MULTINATIONAL

Views:
 
Category: Entertainment
     
 

Presentation Description

No description available.

Comments

Presentation Transcript

MULTINATIONAL ENETEPRISE (MNE):

MULTINATIONAL ENETEPRISE (MNE)

DO YOU KNOW?:

DO YOU KNOW? Who are the players in the international business arena? How can you tell the degree of a firms internationalization? Will a higher degree of internationalization lead to higher corporate performance? What advantages and disadvantages do MNEs have when they operate overseas compared to local firms ? What are the typical features of developing country MNEs? How do they differ from developed country MNEs?

WHAT IS A MULTINATIONAL ENTERPRISE:

WHAT IS A MULTINATIONAL ENTERPRISE A multinational corporation (MNC), also called a Trans-National Co-operation,( TNC ) or multinational enterprise ( MNE ), is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation . The International Labor Organization (ILO) has defined an MNC as a corporation that has its management headquarters in one country, known as the home country , and operates in several other countries, known as host countries .

WHAT IS A MULTINATIONAL ENTERPRISE:

WHAT IS A MULTINATIONAL ENTERPRISE The Dutch East India Company was the first multinational corporation in the world. It was also arguably the world's first mega corporation, possessing like governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies. The first modern multinational corporation is generally thought to be the East India Company .

WHAT IS A MULTINATIONAL ENTERPRISE:

WHAT IS A MULTINATIONAL ENTERPRISE Many corporations have offices, branches or manufacturing plants in different countries from where their original and main headquarters is located. Some multinational corporations are very big, with budgets that exceed some nations' GDPs. Multinational corporations can have a powerful influence in local economies, and even the world economy, and play an important role in international relations and globalization.

THE DEGREE OF INTERNATIONALIZATION:

THE DEGREE OF INTERNATIONALIZATION Transnationality Index (TNI) – the level of MNE internationalization. Calculated as the average of three ratios: Foreign assets to total assets Foreign sales to total sales Foreign employment to total employment

TNCs WITH HIGHEST TNI WORLD WIDE:

TNCs WITH HIGHEST TNI WORLD WIDE Rank Company Country Business TNI 1 Xstrata United Kingdom Mining & quarrying 93.2 2 ABB Ltd. Switzerland Engineering services 90.4 3 Nokia Finland Electrical & electronic equipment 90.3 4 Pernod Ricard SA France Food, beverages and tobacco 89.1 5 WPP Group United Kingdom Business services 88.9 6 Vodafone Group Plc United Kingdom Telecommunications 88.6 7 Linde AG Germany Chemicals 88.3 8 Anheuser-Busch InBev Netherlands Food, beverages and tobacco 87.9 9 Anglo American United Kingdom Mining& quarrying 87.5 10 Arcelor Mittal Luxembourg Metal and metal products 87.2

THE WORLD’S LARGEST MNES (Top 10 TNCs):

THE WORLD’S LARGEST MNES (Top 10 TNCs) Rank Name of Company Business type Country Assets US $ Million 1 Wal-Mart Stores Retail USA 408,214 2 Royal Dutch Shell Oil Netherland 285,129 3 Exxon Mobil Oil USA 284,650 4 BP Oil UK 246,138 5 Toyota Motor Auto Japan 204,106 6 Japan Post Holdings Post Japan 202,196 7 Sinopec Oil and Gas China 187,518 8 State Grid Electricity distribution China 184,496 9 AXA Insurance France 175,257 10 China National Petroleum Oil and Gas China 165,496

THE TRANSNATIONALITY INDEX OF 100 LARGEST TNCs:

THE TRANSNATIONALITY INDEX OF 100 LARGEST TNCs

THE WORLD’S LARGEST TNCs (industry composition of 100 largest TNCs):

THE WORLD’S LARGEST TNCs (industry composition of 100 largest TNCs) Industry No. of entries Media 2 Food and beverages 10 Construction 2 pharmaceuticals 7 Chemicals 7 Petroleum Expl/Ref/Distr 13 Electronics and electrical equipment 18 Motor vehicle and parts 14 Metals 1 Divesified 6 Retailing 4 Utilities 5 telecommunication 3 Trading 4 others 4

PROFITABILITY AND PROFIT LEVEL OF TNCs:

PROFITABILITY AND PROFIT LEVEL OF TNCs

THE GROWTH OF SERVICE MNES:

THE GROWTH OF SERVICE MNES There has been significant growth of MNEs in service areas, due to: Economic transformation – developed nations shifting into service economies Globalization and liberalization of regulatory systems – “open skies” agreements, accounting standards etc. Communication advances – allow MNEs to coordinate knowledge-intensive operations across borders.

