M8 Study Guide

M8S1 Important Notes

1. A global corporation and a multinational company are the same thing.

2. A global corporation is a company that operates in two or more countries, leveraging the global
environment to approach varying markets in attaining revenue generation.
3. Global corporations pursue international operations as a result of the strategic potential
provided by technological developments, making new markets a more convenient and
profitable pursuit both in sourcing production and pursuing growth.
4. If you own a corporation and you only operate locally, the only market you have access to is the
local market. Profits will be based on the consumption within that market. But if you were to
operate globally, you gain access to a larger market and larger profits.
5. International operations are a direct result of either achieving higher levels of revenue or a
lower cost structure within the operations or value-chain.
6. Multinational company operations often attain economies of scale, through mass producing in
external markets at substantially cheaper costs, or economies of scope, through horizontal
expansion into new geographic markets.
7. Economy of scale is a proportionate saving in costs gained by an increased level of production;
the more units you produce of a single product, the less costly it becomes to produce. Economy
of scope is a proportionate saving gained by producing two or more distinct goods, when the
cost of doing so is less than that of producing each separately; the more different-but-similar
goods you produce, the lower the total cost to produce each one.
8. A multinational corporation (MNC) is present in several countries, which improves the
company’s ability to maintain market share and earn higher profits. As GDP growth migrates
from mature economies, such as the US and EU member states, to developing economies, such
as China and India, it becomes highly relevant to capture growth in higher growth markets.
9. Higher growth markets essentially mean markets where consumers have a growing capacity for
spending.
10. The significant challenges that MNCs face in penetrating international markets are based on
public relations, ethics, organizational structure, and leadership.
11. Under public relations, public image and branding are critical components of most businesses.
Building this public relations potential in a new geographic region is an enormous challenge,
both in effectively localizing the message and in the capital expenditures necessary to create
momentum.
12. Ethics is arguably the most substantial of the challenges faced by MNCs. Ethics have historically
played a dramatic role in the success or failure of global players.
13. The organizational structure challenge that MNCs face refers to the ability to efficiently and
effectively incorporate new regions within the value chain and corporate structure.
14. The leadership challenge MNCs face acknowledges that there are differences in strategies and
approaches in every geographic location worldwide, and attracting talented managers with high
intercultural competence is a critical step in developing an efficient global strategy.
15. Multinational corporations are capable of raising revenues that are higher than the GDP of some
countries.
M8S2 Important Notes

1. Market integration is the fusing of many markets into one.

2. Market integration occurs when prices among different locations or related goods follow similar
patterns after a long period of time.
3. Markets tend to integrate because if at least one market does not have a similar price with
other markets, certain things can occur that lead to advantages to some parties and
disadvantages to other parties.
4. A market is a subset of an economy. This means that an economy can have many markets within
it. There are many ways to define a market. Three perspectives were used in this module.
5. “A market is the existence of a public place for transactions,” is one of the three perspectives
presented in the module on how to define a market. “A market is the capacity of buyers and
sellers to interact,” is another perspective. A market is the tendency of prices to move toward
uniformity,” is one more perspective. The best way to define a market is to take all of these
perspectives together.
6. Not all markets exist in a public space.
7. Review the M8S2 slides specifically for the different market types and subtypes. These will be
important.
8. A monopoly is a market structure where only one seller controls all market share for a given
product.
9. An imperfect competition is a market structure where a small group of sellers each control a
large market share for a given product.
10. A perfect competition is a market structure where there are multiple sellers with varying market
shares each for a given product.