Cross cultural management 3e by cullen ch01

1
Chapter
Multinational Management in a
Changing World

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Learning Objectives
••
••
••
••

Define
Define multinational
multinational management
management
Understand
Understand the
the characteristics
characteristics ofof aa multinational
multinational
company
company
Understand
Understand the
the nature
nature ofof the
the global
global economy

economy and
and the
the
key
key forces
forces that
that drive
drive globalization
globalization
Know
Know the
the basic
basic classification
classification ofof the
the world’s
world’s economies
economies

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Learning Objectives
•• Identify
Identify the
the characteristics
characteristics ofof the
the next
next generation
generation ofof
multinational

multinational managers
managers

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Multinational Management
•• Formulation
Formulation ofof strategies
strategies and
and management
management systems
systems toto
take
take advantage
advantage ofof international
international opportunities
opportunities and
and
respond
respond toto international
international threats
threats

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The Nature of the
Multinational Company
•• Any

Any company
company that
that engages
engages inin business
business functions
functions
beyond
beyond its
its domestic
domestic borders
borders
•• Includes
Includes both
both large
large and
and small
small companies
companies

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Exhibit 1.1 – The Largest
Companies in the World

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Globalization
•• Worldwide

Worldwide trend
trend ofof the
the economies
economies ofof the
the world
world
becoming
becoming borderless
borderless and
and interlinked.
interlinked.
•• Not
Not all
all economies
economies are
are participating
participating or
or benefiting
benefiting
equally
equally inin the
the process.
process.
•• Important
Important forces
forces are
are driving
driving globalization.
globalization.
•• ItIt isis also

also important
important toto look
look atat classifications
classifications ofof the
the
world’s
world’s economies.
economies.
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Countries of the World: The
Arrived, the Coming, and the
Struggling
•• Developed
Developed countries:
countries: mature
mature economies
economies with
with
substantial
substantial per
per capita
capita Gross
Gross Domestic
Domestic Product,
Product,
international
international trade,
trade, and

and investments.
investments.
•• Developing
Developing countries:
countries: economies
economies that
that have
have grown
grown
extensively
extensively over
over past
past two
two decades,
decades, e.g.,
e.g., Hong
Hong Kong,
Kong,
Singapore,
Singapore, South
South Korea.
Korea.

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Countries of the World: The
Arrived, the Coming, and the
Struggling
•• Transition

Transition economies:
economies: countries
countries that
that have
have changed
changed
from
from mostly
mostly communist
communist systems
systems toto market/capitalistic
market/capitalistic
systems,
systems,
•• e.g.,
e.g., Czech
Czech republic,
republic, Hungary,
Hungary, Poland.
Poland.
•• Less
Less developed
developed countries:
countries: have
have yet
yet toto show
show much
much
progress
progress inin the

the global
global economy
economy
•• most
most are
are located
located inin Central
Central and
and South
SouthAmerica
America and
and
Africa.
Africa.
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Exhibit 1.2: Selected
Economies of the World

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The Globalizing Economy:
Seven Key Trends
••
••
••
••

Disintegrating
Disintegrating borders
borders
Growing
Growing cross-border
cross-border trade
trade and
and investment
investment
The
The rise
rise ofof global
global products
products and
and global
global customers
customers
Privatizations
Privatizations

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The Globalizing Economy:
7 Key Trends
••
••
••

New

New competitors
competitors inin the
the world
world market
market
The
The rise
rise ofof global
global standards
standards ofof quality
quality and
and production
production
The
The Internet
Internet and
and information
information technology
technology

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Exhibit 1.3: The Globalizing
Economy

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Borders Are Disintegrating:

The World Trade Organization
•• Formal
Formal structure
structure for
for continued
continued negotiations
negotiations and
and for
for
settling
settling trade
trade disputes
disputes among
among nations.
nations.
•• 1947:
1947: Nations
Nations met
met toto reduce
reduce tariffs
tariffs from
from 45%
45% toto less
less
than
than 5%—resulted
5%—resulted inin the
the General
GeneralAgreement
Agreement on

on
Tariffs
Tariffs and
andTrade
Trade (GATT).
(GATT).
•• 1986:
1986: Negotiations
Negotiations began
began inin Uruguay
Uruguay toto continue
continue
reducing
reducing tariffs.
tariffs.

