MULTINATIONAL COMPANIES (TIẾNG ANH KINH tế SLIDE)

Direct exporting• Direct exporting – A practice by which a company sells its products directly to buyers in a target market.. Indirect exporting• In direct exporting – A practice by whic

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

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

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

-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 cost, risk mode of entry into new markets It allows them to maintain consistency by replicating the process for standardized products

low 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

day-to-day operations in the target market and over access to valuable technology,

processes, and other intangible properties within the subsidiary.

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

13 Joint ventures

• Disadvantages of Joint Venture:

-Conflict is most common when

management is shared equally.

-Loss of control over a joint venture’s

operations can also result when the local government is a partner.

-An alliance between Siemens (Germany) and

Hewlett-Packard (United States) to create and

market devices used to control

telecommunication systems

14 Strategic Alliance

• Advantages of Strategic Alliance

-Companies share the cost of an international investment projects

-Companies use strategic alliances to tap into competitors’ specific strength

-Some companies can gain access to a partner’s channels of distribution in a target market Other companies can reduce exposure to the same kind of risks from which joint ventures provide protection

14 Strategic Alliance

• Disadvantages of Strategic Alliance

-They can create a future local or even global competitor.

-Conflict can arise and eventually

undermine cooperation