THE GROWTH OF SERVICE TNCs 2009 (Top 10 banks):

THE GROWTH OF SERVICE TNCs 2009 (Top 10 banks) Rank Name of Bank Assets US $ million Country 1 Deutsche Bank , 841,801 Germany 2 BNP Paribas 700,236 France 3 The Bank of Tokyo-Mitsubishi Ltd, 700,065 Japan 4 UBS 686,634 Switzerland 5 Bank of America 571,732 USA 6 The Sumitomo Bank Ltd 524,229 Japan 7 Bayerische Hypo-und Vereinsbank 504,415 Germany 8 The Norinchukin Bank 485,112 Japan 9 The Dai-Ichi Kangyo Bank Limited, 480,710 Japan 10 The Sakura Bank Ltd, 472,828 Japan

THE GROWTH OF SERVICE MNES 2009 (Top 10 Airlines):

THE GROWTH OF SERVICE MNES 2009 (Top 10 Airlines) Rank Name of Airline Passengers /year Country 1 Delta Airlines 161,049 USA 2 Southwest Airlines 101,339 USA 3 American Airlines 85,719 USA 4 United Airlines 81,421 USA 5 Lufthansa Airlines 76,543 Germany 6 Air France-KLM 71,394 France 7 Southern Airlines 66,280 China 8 Ryanair 65,300 Ireland 9 Continental Airlines 62,809 USA 10 US Airways 51,016 USA

THE MNE IN THE PUBLIC EYE:

THE MNE IN THE PUBLIC EYE The MNE has been both lauded and vilified for its impact on host and home countries. Among the more positive attributes are: MNEs provide knowledge, capital, technology, expertise, global affiliations, contributions to national productivity and exports, innovation, employment, and societal change.

THE MNE IN THE PUBLIC EYE:

THE MNE IN THE PUBLIC EYE Among the negative attributes are: the MNE is perceived as a threat to national sovereignty have unfair advantages over local competition exploit government incentives at the expense of taxpayers limit knowledge transfer to developing nations exploit critical national and natural resources move on when their exploitation is finished

THE COMPETITIVE ADVANTAGE OF THE MNE:

THE COMPETITIVE ADVANTAGE OF THE MNE The MNE generally has large capital, human, brand, and technological resource base, it can use many countries. Global spread provides MNEs with: diversification so they can compensate for low performance and uncertainty helps them overcome entry barriers and high start up costs.

MNE’s CAPABILITIES:

MNE’s CAPABILITIES MNE Capabilities Firm capabilities Familiarity with national culture, industrial structure, and government requirements Existing relationships with customers, suppliers, regulators Strategic capabilities Technological assets (patents, trade secrets, proprietary designs, product development) Managerial skills International experience

MNE’S CAPABILITIES:

MNE’S CAPABILITIES Capability Deployment MNE’s transfer critical capabilities unavailable to local players. Technological and financial capabilities are more transferable than organizational skills. Capability Upgrading Learning capability – the capacity to generate ideas and acquire new knowledge. More transferable than firm resources .

