Dr  Qiuping  Li  

MGT  3201  Global  Business  Strategy  

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•  Define  mul>na>onal  management  •  Understand  the  characteris>cs  of  a  mul>na>onal  company  

•  Understand  the  nature  of  the  global  economy  and  the  key  forces  that  drive  globalisa>on  

•  Know  the  basic  classifica>on  of  the  world’s  economies  

•  Iden>fy  the  characteris>cs  of  the  next  genera>on  of  mul>na>onal  managers  

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•  Mul$na$onal  Management:  Formula>on  of  strategies  and  management  systems  to  take  advantage  of  interna>onal  opportuni>es  and  respond  to  interna>onal  threats  

•  Mul$na$onal  Company  (MNC):  Any  company  that  engages  in  business  func>ons  beyond  its  domes>c  borders,  including  both  large  and  small  companies  

•  Foreign  Direct  Investment  (FDI)  occurs  when  a  mul>na>onal  company  from  one  country  has  an  ownership  posi>on  located  in  another  country.  

•  Globalisa$on:  the  worldwide  trend  of  the  economies  of  the  world  becoming  borderless  and  interlinked.  

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Nega$ves:  •  Not  all  economies  of  the  world  

are  benefi>ng  equally  or  par>cipa>ng  equally  in  the  process.  

•  Terrorism,  wars,  and  a  worldwide  economic  stagna>on  have  limited  or  reversed  some  aspects  of  globalisa>on.  

•  Producing  nega>ve  effects  e.g.  scarcity  of  natural  resources,  environmental  pollu>on,  nega>ve  social  impacts,  and  increased  interdependence  of  the  world’s  economies.  

•  Widening  the  gap  between  rich  and  poor  countries.  

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Benefits:  •  Lower  prices  as  MNCs  are  

becoming  more  efficient.  

•  Emerging  markets  enjoy  greater  availability  of  jobs  and  beXer  access  to  technology.  

•  Major  reason  why  many  new  companies  from  Mexico,  Brazil,  China,  India,  and  South  Korea  are  the  new  dominant  global  compe>tors.  

•  Developed  countries  

•  Developing  countries  

•  Transi$on  economies  

•  Emerging  markets  

•  Less  developed  countries  (LDCs)  

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 Disintegra>ng  borders     Growing  cross-­‐border  trade  and  investment   The  rise  of  global  products  and  global  customers   The  internet  and  informa>on  technology   New  compe>tors  in  the  world  market   The  rise  of  global  standards  of  quality  and  produc>on  

 Corporate  social  responsibility  and  ethics   Priva>sa>ons  of  formerly  government-­‐owned  companies  

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•  The  World  Trade  Organisa>on  (WTO)  –  In  1986,  established  WTO  to  succeed  1947’s  GATT.  –  provides  structure  for  con>nued  nego>a>ons  and  seXling  

trade  disputes  among  na>ons.  –  Not  all  countries  are  par>cipa>ng  equally  in  WTO.  

•  Regional  Trade  Agreements  (e.g.  EU,  NAFTA,  APEC)  

–  agreements  among  na>ons  to  reduce  tariffs  and  develop  similar  technical  and  economic  standards.    

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•  World  trade  grew  con>nually  from  1990  to  2006.  Latest  trends  show  a  slowdown  due  to  effects  of  economic  recession.  

•  FDI  increased  by  more  than  36%  between  1996  and  2000.  Since  2001,  there  has  been  a  decline  in  FDI.  

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•  Developed  countries  get  the  bulk  of  FDI  (69%)  while  developing  countries  get  around  30%.  

•  Least  developed  countries  get  minimal  FDI.  •  Emerging  markets  will  con>nue  to  aXract  FDI.  •  Developing  countries  provide  opportuni>es  and  risks.  

•  Implica>ons  for  managers  -­‐  significant  opportuni>es  around  the  world.  

•  Mul>na>onal  managers  should  look  at  risk  ra>ng  of  countries.  

