower local management – increase autonomy of foreign subsidiaries
  • Link local managers to corporate decision making – necessary to enable local-for-local (or locally leveraged) innovations to effective throughout the company
  • Integrate subsidiary functions – use cross-functional integration/coordination (e.g. joint product/marketing committee).
  • TRANSNATIONAL INNOVATION MODELS
  1. Locally leveraged – innovation developed by local unit is made available to all units worldwide
  • Globally linked – resources and capabilities of several subsidiary units are pooled together to develop products which become available to all units
  • MAKING TRANSNATI ONAL PROCESSES FEASIBLE
  1. Assumptions/Factors leading to lack of Transnationality
  1. Symmetry of organizational units’ roles – i.e. different business units treated/managed the same
  • HQ-subsidiary relationships based on either dependence or independence
  • HQ/Corporate decision-making and control must be uniform.
  • Solutions
  1. Manage using differentiation instead of symmetry – e.g. in product management, functions (marketing, etc.), geography
  • Establish interdependence  instead of dependence/independence.
  1. Problems with dependence and independence:
  • “Independent” subsidiaries susceptible to competition from MNEs
  • Dependent subsidiaries may not be able to respond to local changes or local challenges

2.   MOTIVATIONS DRIVING FORMATION OF STRATEGIC ALLIANCES (continued)

c.   Industry convergence – several high-tech industries are beginning to overlap due to complexity of technological skill set needed to compete and survive in the industry (e.g. HDTV)

d.   Economies of scale and reduction of risk

i.    Partners can pool resources to increase economies of scale

ii.    Partners and share and leverage specific strengths of each other

iii.   Sharing different and complementary resources can reduce cost of duplication.

e.   Alliances as alternative to mergers – create alliances when political, legal or regulatory constraints prohibit mergers (e.g. code-sharing in airline industry when foreign ownership is prohibited)

B.       RISKS AND COSTS OF COLLABORATION

                    1.       Risks of Competitive Collaboration:

a.   Asymmetrical benefits – one may use partnership to gain competitive edge over the other (e.g. one partner learns skills from the other but is reluctant to share its own).

b.   Control of investments – one partner keeps control over key investments (e.g. in product development, marketing, manufacturing). Other partner becomes dependent.

c.   Risk of “learning by doing” – one partner uses knowledge gained from the alliance to compete against the other partner. (i.e. risk of strengthening a competitor)

d.   Risk of takeover – fear that alliance may result in the acquisition of one partner by the other.

    2.       Cost of Strategic and Organizational Complexity

a.   Risk and rewards of collaboration become more complex because they must be shared (i.e. allocated) between partners

C.       BUILDING AND MANAGING COLLABORATIVE VENTURES

                    1.       Challenges of Building Cooperative Ventures

a.   General challenges include

i.    Strategic and environmental disparities among partners – individual partners may have opposing strategic objectives

ii.   Lack of common experience and perception base – may have different administrative heritages, different organizational cultures

iii.  Difficulties in inter-firm communications – e.g. due to different languages, culture

iv. Conflicts of interest and priorities – regarding objectives.

v.   Personal differences among managers – due to management teams from different cultural/national backgrounds

                        b.       Pre-alliance Challenges

                        Challenges faced by firms prior to joining forces with a partner.

i.    Analyzing the partner’s strategic and organizational capabilities – often difficult due to lack of adequate information.

ii.    Escalation of commitment – managers involved in planning alliance reluctant to back out.

Solution: operational managers responsible for implementation involved in planning.

iii.   Defining scope of alliance – problem overstating the scope of the partnership.

                        Scope more difficult to define due to:

  • Complicated cross-ownership of equity
  • Need for cross-functional coordination
  • Number and scope of joint activities

C.       BUILDING AND MANAGING COLLABORATIVE VENTURE (continued)

2.     Challenges of Managing Cooperative Ventures

                  a.       Managing the boundary –

i.    Setting organizational boundary structures to separate the alliance from the partners’ operations. May use:

  • Separate legal entity
  • One or both partners given operational control
  • Joint committees.

ii.    Choice of boundary structure depends on scope. Higher level of interdependent tasks needs structure with more decision-making integration (likely through separate entity).

                        b.       Managing knowledge flows

                                  i.Need to exploit knowledge generated by the partnership

ii.    Each needs to protect internal knowledge it does not want to share with the other partner (i.e. appropriability theory).

c.   Set up effective governance structure

i.  To provide proper strategic direction.

ii.    “Distributive” equality (i.e. win-lose) in negotiations/governance not necessarily desirable (may lead to ineffectiveness). Use “integrative” equality based on relevant task/expertiseinstead.

