Transcript MNC`s
GLOBALIZATION AND INTERNATIONAL BUSINESS
“The world isn’t just for travelers”
• What is the nature of international business?
• What are multinational corporations and how do they work?
GLOBALIZATION AND INTERNATIONAL BUSINESS
The Nature of International Business
• Globalization creates international business
opportunities.
• International business is done by global sourcing,
import/export, licensing, and franchising.
• International business is done by joint ventures and
wholly owned subsidiaries.
• International business is complicated by different
legal and political systems.
Multinationals and LDC’s- perhaps??
THE NATURE OF INTERNATIONAL BUSINESS
Globalization
• International Business
– Conducting commercial transactions across national
boundaries
• Five Reasons to Pursue International Business
1. Expanded profit potential
2. More customers
3. More capital
4. Lower cost suppliers
5. Lower costs of labor
GLOBALIZATION
International Business
• Exporting
– Local products are sold abroad
• Importing
– The process of acquiring products abroad and selling them in
domestic markets.
• Licensing
– one firm pays a fee for rights to make or sell another company’s
products.
• Franchising
– a firm pays a fee for rights to use another company’s name and
operating methods.
GLOBALIZATION
International Business
• Joint Venture
– A firm operates in a foreign country through co-ownership with
local parties.
• Strategic Alliance
– each partner hopes to achieve through cooperation things they
couldn’t do alone.
• Foreign Subsidiary
– a local operation completely owned by a foreign firm.
GLOBALIZATION AND INTERNATIONAL BUSINESS
Multinational Corporations
• Multinational corporations do substantial business in several
countries.
• Multinational corporations can be controversial at home and
abroad.
• Multinational corporations face a variety of ethical challenges.
• Planning and Controlling are complicated in multinational
corporations.
• Organizing is complicated in multinational corporations.
• Leading is complicated in multinational corporations.
GLOBALIZATION AND INTERNATIONAL BUSINESS
Multinational Corporations
• Multinational Corporation (MNC)
– A business with extensive foreign operations in more than one
county.
• Transnational Corporation
– A MNC that operates worldwide on a borderless basis.
“Fortune’s” Top 10 Multinational Corporations
1. Wal-Mart Stores
2. BP
3. Exxon Mobil
4. Royal Dutch Shell Group
5. General Motors
6. DaimlerChrysler
7. Toyota Motor
8. General Electric
9. Total
10. Chevron
Acceleration Quiz
Q: Of the 100 top economies in the world, how
many are multinational corporations and how
many are nation states?
Los Angeles
Palo Alto
Acceleration Quiz
Q: Of the 100 top economies in the world, how
many are multinational corporations and how
many are nation states?
51 MNC’s and 49 Nations.
July 2011
Rank
Company
Country
Field
1
Wal-Mart Stores
United States
Retail
2
Royal Dutch Shell
Netherlands†
Petroleum
3
Exxon Mobil
United States
Petroleum
4
BP
United Kingdom
Petroleum
5
Sinopec
China
Petroleum
6
China National
Petroleum
China
Petroleum
7
State Grid
China
Power
8
Toyota Motor
Japan
Automobiles
9
Japan Post
Holdings
Japan
Diversified
10
Chevron
United States
Petroleum
2
Acceleration Quiz
Q: Disney and Sony (respectively) produce and
launch one new product every _________?
© 2005 Accelerating.org
Acceleration Quiz
Q: Disney and Sony (respectively) produce and
launch one new product every _________?
Once every three minutes for Disney.
Once every twenty minutes for Sony.
MULTINATIONAL ORGANIZATIONS
MNC Issues
Acceleration Quiz
Q: How much of Hewlett Packard’s revenue
comes from products launched in the last
year?
Acceleration Quiz
Q: How much of Hewlett Packard’s revenue
comes from products launched in the last
year?
70%
Toyota
McDonalds
MULTINATIONAL ORGANIZATIONS
MNC Issues
Protectionism
A call for tariffs and special treatment to protect
domestic firms from foreign competition.
Corruption
Illegal practices to further one’s business interests.
Transparency International gives these countries its
poorest corruption scores:
• Indonesia
• Nigeria
• Tajikistan
• Bangladesh
• Haiti
• Paraguay
• Myanmar
MULTINATIONAL ORGANIZATIONS
MNC Issues
Sweatshops
Employ workers at very low wages, for long hours, and in poor
working conditions.
Child labor
The full-time employment of children for work otherwise done
by adults.
Sustainable Development
Development that meets the needs of the present without
hurting future generations.
MULTINATIONAL ORGANIZATIONS
MNC Issues
Currency Risk
The possible loss of profits because of
fluctuating exchange rates.
Understanding Currency Risk in International Business
U.S. exporter makes a sale in France for Euro 100,000.
Scenario 1: Weak dollar
.95 Euros = 1 $US
Take home revenue = $105,263
Scenario 2: Strong dollar
1.25 Euros = 1 $US
Take home revenue = $80,000
MULTINATIONAL ORGANIZATIONS
MNC Organizations
MULTINATIONAL ORGANIZATIONS
MNC Organizations
Expatriate
An employee who lives and works in a foreign country.
Global Manager
A person who is culturally aware and informed on international
affairs.
Personal Attributes for Expatriate Success
High degree of self-awareness
Cultural sensitivity
Desire to live and work abroad
Family flexibility and support
Technical job competence
Are you willing to admit that the world isn’t just for traveling anymore,
and to embrace it as a career opportunity? Is it possible that you might
stand out to a potential employer as someone with the skills to excel as a
global manager?
Management Tips
Criteria for choosing a partner for
successful joint ventures
• Familiar with your firm’s major business
• Employs a strong local workforce
• Values its customers
• Has potential for future expansion
• Has strong local market for its own products
• Has good profit potential
• Has sound financial standing
Acceleration Quiz
Q: How many of the lowest net-worth
Americans would it take to approximate Bill
Gate’s net worth?
Acceleration Quiz
Q: How many of the lowest net-worth Americans
would it take to approximate Bill Gate’s net
worth?
Roughly 110 million Americans in 1997, when his
net worth was $40 billion. At $30 billion presently
(2005), Mr. Gates ranks roughly as the 60th largest
country (of 280) and the 55th largest business.
When MSFT went public in 1986, Bill was worth
$230 million.
© 2005 Accelerating.org
NYU economist
Edward Wolff, Top Heavy, 2002
Something Curious Is Going On
Unexplained.
(Don’t look for this in your physics or information theory texts…)
© 2005 Accelerating.org