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•  Economic  risk:  considers  all  factors  of  a  na>on’s  economic  climate  that  may  affect  a  foreign  investor.  

•  Poli$cal  risk:  anything  a  government  might  do  or  not  do  that  might  adversely  affect  a  company.  

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•  War  and  increases  in  oil  prices  have  the  poten>al  to  slow  down  global  trade  

•  Natural  disasters  

•  Interna>onal  terrorism  

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•  Electronic  Communica>on  -­‐  E-­‐mail,  World  Wide  Web,  etc.    – Allows  mul>na>onals  to  communicate  with  company  loca>ons  throughout  the  world.  

– Allows  mul>na>onals  to  monitor  worldwide  opera>ons.    

–  Expands  global  reach  of  organisa>ons.  •  Informa>on  technology    –  is  spurring  a  borderless  financial  market.    – makes  available  many  new  tools  that  facilitate  business  opera>ons,  e.g.  Skype,  MSN  Messenger  and  AOL,  WIKIs,  Google…   12

•  The  needs  of  customers  for  many  products  and  services  are  growing  more  similar  – E.g.,  McDonald’s,  Boeing,  Toyota.  

•  Global  customers  search  the  world  for  their  supplies  without  regard  for  na>onal  boundaries.  

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•  Free  market  reforms  are  crea>ng  a  poten>al  group  of  new  compe>tors.  

•  These  companies  have  survived  brutal  compe>>on  in  local  markets.  

•  Able  to  deal  with  domes>c  rivalry  and  compe>>on  from  western  MNC.  

•  Develop  strategies  to  compete  with  very  low  prices.    •  Global  trade  has  two  important  effects  in  developing  new  compe>tors…  

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•  Companies  can  make  one  or  only  a  few  versions  of  a  product  for  the  world  market.  

•  This  is  cheaper  than  making  different  versions  for  different  countries.  

•  Drive  to  develop  common  standards  to  save  money.  

•  Consistency  in  quality  also  an  important  requirement  of  doing  business  in  many  countries.  

•  Interna>onal  organisa>on  for  standardisa>on  (ISO)  in  Geneva,  Switzerland  developed  a  set  of  technical  standards  (ISO  9001:2000  series).  

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•  Increased  pressure  on  MNCs  to  be  responsible.  •  Increased  scru>ny  of  MNCs’  ac>ons  and  impact.  •  Some  MNCs  are  becoming  more  proac>ve  in  responding  to  social  and  ethical  issues  that  arise  from  their  overseas  opera>ons.  

•  Some  issues  are:  – Climate  change  – Environmental  degrada>on  and  pollu>on  

– Sweatshop  condi>ons  for  labour  – Bribery  

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Global  mindset    

Long-­‐range  

perspec>ve  

Emo>onal    intelligence  

Accomplished  nego>a>on  skills  

Talent  to  mo>vate  all  employees  to  achieve  excellence  

Willingness  to  seek  overseas  assignments  

Understanding  of  na>onal  cultures  

•  Considers  how  managers  formulate  and  implement  strategies  to  compete  successfully  in  the  global  economy.  

•  Strategies  are  the  maneuvers  or  ac>vi>es  used  to  increase  and  sustain  organisa>onal  performance.  

•  Mul>na>onal  strategies  must  include  maneuvers  that  deal  with  opera>ng  in  more  than  one  country  and  culture.  

•  Helps  posi>on  yourself  in  evolving  global  economy.  

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•  Blurring  of  industry  boundaries  •  Flexibility  maXers  more  than  size  

•  Focusing  on  niche  •  Hyper-­‐compe>>on  

•  Emphasis  on  innova>on  and  the  learning  organisa>on  

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•  Must  be  prepared    to  compete  with  firms  from  any  country.  

•  Must  be  prepared  to  collaborate  and  align  with  firms  from  any  country.  

•  Develop  organisa>onal  strategies  and  skills  to  compete  in  different  na>ons  in  a  global  economy.  

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