International Business Midterm

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CHAPTER 1

MULTINATIONAL MANAGEMENT IN A CHANGING WORLD

Learning Objectives

1. Define multinational management
2. Understand the characteristics of a multinational company 3. Understand the nature of the global economy and the key forces that drive globalization 4. Know the basic classification of the world’s economies

5. Be able to identify the characteristics of the next generation of multinational managers

Introduction

6. Businesses of all sizes, whether from the old or new economy, increasingly see the entire world as a source of business opportunities 7. Why?
• World is becoming one connected economy
• Any company from any country can become a competitor • The internet crosses national boundaries – the click of a mouse allows even the smallest of businesses to go global immediately • Companies can no longer afford the luxury of assuming that success in their home market equates to long-term profitability □ An integrated global economy is not without its challenges and threats • Terrorism, wars, SARS, and effects of recessions on interlinked economies represent threats to multinational companies 8. With companies increasingly looking at global rather than domestic markets, managers of the next century will have little to choice but to be multinational in outlook and strategies • Consequently, all students of business should have at least a basic background in multinational management 9. Multinational management is the formulation of strategies and the design of management systems that successfully take advantage of international opportunities and respond to international threats 10. To provide basic background in multinational management, this book introduces students to the latest information on how managers throughout the world respond to the challenges of globalization 11. The book also provides you with insights into the real world of multinational management through • Preview Cases in Point – show you examples of how multinational companies are dealing with a key issue discussed in the text • Cases in Point – give information on how actual multinational companies deal with the issues currently under review in the text • Multinational Management Briefs – give you further detail and examples that extend the discussions in the chapters • Multinational Management Challenges – describe problems and dilemmas faced by real multinational managers

The Nature of the Multinational Company

12. The multinational company is broadly defined here as any company that engages in business functions beyond its domestic borders • This is a broad definition to include all types of companies, large and small, that engage in international business 13. Most multinational companies, however, are also multinational corporations • Smaller, nonpublic multinational companies are also becoming increasingly important as it becomes more common for smaller organizations to compete globally □ What kinds of activities might make a company multinational? • The apparent activity, of course, is international sales • However, as you will see in more detail, crossing national borders opens up more international options than simply selling internationally

See Exhibit 1.1 The 30 Largest Companies in the World Ranked By Sales Revenue

The Globalizing Economy: A Changing (But Not Always Stable) Environment for Business

□ Globalization: the world wide trend of economic integration across boarder allowing businesses to expand beyond their domestic boundaries • Trade barriers are falling
• World trade among countries in goods and services has grown faster than domestic productions • Money is flowing more freely across national borders • Is not however a simple uniform evolutionary process – not all countries are participating equally

14. Several key trends are globalizing the world economy and driving businesses to become more multinational to...
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