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The Multinational Enterprise (MNE)Pushpakaran, KMBA (SJP), PhD(Reading)
12th March, 2012
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The Multinational Enterprise (MNE)
Objective
The nature of multinational enterprises
Strategic management and multinationalenterprises
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Objectives
Characteristics of MNEs
Internationalization process
Why firms become MNEs?
Strategic philosophy of these firms
Introduction to a country/firm framework forexamining a firms competitiveness
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The Multinational Enterprise (MNE)
A company headquartered in one country butwith operations in one or more othercountries
MNEs often represent the fact that they areforeign-held.
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Table 1. 1: The Worlds Largest 500 Multinational Enterprises, 2010
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The Worlds Largest 500 Multinational Enterprises, 2011Fortune 2011
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http://money.cnn.com/magazines/fortune/global500/2011/maps/profits25.html7/31/2019 Pr. - 1 - MNEs
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The Worlds Largest 50 Multinational Enterprises, 2011Fortune 2011
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Characteristics of MNES
Affiliates must be responsive to a number ofimportant environmental forces, includingcompetitors, customers, suppliers, financialinstitutions, and government
Draw on a common pool of resources,including assets, patents, trademarks,
information, and human resources
Affiliates and business partners are linkedtogether by a common strategic vision
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Figure 1.1 The Multinational Enterprise and Its Environment
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The Internationalization Process
Internationalization: The process by which acompany enters a foreign market
Not all international business is done by
MNEs. Indeed, setting up a wholly-ownedsubsidiary is usually the last stage of doingbusiness abroad
Why do businesses wait to set up wholly-owned subsidiaries?
Foreign markets are risky
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Figure 1.2 Entry into Foreign Markets: the Internationalization Process
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Figure 1.3 Entry into Foreign Markets: the Internationalization Process
License
Exportvia Agent / Dealers
via Own Sales Reps
Local Packaging & Assembly
FDI Mergers & JVs Acquisitions
Greenfield (Totally New)
http://www.kfc.com/about/history.asphttp://www.bmwgroup.com/bmwgroup_prod/e/nav/index.html?http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/unternehmen/historie/meilensteine/meilensteine.htmlhttp://www.tata.com/htm/Group_milestone.htm?sectid=0Xw9Kk6LW6s=http://www.samsung.com/ca/aboutsamsung/corporateprofile/history02.htmlhttp://heritage.coca-cola.com/7/31/2019 Pr. - 1 - MNEs
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Why do Firms become MNEs?
to diversify themselves against the risks anduncertainties of the domestic business cycle
to tap the growing world market for goods andservices
in response to foreign competition
to reduce costs
to overcome barriers to entry into foreign markets
to take advantage of technological expertise bymanufacturing goods directly
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Why do Firms become MNEs?
A few examples:Pakistan starts onion exports to India
Canada food imports
Chinese Geely buys Volvo form Ford for $1.8b
Tata Motors buys Jaguar, Land Rover
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Strategic management and MNEs
Figure 1.4 The Strategic Management Process in Action
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Analysis of the External andInternal Environment
The goal of external environmental analysisis to identify opportunities and threats thatwill need to be addressed
The purpose of an internal environmentalanalysis is to evaluate the companys
financial and personnel strengths andweaknesses
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Formulation of Objectivesand Overall Plan
Internal and external analyses will helpidentify long-term (25 years) and short-term (< 2 years) goals
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The Implementation Process
Once goals have been established, the plan is
then broken into major parts and each affiliateand department is assigned goals andresponsibilities
E l ti d C t l f
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Evaluation and Control ofOperations
Progressis periodically evaluated and changesare made in the plan to accommodate changingcircumstances and new information
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Framework for Global Strategies:
the / Matrix
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Building Blocks inour International Business
There are two basic building blocks in aninternational business course
a uniquecapability proprietary to the organization
It may be built upon product- or processtechnology, marketing- or distributional skills.
countryfactors
Natural resource endowments (minerals,energy and forests), the labour force and
associated cultural factors, etc.
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Figure 1.5 The Basic Components of International Business
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Figure 1.6 The FSA-CSA Matrix
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The Competitive Advantage Matrix
resource-based and/or mature,globally-oriented firms producing acommodity-type product (Improving FSA can make them move toquadrant 3.)
inefficient, floundering firms noalternative but to restructure
follow any of the generic strategies both
differentiated firms with strongFSAs in marketing and customization
(the CSA is not relevant)
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Organization should come first
Professionalized a group that should have loyalty
over competence
Focus on long-term value
Succeed acquisitions in Sri Lanka and abroad
Gear the group to compete in a global marketplace
Taking Sri Lanka to the World
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