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 ti
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-to-assess
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 low-cost, lowrisk 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 drinking-water 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 dayto-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 offlimit.
-Companies can gain access to another company’s
distribution network.
-Companies form international joint venture for
defensive reasons, avoiding the government
interference