CHAPTER 7 – I MPLEMENTI NG THE STRATEGY

  1. GLOBAL BUSINESS MANAGEMENli 1.           Global Business Manager
    1. Fundamental capabilities required include:
  1. Ability to identify opportunities and risks across national borders and functional specialties

11.    Ability to coordinate activities across borders to capitalize on MNEs worldwide competitive advantages.

  • Responsibilities and roles of Global Business Manager
  1. Be a Global Business Strategist
  • Need to have worldwide perspective to assess the firm’s strategic position
  • Forms an integrative strategy incorporating the views of geographic and functional managers.
  • Likely come from a country subsidiary
  • Does not necessarily have to be located in home country
  1. Be an Architect of Asset and Resource Configuration, characteristics:
  • Oversees worldwide distribution of key assets and resources, with input from geographic and functional managers.
  • Must be politically savvy to overcome
  1. Be a Cross-Border Coordinator
  • coordinating flow of materials, components, finished products

Continued

  • National Defender and Advocate
  1. Must be able to counterbalance global strategies/objectives of the firm with strategies/objectives of the local firm
  1. Ensure that local needs and opportunities are incorporated in global decision-making

11.      Country manager must defend and mentor local employees in their fight for corporate resources and recognition

  • Frontline Implementer of Corporate Strategy
  1. Problems/challenges faced by country manager when implementing corporate strategy
  1. Local government suspicious of MNEs subsidiary motives

commitment

11.           Local unions distrust MNEs national

operating

111.          Local consumers unfamiliar with MNEs way of

1v.    Headquarters demands that local management translate global strategies into specific actions that are locally responsive

  • TOP LEVEL CORPORATE MANAGEMEN Identifying roles/responsibilities of top level managers
  1. Providing Direction and Purpose
  1. Need to create common vision and shared set of values which supersedes local management’s objectives
  1. Vision must be:
  • Clear
  • Simple
  • Relevant
  • Continuously reinforced
  • Consistent across organizational units
  • Leveraging Corporate Performance

a.     Must achieve short term goals to remain competitive

  • Leveraging Corporate Performance {continued)
  • Must provide
  1. Controls – use proactive methods
  1. Support –
    1. delegate responsibility and provide rewards
    1. Resist sending in “experts” from HQ.

iii.      Coordination of activities

  • Ensure continual renewal
  1. Ensure external orientation by:
  1. Reduce/eliminate internal bureaucracy

11.   Maintaining customer focus

111.  Benchmarking against competitors

  • Create “dynamic imbalance” – i.e. question, challenge, and change to force adaptation and learning.
  • Define the corporate mission to have flexibility and maneuverability.

CHAPTER 8 – THE FUTURE OF THE TRANSNATI ONAL

  1.        GROWING DISCONTENT WITH MNEs
  1. Opposing Views of Globalization:
  1. View from developed countries:
  1. Globalization seen as driving force behind economic development

11.     Globalization necessary to spread capitalism and free market around the world

  • View from developing countries
  1. Globalization just another means by which MNEs exploit poorer countries due to the perceived widening of the gap between rich and poor
  • Consequences of Discontent
  1. Blockage of “unfair” WTO rules by delegates from poorer nations
  • Violent protests at WTO summit (Seattle 1999)
  • Hypocrisy of “First World” remains – Developed countries advocate free market but still subsidize some industries (e.g., agriculture, textiles, apparel)
  • THE CHALLENGE FACING MNEs
  1. How to deal with the failure of government-funded aid programs. Failure due to:
  1. Paternalistic view of aid programs (i.e. they define the problem and propose the solution)
  • Aid programs provide no accountability or feedback
  • Expected Roles/Responsibilities of MNEs
  1. MNEs expected to continue playing role in economic development using their:
    1. financial resources (e.g. via FOi)
    1. managerial talent
    1. technical expertise

C.        MNEs’ RESPONSES TO NEEDS OF DEVELOPING WORLD

Four categories of responses (postures):

1.       The Exploitive MNE –

a.    “Takes advantage of disadvantage”

b.    Primary motivation for internalization – to seek low costs of production (especially labor)

c.    Takes advantage of:

i.   Low labor rates

ii.  Poor working conditions (e.g. long work weeks)

iii.    Weak legal climate (e.g. lack of, or poor enforcement of workers’ rights)

iv.    Poor living standards

d.    Based on Milton Friedman’s view of managerial capitalism (i.e. stockholder is the only legitimate stakeholder)

e.    May resort to illegal tactics (especially in 1970s)

f.     Likely have adversarial relationship with NGOs.

g.    Rare today (especially due to media exposure)

2.       The Transactional MNE:

a.    Has non-oppressive relationship with governments of emerging markets.

b.    Does not pursue profits at all cost

c.    Willing to make changes to products to suit local market if changes will result in higher market share/profits (e.g. McDonald’s, KFC)

d.    Relationship with NGOs based more on “monitoring and challenging” than on “confrontation and accusation”

3.       The Responsive MNE

a.    Increase in awareness of “sustainability”

b.    Makes conscious commitment to be a “corporate citizen”

c.    More sensitive to needs of stakeholders in developing countries

d.    Sees market in “Bottom of the Pyramid”

4.       The Transformative MNE

a.    Takes initiative to solve root causes of problems in developing markets (e.g. illiteracy, hunger)

b.    Often done through foundations created by founder (e.g. Bill Gates)

c.    Will develop products to satisfy needs of developing nations even if it is not profitable (e.g. Nokia)

d.         Works in partnership with NGOs (NGOs are better at implementing social development program

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