CHAPTER 1

MULTINATIONAL
MANAGEMENT
IN A CHANGING
WORLD
MULTINATIONAL
MANAGEMENT
The formulation of strategies
and the design of management
systems to take advantage of
international opportunities and
respond to international threats
Any company that engages in
business functions beyond its
domestic borders
Includes both large and
small companies
THE MULTINATIONAL
COMPANY
Exhibit 1.1 (in Text) Lists
The Top Multinational
Corporations Ranked By
Sales Revenue.
Businesses increasingly look to
other countries
to seek global opportunities
to keep an eye on global
competition
WHY IS MULTINATIONAL
MANAGEMENT IMPORTANT?
GLOBALIZATION

The worldwide trend of
businesses expanding beyond
their domestic boundaries
SEVEN KEY FORCES ARE
GLOBALIZING THE WORLD
ECONOMY
1. Disintegrating borders
2. Growing cross-border trade
and investment
3. The rise of global products
and global customers
4. Privatizations
5. New competitors in the
world market
6. The rise of global standards
of quality and production
7. The Internet and
information technology
THE
GLOBAL
ECONOMY
New
Competiors
Rise of Global
Standards
Disintegrating
Borders
The Internet &
Information
Technology
Privatization
Growing Trade
and Investment
Global
Products/
Customers
1. Falling Borders
THE
GLOBAL
ECONOMY
Free trade areas and the world
trade organization
By 2000, the number of
regional trade agreements
reached 139, more than double
the number existing in 1992
BORDERS ARE FALLING
Reduce tariffs and restrictions
The three largest groups --EU,
NAFTA, and APEC
World Trade Organization
TRADE AGREEMENTS
2. Growing Trade
and Investment
THE
GLOBAL
ECONOMY
World trade growth: average of
6.5% per year 1990 to 2000
Nearly half of the over $5 trillion
in world trade is among the
European union, the U.S., and
Japan -- the TRIAD
SELL ANYWHERE, LOCATE
ANYWHERE
Exhibits 1.4 and 1.5 (in text)
show the leading countries in
terms of import and export
size and growth.
A company from one country has an
ownership position in an organization
from another country - See Ex 1.6
for top 30
FDI in the developed countries
approximately $899 billion
FOREIGN DIRECT INVESTMENT
(FDI)
EXHIBIT 1.6 TOP FOREIGN
ASSET COMPANIES
1. General Electric: USA
2. General Motors: USA
3. Royal Dutch Shell:
UK/Netherlands
4. Ford: USA
5. Exxon: USA
6. Toyota: Japan
EXHIBIT 1.9 RISK RATINGS FOR
SELECTED COUNTRIES
(100 = Lowest Risk)
0 20 40 60 80 100 120
Afghanistan
Congo
Venezuela
India
Mauritius
Czech Republic
Israel
Greece
Switzerland
3. Global Products/
Customers
THE
GLOBAL
ECONOMY
THE RISE OF GLOBAL
PRODUCTS AND GLOBAL
CUSTOMERS
The needs of customers growing
more similar
Global customers search the
world for their supplies without
regard for national boundaries
4. Privatizations
THE
GLOBAL
ECONOMY
PRIVATIZATION
Privatization is the sale of
government owned businesses to
private investors

Privatization, continued
The developing countries and
transition economies use
privatization to become
capitalistic economies
BENEFITS FOR
MULTINATIONAL
COMPANIES
Opportunities for bargain
basement investments
An easy way to gain access
often with local government
incentives such as several
years of tax free operations
5. New Competitors
THE
GLOBAL
ECONOMY
EXHIBIT 1.10: TOP
EMERGING MARKET
COMPANIES
1. China Telecom: Hong Kong
2. Taiwan Semiconductor:
Taiwan
3. Samsung Electronics: Korea
4. Telefonos de Mexico
(Telmex): Mexico

6. Rise of Global
Standards
THE
GLOBAL
ECONOMY
GLOBAL OR REGIONAL
PRODUCT STANDARDS
Companies can make one or only
a few versions of a product for
the world market
Cheaper than versions for
different countries
CONSISTENCY AND
PREDICTABILITY IN
QUALITY
The international organization
for standardization (ISO) in
Geneva, Switzerland - ISO
9000:2000
7. IT and the
Internet
THE
GLOBAL
ECONOMY
THE INTERNET AND
INFORMATION
TECHNOLOGY
Allows easy worldwide
communication and economic
transactions
Small companies have more
computer power
Poorer nations can have
technology
THE NEXT GENERATION OF
MULTINATIONAL
MANAGERS
A global mindset
The ability to work with diverse
people
A long range perspective
The ability to manager change
and transition
The next generation of
multinational managers, continued
The ability to create systems
for a learning and changing
organizations
The talent to motivate all
employees to achieve excellence
Accomplished negotiation skills
The next generation of
multinational managers, continued
A willingness to seek and
succeed in overseas assignments
An understanding of national
cultures
MULTINATIONAL
MANAGEMENT: A
STRATEGIC APPROACH
The strategic approach to
multinational management
considers how managers formulate
and implement strategies to
compete successfully in the global
economy
STRATEGY
The maneuvers or activities
that managers use to sustain
and increase organizational
performance
MULTINATIONAL STRATEGY
FORMULATION
The process of choosing or
crafting a strategy
challenge of dealing with
opportunities and competitors
located anywhere in the world
MULTINATIONAL STRATEGY
IMPLEMENTATION
Includes all the activities necessary
to achieve strategic objectives
requires complex management
systems to carry out the
strategies that reach beyond
domestic boundaries
A FUNDAMENTAL
ASSUMPTION OF THE BOOK
When you understand your
competitors and yourself, you
will always win," Sun Tzu, The
art of war
CONCLUSIONS
Multinational management and the
multinational company
Forces that drive globalization
Key characteristics of successful
multinational managers
The strategic approach to
multinational management