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7/30/2019 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.
http://en.wikipedia.org/wiki/Productionhttp://en.wikipedia.org/wiki/Servicehttp://en.wikipedia.org/wiki/Servicehttp://en.wikipedia.org/wiki/Production7/30/2019 UNIT-5 Strategic Management
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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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