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ib_mmc

ib_mmc

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Published by: rsrao70 on May 30, 2010
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UNIT
 – 
ILesson 1:International Management
 – 
An IntroductionObjectives:
After studying this lesson you should be able to:
 
To appreciate the need of Multinational Corporation
 
To take note of trends which will change the landscape of business
 
To know the process of overseas expansion by international companies
Structure
1.1
 
Introduction1.2
 
Evolution of Multinational Corporation1.3
 
Trends effecting Corporate World:1.4
 
The Process of Overseas Expansion1.5
 
Summary1.6
 
Glossary1.7
 
Self Assessment Questions1.8
 
Further Readings1.1
 
Introduction:
 Globalization is the single most significant development changing businessdynamics in this century. The reality of global markets and global competition ispervasive. The forces that are driving the world toward greater globalization aregreater than the forces that restrain this move. With the improvements intransportation and communication technologies there is a sea change in the waythe companies are run. International trade leads to international marketing,which in turn leads to growth in international business. The phenomenal growth
 
in international business brought about number of new concepts in internationalmanagement. The old theories of international trade focused upon naturalresources and crude measures of factor endowments. Newer models focus uponthe actual sources of competitive advantage of companies in industries.Ultimately, competitive advantage is based upon understanding what customersneed and want and on knowing how to deliver these needs and wants with acompetitive advantage. The formula that guides this task is V=B/P: value =benefits divided by price. The greater the benefits and the lower the price, thegreater the value. The task of the global company is to deliver value tocustomers located in global markets. The ability of corporations of all sizes touse globally available factors of production is an important factor ininternational competitiveness. A single Barbie doll is made in more than tencountries- designed in the United States, with parts and clothing from Japan,Korea, Italy, and Taiwan, assembled in Mexico and sold in different countries.
1.2
 
Evolution of Multinational Corporation:
The dynamics of international business created a great need for the evolution of Multinational corporation. The multinational corporation is a company engagedin producing and selling goods or services in more than one country. It normallyconsists of a parent company located in the home country and few or moreforeign subsidiaries. Some MNCs have more than 100 foreign subsidiariesscattered around the world. It is the globally coordinated allocation of resourcesby a single centralized management that differentiates the multinationalenterprise from other firms engaged in international business.MNCs make decisions about market-entry strategy; ownership of foreignoperations; and production, marketing, and financial activities with an eye towhat is best for the corporation as a whole. The true multinational corporationemphasizes group performance rather than the performance of its individualparts. There are different types of multinational companies, such as;
 
a)
 
Raw-Material Seekers:
Raw-material seekers were the earliestmultinationals and their aim was to exploit the raw materials that could befound overseas. The modern-day counterparts of these firms, themultinational oil and mining companies such as British Petroleum, ExxonMobil, International Nickel, etc.,b)
 
Market Seekers:
The market seeker is the archetype of the modernmultinational firm that goes overseas to produce and sell in foreign markets.Examples include IBM, Toyota, Unilever, Coca-cola.c)
 
Cost Minimizers:
Cost minimizers are a fairly recent category of firmsdoing business internationally. These firms seek out and invest in lower-costproduction sites overseas (for example, Hong Kong, Malaysia, Taiwan, andIndia) to remain cost competitive both at home and abroad.MNCs have to follow the changes in macroeconomic factors, environmental andsocial issues, and business and industry developments. These factors will allprofoundly shape the corporate landscape in the coming years. The followingsection deals with these trends.
1.3 Trends effecting Corporate World:
Those who say that business success is all about execution are wrong. The rightproduct markets, technology, and geography are critical components of long-term economic performance. Bad industries usually trump good management,however: in sectors such as banking, telecommunications, and technology,almost two-thirds of the organic growth of listed Western companies can beattributed to being in the right markets and geographies. Companies that ride thecurrents succeed; those that swim against them usually struggle. Identifyingthese currents and developing strategies to navigate them are vital to corporatesuccess. What are the currents that will make the world of 2015 a very different

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