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World Trade Organization
•• 1997:
1997:Trade
Trade ministers
ministers from
from countries
countries representing
representing 92%
92%
ofof world
world trade

trade agreed
agreed toto eliminate
eliminate tariffs
tariffs on
on software,
software,
computer
computer chips,
chips, telecommunication
telecommunication equipment,
equipment, and
and
computers.
computers.
•• WTO
WTO has,
has, nevertheless,
nevertheless, some
some critics.
critics.
•• Not
Not all
all countries
countries are
are participating
participating equally
equally inin WTO.
WTO.

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Regional Trade Agreements
•• Regional
RegionalTrade
TradeAgreements—agreements
Agreements—agreements among
among
nations
nations toto reduce
reduce tariffs
tariffs and
and develop
develop similar
similar technical
technical
and
and economic
economic standards.
standards.
•• European
European Union:
Union: includes
includes aa large
large number
number ofof
European
European countries.
countries.
•• Allows

Allows free
free movement
movement ofof goods
goods and
and services
services and
and
aa common
common currency.
currency.

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Regional Trade Agreements
•• The
The North
NorthAmerican
American Free
FreeTrade
TradeAgreement
Agreement
(NAFTA):
(NAFTA): links
links United
United States,
States, Canada,
Canada, and
and Mexico
Mexico

inin an
an economic
economic bloc.
bloc.
•• Allows
Allows freer
freer exchange
exchange ofof goods
goods and
and services
services
•• The
TheAsia-Pacific-Economic
Asia-Pacific-Economic Cooperation
Cooperation (APEC):
(APEC):
looser
looser confederation
confederation ofof 19
19Asian
Asian nations
nations with
with less
less
specific
specific agreements
agreements on
on trade
trade facilitation.
facilitation.

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Sell Anywhere, Locate
Anywhere
•• World
World trade
trade growth:
growth: average
average ofof 6.5%
6.5% per
per year
year between
between
1990
1990 and
and 2000.
2000.
•• Nearly
Nearly half
half ofof the
the over
over $5
$5 trillion
trillion inin world
world trade
trade isis
among
among the

the European
European union,
union, the
the U.S.,
U.S., and
and Japan—the
Japan—the
TRIAD.
TRIAD.

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Exhibit 1.5 – Leading
Exporting and Importing
Countries

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Exhibit 1.5 – Leading
Exporting and Importing
Countries, continued

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Exhibit 1.6: Recent
Growth/Decline for Leading
Importers and Exporters

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Exhibit 1.6: Recent
Growth/Decline for Leading
Importers and Exporters

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Sell Anywhere, Locate
Anywhere
•• Foreign
Foreign Direct
Direct Investment
Investment (FDI)
(FDI) occurs
occurs when
when aa
multinational
multinational company
company from
from one
one country
country has
has an
an
ownership
ownership position

position located
located inin another
another country.
country.
•• FDI
FDI increased
increased by
by more
more that
that 36%
36% between
between 1996
1996 and
and
2000.
2000.
•• Post
Post 9/11
9/11 has
has seen
seen aa decline
decline inin FDI.
FDI.
•• Nevertheless,
Nevertheless, itit remains
remains aa significant
significant factor.
factor.
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Exhibit 1.7 – Top 25
Companies by Foreign Asset
Ownership

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Foreign Direct Investment
•• Developed
Developed countries
countries get
get the
the bulk
bulk ofof FDI
FDI (69%)
(69%) while
while
developing
developing countries
countries get
get around
around 30%.
30%.
•• Least
Least developed
developed countries
countries get
get minimal
minimal FDI.

FDI.
•• Implications
Implications for
for managers—significant
managers—significant opportunities
opportunities
around
around the
the world.
world.
•• Multinational
Multinational managers
managers should
should look
look atat risk
risk rating
rating ofof
countries.
countries.
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