The Multinational Corporation

Topics: Globalization, Multinational corporation, Corporation Pages: 8 (836 words) Published: March 5, 2013
Topic 6 The Multinational Corporation

Dr Esther Tippmann,


Learning outcomes
• Explain the raison d’être of MNCs • Compare different approaches and strategies of managing MNCs • Recognise and discuss the challenges of managing MNCs



Recap - Alternative Modes of Overseas Market Entry
Spot sales Foreign agent / distributor Licensing patents & other IP


Joint venture
Marketing & Distribution only Franchising Fully integrated

Wholly owned subsidiary

Long-term contract

Marketing& Distribution only

Fully integrated


Resource commitment


What is a multinational?
Multinational corporation (MNC) or multinational enterprise (MNE) • Manages production or delivers products/services in more than one country.  Management headquarters (HQ) in one country (home country)  Foreign subsidiaries in several other countries (host countries)

Multinationality = extent to which a firm operates beyond its national borders and benefits from product and geographical diversifications through economies of scale and scope (e.g. Hitt et al1997, Kotabe et al. 2002) Accréditations


The World's 20 Largest MNCs (Market Value, 2011 in $US millions)




Some more statistics …
• • Account for approximately 1/3 of global trade 90% of world’s 500 largest MNCs are North American, Japanese or European  The top 300 firms control 25% world’s productive resources

50 largest MNCs from developing countries include:
 Mexico (3), Chile (5), Brazil (4), Argentina (2), South Africa (3), Saudi Arabia (2), South Korea (6); China (15), India (1)

• •

But the world is changing: more (large) emerging market MNCs Some MNCs large, but many small, less than 250 employees (regionalization of FDIs) Accréditations

Two strategic needs …
Forces of global integration
MARKET DRIVERS • Common customer needs • Global customers • Cross-border network effects COST DRIVERS • Global scale economies • Differences in national resource availability • Learning COMPETITIVE DRIVERS • Potential for strategic competition (e.g. cross- subsidization)

Forces of national differentiation / localisation
MARKET DRIVERS • Different languages • Different customer preferences • Cultural differences COST DRIVERS • Transportation costs • Transaction costs • Economic & political risk • Speed of response GOVERNMENT DRIVERS • Barriers to trade & inward inv. • Regulations


Two strategic needs ….
Forces of localisation
A multi-domestic strategy treats the world as a portfolio of national opportunities. • • Strong forces favouring national responsiveness Weak forces favouring global integration

National responsiveness

e.g. branded packaged-goods business (food products, cleaning products), Unilever, Proctor & Gamble Accréditations

Two strategic needs ….
Forces of globalisation / standardisation A global strategy treats the world as a single market. Global integration and coordination • • Strong forces favouring global integration are strong Weak forces favouring national responsiveness are weak

e.g. consumer electronics, some internationally-branded restaurant and drink products. Philips, McDonald’s, Coca-Cola. Accréditations


Two strategic needs ….
Forces of globalisation / standardisation

Forces of localisation

Global integration and coordination

National responsiveness

? Question of reconciliation



Reconciling Global Integration with National Differentiation: The Transnational Corporation

Need for global coordination and integration

Need for national differentiation and responsiveness


(Source: Bartlett and Beamish (2011) Transnational Management, Chapter 4, p. 308)

(Source: Bartlett and Beamish (2011) Transnational...
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