UNIT-5 Strategic Management

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Global Issues in Strategic Management

The world is just for travelers

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What is an MNC?

Multinational corporation (MNC) is a enterprise that

manages production or delivers services in more than one

country.

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Multinational corporate structure

Horizontally integrated multinational corporations manageproduction establishments located in different countries toproduce the same or similar products.

(example: Ford, General Motors, Coca-cola and McDonalds

Vertically integrated multinational corporations manageproduction establishment in certain country/countries to produceproducts that serve as input to its production establishments inother country/countries.

(example: Adidas, Royal Dutch Shell, BP , ChevronCorporation, Texas Fuel Company.

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Advantages of MNCs

Gain new customers for their product and services.

Growth in revenues and profit.

To meet expectations of stakeholders.

To meet organization success.

Competition may be less intense then domestic market.

Result in reduce tariffs, lower taxes and favorable political

treatment.

Joint ventures enable firm to learn Technology, culture &business.

Large scale production and better efficiencies allow higher sales

volume and lower price offerings.

A firms power and prestige enhance significantly if it competes

globally.

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Disadvantages of MNCs

1. Firms confront with different cultures, sometime they cannot

understand the rules of game.

2. Firms confront with different political, legal, Demographic ,

technological, economical environment etc.

3. Dealing with different monetary systems, can generate

complication.

4. Communication barrier.

5. Autonomy to local managers .

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Global Challenges

The global challenges faced by business is two folds:

How to gain and maintain exports to other nations, and

How to defend domestic markets against imported goods.

Few companies can afford to ignore the presence of international

competition. Firms that seem insulated and comfortable today may be

vulnerable tomorrow.

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Communication differences acrosscountry

Americans increasingly interact with managers in other countries, so it is

important to understand foreign business cultures. Americans often

come across as intrusive, manipulative and garrulous; this impression

may reduce their effectiveness in communication.

Forbes recently provided the following cultural hints --

Italians, Germans, and Frenchdo not soften up

Israelisaccustomed to fast paced meetings

British, American-- chatter too much

Europeantreated like childrens

India interrupting one another

Malasiya or Japaneseneed time to negotiate

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World wide tax rates and theirimpact

The lowest corporate tax rates among developed countries reside

in Europe, and European countries are lowering tax rates further

to attract investment.

The average corporate tax rate among European Unioin Countries

is 26 percent, compared with 30 percent in the Asia-Pacific regionand 38 percent in the U.S. and Japan.

Ireland and the former Soviet-bloc nations of Eastern Europe

recently slashed corporate tax rates to nearly zero, attracting

substantial investment.

Germany cuts its corporate tax rate from 39 % in 2007 to justunder 30 % in 2008. Great Britain cut its corporate tax rate to 28

% from 30 %. France cut its rate from 34 % to 27 % in 2008.

Note- It effect companies decisions to locate plants and facilities.

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Participation of internationalinstitutions

World Trade Organisation

International Monetary Fund

World Bank

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MNC In India

MNC in India are attracted towards:

Indias large market potential

India presents a remarkable business

opportunity by

a. Labor competivenessb. FDI attractiveness

Indias vast population is increasing its

purchasing power

India is also emerging as the manufacturinghub.

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The Indian MNCs

Paints Asian Paints

Auto & Components Tata Motors, Bharat Forge

Chemicals Tata Chemicals, United Phosphorus

Packaging Essel

PharmaceuticalsRanbaxy, Wockhardt, Sun, DRL

Oil & Gas ONGC

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Types of international Business

Exporting Local products are sold abroad

Importing

The process of acquiring products abroad and selling them indomestic markets.

Licensing

one firm pays a fee for rights to make or sell another

companys products.

Franchising

a firm pays a fee for rights to use anothercompanys name andoperating methods.

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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

couldnt do alone.

Foreign Subsidiary

a local operation completely owned by a foreign firm.

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