TIẾNG ANH KINH TẾ Slides ESP multinational companies

UNIT 8
MULTINATIONAL COMPANIES


1. What is a multinational
company?
 The

term ‘multinational’ is used for a
company which has subsidiaries or
sales facilities throughout the world.
 Another expression for this type of
business enterprise is ‘global
corporation’
 Example: Coca Cola, Heinz, Sony,
Hitachi, Akzo, General Motors…


2. What are their
characteristics?
 They

control vast sums of money
 They operate in countries with widely
differing political and economic
systems.


3.Multinational strategy
A strategy of adapting products
and their marketing strategies in

each national market to suit local
preferences.
• Multinational strategy allows
companies to closely monitor buyer
preferences in each local market
and respond quickly and effectively
as new buyer preferences emerge.
• It does not allow companies to
exploit scale economies in product
development, manufacturing, or
marketing.
•


4. Global strategy
•

•

•

•

A strategy of offering the same
products using the same marketing
strategy in all national markets.
The main benefit of a global strategy
is its cost savings due to product
and marketing standardization.
It allows managers to share lessons

learned in one market with
managers at other locations.
It may cause a company to overlook
important differences in buyer
preferences from one market to
another.


5. What are their reasons for
going international?
•
•

•

•
•
•

Their national markets become
saturated.
Some countries set up trade
barriers – usually tariffs or
quotas – against a company’s
products.
Cheap labour and natural
resources abroad, especially in
developing countries.
Expand sales
Diversify sales

Gain experience


6. Direct exporting
 Direct

exporting – A practice by which a
company sells its products directly to
buyers in a target market.
 Sales representatives represent only its
own company’s products, not those of
other companies.
 Distributors take ownership of the
merchandise when it enters their
countries.


7. Indirect exporting
 In

direct exporting – A practice by which a
company sells its products to intermediaries
who resell to buyers in a target market.
 Agents: Individuals or organizations that
represent one or more indirect exporters in a
target market.
 Export Management Companies: Companies
that export products on behalf of indirect
exporters.
 Export Trading Companies: Companies that

provide services to indirect exporters in
addition to those activities directly related
to clients’ exporting activities.


8. Licensing
Licensing

– Practice by which one
company owning intangible property (the
licensor) grants another firm (the
licensee) the right to use that property
for a specified period of time.
E.g.
-Hitachi (Japan) licenses from Duales
System Deutschland (Germany)
technology to be used in the recycling of
plastics in Japan.
-Hewlett-Packard (United States) licenses
from Canon (Japan) a printer engine for
use in its monochrome laser printers.


8. Licensing

Advantages

of Licensing:
-Licensors can use licensing to finance their
international expansion.

-Licensing can be a less risky method of
international expansion for a licensor.
Licensing helps shield the licensor from the
increased risk of operating its own local
production facilities in unstable or hard-toassess markets.
-Licensing can help reduce the likelihood that
a licensor’s product will appear on the black
market.
-Licensees can also benefit from licensing by
using it as a method of upgrading existing
production technologies.


8. Licensing
 Disadvantages

of licensing:
-Licensing can restrict a licensor’s future
activities.
-Licensing might reduce the global
consistency of the quality and marketing
of a licensor’s product in different
national markets.
-Licensing might amount to a company
‘lending’ strategically important property
to its future competitors. This is an
especially dangerous situation when a
company licenses assets on which its
competitive advantage is based

9. Franchising
Franchising

– A practice by which one
company ( the franchiser) supplies another
(the franchisee) with intangible property and
other assistance over an extended period.
E.g.
-Jean-Louis David (France) awards franchises
to franchisees for more than 200 of its
hairdressing salons in Italy.
-Brooks Brothers (U.S) awards Dickson
Concepts (Hong Kong) a franchise to operate
Brooks Brothers stores across Southeast
Asia.


9. Franchising
 Advantages

of Franchising:
-Franchisers can use franchising as a lowcost, low-risk mode of entry into new
markets. It allows them to maintain
consistency by replicating the process for
standardized products.
-It allows for rapid geographic expansion.
Firms often gain a competitive advantage
by being first in seizing a market
opportunities.

-Franchisers can profit from the cultural
knowledge and know-how of local
managers.


9. Franchising
 Disadvantages

of Franchising:
-Franchisers may find it cumbersome to
manage a large numbers of franchisees
in a variety of national markets.
-Franchisees can experience a loss of
organizational flexibility in franchising
agreements.


10. Management
Contracts
 Management
Contract – A practice by which
one company supplies another with managerial
expertise for a specific period of time.
 E.g.
-DBS Asia (Thailand) awarded a management
contract to Favorlangh Communication (Taiwan)
to set up and run a company supplying digital
programming in Taiwan.
-Lyonnaise de Eaux (France) and RWE Aqua
(Germany) have agreed to manage drinkingwater quality and client billing and to maintain

the water infrastructure for the city of
Budapest, Hungary, for 25 years.


10. Management Contract
Advantages

of Management Contract:
-A firm can exploit an international
business opportunities without having
to place a great deal of its own
physical assets at risk.
-Governments can award companies
management contracts to operate and
upgrade public utilities, particularly
when a nation is short of investment
financing.
-Governments can use management
contracts to develop the skills of local
workers and managers


10. Management Contract
 Disadvantages

of Management

Contract:
-Management Contracts require that
company managers relocate for given

periods of time. In nations undergoing
political or social turmoil, lives can be
placed in significant danger.
-Expertise suppliers may end up
nurturing a formidable new competitor
in the local market.


11. Turnkey projects
 Turnkey

(or build-operate-transfer)
project – A practice by which one
company designs, constructs and tests
a production facility for a client firm.
 E.g.
-Webster Griffin (UK) installed $150,000
worth of cooking oil bagging
machinery to fulfill its turnkey project
with Palm-Oleo (Malaysia).
-Lubei Group (China) agreed with the
government of Belarus to join in the
construction of a facility for processing
a fertilizer by-product into cement.


11. Turnkey projects
 Advantages

of Turnkey Projects

-Turnkey projects permit firms to
specialize in their core competencies
and to exploit opportunities that they
could not undertake alone.
-Turnkey projects allow governments to
obtain designs for infrastructure
projects from the world.


11. Turnkey projects
 Disadvantages

of Turnkey Projects:
-A company may be awarded a project for
political reasons rather than for
technological know-how.
-They can create future competitors.


12. Wholly owned
subsidiaries
 Wholly

owned subsidiary – A facility
entirely owned and controlled by a
single parent companies.


12. Wholly owned
subsidiaries

 Advantages
-

of Wholly owned
subsidiaries:
Managers have complete control over
day-to-day operations in the target
market and over access to valuable
technology, processes, and other
intangible properties within the
subsidiary.


12. Wholly owned
subsidiaries
 Disadvantages

of Wholly owned

subsidiarieys:
-They can be expensive undertakings.
-Risk exposure is high because a wholly
owned subsidiary requires substantial
company resources.


13. Joint ventures
 Joint

venture: Separate company that is

created and jointly owned by two or
more independent entities to achieve a
common business objectives.
 E.g.
-A joint venture between Suzuki Motor
Corporation (Japan) and the
government of India to manufacture a
small-engine car specifically for the
Indian market.


13. Joint ventures
Advantages

of Joint Venture:
-Companies rely on joint ventures to
reduce risks.
-Companies can use joint venture to
penetrate international markets that
are otherwise off-limit.
-Companies can gain access to another
company’s distribution network.
-Companies form international joint
venture for defensive reasons,
avoiding the government
interference