The Multinational Corporation

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Topic 6 The Multinational Corporation

Dr Esther Tippmann
esther.tippmann@grenoble-em.com, esther.tippmann@ucd.ie

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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

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

Licensing

Joint venture
Marketing & Distribution only Franchising Fully integrated

Wholly owned subsidiary

Long-term contract

Marketing& Distribution only

Fully integrated

Low

Resource commitment

High



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

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



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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

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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

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Two strategic needs ….
Forces of globalisation / standardisation

Forces of localisation

Global integration and coordination

National responsiveness

? Question of reconciliation

?

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Reconciling Global Integration with National Differentiation: The Transnational Corporation

Need for global coordination and integration

Need for national differentiation and responsiveness

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

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