THE MNE FROM EMERGING / DEVELOPING ECONOMIES (DMNE):

THE MNE FROM EMERGING / DEVELOPING ECONOMIES (DMNE) MNEs from developed nations typically dominate global business. DMNEs, however, are making inroads. DMNEs face the following constraints and advantages: Resource constraints. Knowledge, sophistication constraints. Sheltered environment constraints. Home government support. Flexibility

THE LARGEST DEVELOPING COUNTRY MNES:

THE LARGEST DEVELOPING COUNTRY MNES DMNE Scale The scale is although very low to MNEs but scaling up gradually. DMNE Industries Largest group consists of diversified firms Electronics, petroleum, and food/beverage The National Affiliation of DMNEs Dominated by South, Southeast, and East Asia

THE TRANSNATIONALITY INDEX OF 100 LARGEST TNCs FROM DEVELOPING AND TRANSITION ECONOMIES:

THE TRANSNATIONALITY INDEX OF 100 LARGEST TNCs FROM DEVELOPING AND TRANSITION ECONOMIES

THE LARGEST DEVELOPING COUNTRY TNCs (Industry composition of the largest 50 TNCs from developing countries) :

THE LARGEST DEVELOPING COUNTRY TNCs ( Industry composition of the largest 50 TNCs from developing countries) Industry Number of entries Diversified 14 Food and beverages 5 Construction 3 Petroleum Expl /Ref/ Distr 5 Electronics and electrical equipment 6 Electric utilities or services 2 Steel and iron 3 Transposition 3 Chemicals and pharmaceuticals 1 Pulp and paper 1 Tourism /Hote/l Property 2 Automotive 1 Mining 2 Telecommunication 2

OBSTACLES FACING MNES FROM DEVELOPING ECONOMIES:

OBSTACLES FACING MNES FROM DEVELOPING ECONOMIES Resource Constraints: Capital investment, lack of reputation, brand recognition Lack of Knowledge: Experience in foreign operations, lack of production, marketing and management skills Sheltered Environment: Protected by duties, lack of knowledge and expertise from conducting international business

DMNE ADVANTAGE IN GLOBAL MARKETS:

DMNE ADVANTAGE IN GLOBAL MARKETS Home Government Support: Impact of the DMNE on the national economy Shields the firm from the marketplace, hampering its capability development Flexibility: Lower production scale permits flexibility and adaptation Less investment sunk in older/inefficient plant so can leapfrog into cutting edge technologies

TYPICAL FEATURES OF DMNEs:

TYPICAL FEATURES OF DMNEs Internationalization Patterns To develop ownership advantages To serve as intermediaries To overcome import quotas in developed markets To reduce risk via diversification Focus on Other Developing Markets More likely to have greater share of FDI in other developing markets to get competitive advantage. Reliance on Third Parties To compensate for their resource shortages

TYPICAL FEATURES OF DMNES:

TYPICAL FEATURES OF DMNES Governance: Less likely to be publicly traded, and tightly controlled Industry Domain: More likely to be in manufacturing Bargaining Power: Lack bargaining power in the host country Strategy: More likely to compete on price than on product differentiation

WHAT IS AN SMIE?:

WHAT IS AN SMIE? The SMIE is a “small to medium sized organization” SMIEs account for approximately 94% of all international firms. They often face serious obstacles to internationalization.

WHAT IS AN SMIE?:

WHAT IS AN SMIE? Small companies can be international

OBSTACLES TO SMIE INTERNATIONALIZATION:

OBSTACLES TO SMIE INTERNATIONALIZATION Low economy of Scale and high Transaction Constraints Access to Capital Lack of Knowledge Lack of Market Power Vulnerability to Intellectual Property Violations Language Partners Expertise Regulations and tariffs Integration with foreign country’s business culture Lack of information

SMIE INTERNATIONALIZATION FEATURES:

SMIE INTERNATIONALIZATION FEATURES International Motivation Push factors – competitive pressures in its domestic market Pull factors – make foreign locations more attractive Management factors – managerial commitment and resources devoted to international activity Chance factors – unforeseen circumstances that create internationalization opportunities

SMIE INTERNATIONALIZATION FEATURES:

SMIE INTERNATIONALIZATION FEATURES Internationalization Patterns Often not incremental, often “leapfrog” into international markets SMNE Exporter Profile 97% of U.S. exporters are small businesses Exporter Demographics SMIE Foreign Investment Profile At present relatively small, but growing

SMIE INTERNATIONALIZATION FEATURES:

