This action might not be possible to undo. Are you sure you want to continue?
A global perspective is consider a matter of survival for business. This new field is a blend of strategic management and international business that develops worldwide strategies for global corporations. Strategic management is the process of specifying an organization's objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. Additionally, global strategic management includes acknowledging and handling the challenges of going global. Global competition has become an important part of today’s business activity and demands a new way of thinking that incorporates strategic management. However, there are many unique strategic resource management challenges associated with going global. It is important to develop an international business strategy to deal with a rapidly developing global economy. In this paper I will address the advantages of international expansion as well as identify the challenges associated with expanding from the US to Mexico, France and Turkey. ADVANTAGES FOR A MULTINATIONAL CORPORATION There are several advantages that a multinational company (MNC) can benefit from. Those advantages are described below.
Increasing sales and finding new markets By expanding operations to an international scale means that business can increase their total sales by supplying product to multiple companies. The product may vary in its life cycle in other the company’s other countries. It is quite possible that a mature product in the US is an emerging product in Mexico, France or Turkey. Businesses can take advantage of expanding the product’s life cycle. The Product Life Cycle is the cycle a product progresses through from introduction to growth to maturity and finally, to decline. This cycle is associated with market demand. Many other factors contribute to market demand as addressed below.
then the business is less likely to come under threat from supply shortages or price increases. Mexico. it does not have to compete to get its product in those countries since it already has a presence. The economic cycle includes the phases . Although. businesses obtain a better economies of scale by selling worldwide or establishing production opportunities in low cost labor localities. a plant in Mexico would produce this final product for a less expensive cost compared to France since the raw material for pottery is readily available in Mexico. then it can lessen the impact or cushion the natural progression of the economic cycle.Acquiring New Raw Materials / Resources An example includes the availability of clay in France versus the availability in Mexico. Diversification Business may engage in expanding its operations internationally in order to diversify. Through this increase in the size of the market. US. other obstacles need to be considered as mentioned below. and Turkey. the price per unit of output decreases. Minimizing Competitive Risk The operation of a business in many countries means that it is less likely that a competitor will have a crucial impact on the business operations in one particular market area. it has a known presence in these four countries. This cushions unpredictable swings in market prices and sales in any one particular market thus allowing their other markets to support such occurrences. allowing for a reduction in price or an increase in profits. Gaining Economies of Scale The business experiences cost savings by increasing the scale or size of its operations. Therefore. Cushioning the Economic Cycle If a business has operations in a variety of countries (markets). France. If a business has a range of suppliers from different countries. Through international expansion. If the company manufactures pottery. Example: if the company manufactures tennis shoes in all four of its countries.
Commercial. and set up operations where it will cost them less to operate due to the nature of government regulations in a particular country. Legal. & Regulatory (CLR) Factors Competition Law – Addresses how government regulates competition in country. & Regulatory. Regulatory Differences Some countries of the word have more lenient stances towards regulations involving environmental emissions and/or wages for workers.where sales have declined and unemployment increases. Some industries government says the more the merrier because the consumer will get a better product for a better price. insurance companies. If insurance companies belly up the government will have to pick up the tab.where sales and employment is high to a recession . certain products do not yield this thought process – like energy. Legal. Business may use this to their advantage. On the other hand. Those challenges fall under the categories of Commercial. Fewer competitors and greater regulators examples include healthcare. Therefore a business may take advantage of countries with lower taxation rates.the economy experiences over an amount of time. What are the barriers of entry? What obstacles will make it difficult for a firm to enter a specific market? Some countries do not competitors in their markets because the resident market will suffer eventually putting the locals out of business. . However. and Environmental factors and are discussed in detail below. this can also be an obstacle as listed below. CHALLENGES FOR A MULTINATIONAL CORPORATION There are several challenges faced by multinational companies (MNC). etc. Minimizing Tax Taxes in various countries around the world differ. The economic cycle moves from a booming economy . saving on the costs of production. Market. A company must understand the competition of the market they are entering or they could exhaust endless funds figuring it out.
If selling a car regulators exist for the width of windshield.Tax Law – tax regulations. Market Factors . Environmental Regulations – some countries do not care about the environment. Regulatory Environment – every industry for all foreign market are governed by regulators. As a result. Or a manufacturer could use an existing facility that closes at night to manufacture their product. 70-75% of a company’s expense is dedicated to labor and benefits so knowing the boundaries beforehand is crucial. This is efficient use of money and capital. OSHA may only exist in US by name but there are governmental agencies exist based on functions. This determine inputs of cost that will be passed on to consumers or absorbed by the company. Accounting & Financial Regulations – In every country accounting and financial regulations are different. They only want cheapest source of energy which is coal. This will allow them to produce without the liability of a plant. Tax law affects every aspect of your business. Whereas other countries do not allow the use of coal because of its pollutants. It determines whether you buy or lease equipment. Some countries allow you to write down interest some don’t. then the temperature for which it is transported is regulated. accounting for laptops vary by country. If food.Of course these vary by country. Categories of employees like Exempt vs Non-exempt and Skilled and Unskilled labor. Local governments can grant you a tax hiatus or corporate tax break or use a competitor’s tax rate. a company is building many different “versions” of the same product. Europe has their version of Sarbanes-Oxley named BASEL II. How a company handles its waste products also effects the bottom line due to disposal fees for the product and/or the packaging for the product as disposal fees for the cardboard it was shipped in. US has FAASB that apply only to US. How you pay employees will vary by job. As an example. 220 countries in this world and there are 220 ways to regulate. Labor Law . Depreciation/amortization and tangible assets are capitalized differently. In Mexico there are low wage ratings but benefits may cost you more.