SMIE INTERNATIONALIZATION FEATURES Chance Expansion SMIEs respond to incidental opportunity Nature of FDI by SMIEs Emphasis on Developed Markets More likely to invest in developed markets Selective Globalization Tend to focus on one link in the supply chain and on a selected market Strategy Often adopt niche strategies Rely more on cooperative strategies

FUTURE PROSPECTS OF MNES:

FUTURE PROSPECTS OF MNES MNEs appear optimistic about investment prospects in line with their continuing international expansion plans. By Mode of Entry: Cross-border M&As are leading the FDI recovery. By Industry: Services and primary sector MNEs are more bullish about their medium term investment prospects. By Home Region: The role of developing and transition economies as sources of FDI will accelerate. By Host Regions: Developing and transition economies will be increasingly attractive as investment destinations.

LEVEL OF OPTIMSISM/PESSMISM OF MNEs REGARDING INVESTMENT ENVIRONMENT (Percentage of Response Companies Surveyed):

LEVEL OF OPTIMSISM/PESSMISM OF MNEs REGARDING INVESTMENT ENVIRONMENT (Percentage of Response Companies Surveyed)

PRIORITY GIVEN BY MNEs TO HOST REGIONS IN THEIR INVESTMENT PLAN (Ave. Of Response):

PRIORITY GIVEN BY MNEs TO HOST REGIONS IN THEIR INVESTMENT PLAN (Ave. Of Response)

PRIORITY GIVEN BY MNEs TO HOST COUNTRIES FOR INVESTMENT 2010-2012 (No. of time country is mentioned by MNE ) (Ranking of 2009 given in parenthesis):

PRIORITY GIVEN BY MNEs TO HOST COUNTRIES FOR INVESTMENT 2010-2012 (No. of time country is mentioned by MNE ) (Ranking of 2009 given in parenthesis)

EVOLUTION IN FOREIGN ASSETS AND SALES OF TOP 5000 TNCs (%):

EVOLUTION IN FOREIGN ASSETS AND SALES OF TOP 5000 TNCs (%)

LECTURE SUMMARY:

LECTURE SUMMARY 1. The “players” in the international business scene include a great variety of companies, but only those with foreign direct investment over which the company maintains effective control are called Multi-National Enterprises (MNEs) or Trans-National Corporations(TNCs).

LECTURE SUMMARY:

LECTURE SUMMARY 2. MNEs from developing and emerging economies (DMNEs) and small and medium-size international companies (SMIEs, which include “born international” firms) also play an important role in shaping world economy and global business. The MNE, DMNE, and SMIE significantly differ in their internationalization patterns, resources, and obstacles to international expansion.

LECTURE SUMMARY:

LECTURE SUMMARY 3. MNEs, whether in manufacturing or service sectors, need strong competitive advantages to compete with established local firms. They need to effectively and efficiently build, deploy, exploit, and upgrade distinctive capabilities (technological, organizational, operational, and financial) if they want to prosper.

LECTURE SUMMARY:

LECTURE SUMMARY 4. DMNEs often encounter obstacles in entering foreign markets, including resource constraints, lack of knowledge, and a sheltered environment. They, however, enjoy some unique advantages such as flexibility and home government support. Nevertheless, they cannot simply mimic global strategies used by developed country MNEs.

LECTURE SUMMARY:

LECTURE SUMMARY 5. SMIEs emphasize export rather than FDI due to their resource or experience limitations. They either directly export products to a foreign market or sell through export intermediaries. Recently, some SMIEs, including those offering high-tech products or services, have engaged in various FDI activities such as joint ventures, cooperative alliances, mergers, or acquisitions and skipped many of the evolutionary steps or stages that traditional counterparts followed.

LECTURE SUMMARY:

LECTURE SUMMARY 6. The type of MNE does not necessarily determine international expansion success but strategy and capability do. Firms engaging in international expansion, regardless of their type, size, industry, or origin, need to formulate and execute appropriate strategies that match both external environments and internal capabilities in the course of internationalization

LECTURE SUMMARY:

LECTURE SUMMARY 7. Role of developing and transition economies is growing. Their MNEs and potential as host and home countries will be important in coming days.

PowerPoint Presentation:

THE END

authorStream Live Help