A company will need to train its employees to identify corruption and setup financials so not subject to corruption. Environmental Factors . Some countries limit the number of external workforce you can bring in because you will be taking work away from the locals. They actually breed the graduates to meet their labor demands. If building cars you need people that can read or that can operate computers. An example: for every 100 employees you can only have 1 ex-patriot. If this is the case. Ex-patriot (“ex” meaning external in Latin) should only be 1% of labor force. Market Demand/State of Competition – consider the market before establishing existence in country. Do you need to create a demand? Can you change labor. Economic forecasters an forecast the economy of the future for the market the company is considering entering. Cost of Money (interest rates) – what is the cost of money? What are the interest rates? How have they fluctuated in the recent years? What is the exchange rate? Corruption Index: Every country has some type of corruption. But the bottom line is every company will have deal with some degree of corruption. where do you find the skill set to perform the jobs needed to produce your product? Some corporations actually develop the skill set of the locals to build “home-grown” labor pool. This ties into Labor laws which ties to competition law which ties to regulatory environment. Employees may need to be bilingual depending on the skill set needed for the job skill. competition or regulatory laws? Although no market demand will the government create a market demand to create revenue? what is the local state of competition? Can the company gain market share? Does it make business sense to make the move? Macro Economy – What is the state of economy – is it in a recession or growth stage? A company does not want to introduce a new product or may want to limit the number of new products if the state of the economy is poor.Availability of Skilled Labor – based on the need from the market. Some countries do not have a formal secondary education system.
Physical Infrastructure – bridges. Also includes hospitals. Telecommunications Infrastructure . the gap between information technology of the haves and have-nots of this world is likely to persist. Mexico: Roman Catholic 77%. IT readiness will hinder the growth of any corporation. This revolution will wire the global world into a single communication network. 6% Protestant. but not limited to transportations. and Turkey demands four native languages be known. Operations and employees require these resources so they must be considered. unaffiliated 4% Turkey: Muslim 99%. Information technology (IT) is a revolutionary force that will continue to restructure corporations and drive economic growth.Limitations in IT advancement due to economy. Muslim 5%-10%. remaining: Other • • Availability of Raw Materials (inputs): Does the company have to import materials to build/create their product? If so. Protestant 2%. Information technology is the way MNCs communicate across bodies of water and miles of land. • • US: mixing pot with many different religions. this cost will have to be passed on to the consumer. the central nervous system for the business world. France.Language – Operating in US. If the country does not have the telecommunications infrastructure in place how can a company do business? . If you are not competitive technology-wise in your field your are behind the game. grocery stores. equipment. Jewish 1%. clinics. and gas stations. When considering transferring or training local staff this language barrier must be considered. remaining: Other France: Roman Catholic 83%-88%. national holidays. docks. However. Culture – It is obvious with operating in four different countries there will be varying religious beliefs. cultural beliefs will have to considered and accommodated. Mexico. roads. harbors.
near or far. Company’s rely heavily on importing and exporting goods. Continued Crime and Terrorism– More likely to happen outside of the US disgruntled individuals. However. It integrates the knowledge and experience needed to allow companies to make business decisions for all functional areas. and nations may hold a corporation responsible for taking jobs away from the locals or religious lines crossed. Strategic management plays a roles in their successes. CONCLUSION Our world is becoming integrated into a connected community known as a global economy.Energy Infrastructure – What limitations does the country have regarding energy supply. these are obstacles that are conquered by companies such as Coca-Cola. groups. . driving a competitive need for multinational corporations (MNC). The challenges faced by MNCs as outlined in this paper prove to be barriers. What resources are needed to generate power to the manufacturing plant and how efficient is the energy supplied? Will the plant have limitations as a result of the lack or type of energy supplied? Trade barriers – Are there trade barriers in place? A trade barrier is any government policy or regulation that restricts international trade. McDonald’s. Knowing the trade barriers will save a company money and improve efficiencies. and other well-known corporations – all of which are profitable. And may result in a variety of crimes and terrorism against the corporation.
shtml http://www. Employment Relations Today (Wiley). Senior Vice President of Sales.net/France/fact_sheet.net/business/strategy/global-business-introduction.A. . Retrieved from Business Source Premier database. 19-24. S. People Management in the Context of Global Change. Chan. Telephone Interview. 38. 13(3). Developing International Managers: A Partnership Approach.gov/r/pa/ei/bgn/35749. 29(2).REFERENCES Chan.html http://www.htm Morales. (2002).discoverfrance. Journal of Management Development.com/ http://www. T. http://tutor2u. D. (1994). February 27). BT Global Services.allaboutturkey.com/ http://www.allaboutmexico. (2010.state. Retrieved from Business Source Premier database.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.