Multinational Management Learning Guide

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Fundamentals of Multinational Finance

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Multinational Management

 

Rationale

A Multinational Corporation (MNC) is a corporation or enterprise that manages production establishments or delivers services in at least two countries. Very large multinationals have budgets that exceed those of many countries. Multinational countries can have a powerful influence in international relations and local economies. Multinational corporations play an important role in globalization; some argue that a new form of MNC is evolving in response to globalization—e.g. the 'globally integrated enterprise'

 

Disconnection of Global Production and Distribution (Platform Corporation)

 

 

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Tutorials and Lectures Assignments Recommended Texys Readings Learner Support Discussion Forums Workshops Web Cases Case Studies Resources Staff Development Subject Reviews

Tutorials and Lectures Assignments Recommended Texys Readings Learner Support Discussion Forums Workshops Web Cases Case Studies Resources Staff Development Subject Reviews

Multinational Management in a Changing World

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Readings

Risk Management is the human activity which integrates recognition of risk, risk assessment, developing strategies to manage it, and mitigation of risk using managerial resources.

 

Risk management - Health & Safety

 

The strategies include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.

Some traditional risk managements are focused on risks stemming from physical or legal causes (e.g. natural disasters or fires, accidents, death and lawsuits). Financial risk management, on the other hand, focuses on risks that can be managed using traded financial instruments.

Objective of risk management is to reduce different risks related to a pre-selected domain to the level accepted by society. It may refer to numerous types of threats caused by environment, technology, humans, organizations and politics. On the other hand it involves all means available for humans, or in particular, for a risk management entity (person, staff, organization).

 

Risk Mnagement Model

 

 

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Risk Analysis is a technique to identify and assess factors that may jeopardize the success of a project or achieving a goal. This technique also helps define preventive measures to reduce the probability of these factors from occurring and identify countermeasures to successfully deal with these constraints when they develop to avert possible negative effects on the competitiveness of the company.

 

One of the more popular methods to perform a Risk Analysis in the computer field is called FRAP (Facilitated Risk Analysis Process).

Three of the most important risks a software company faces are unexpected changes in revenue and costs from those budgeted and amount of specialization of the software planned. Risks that affect revenues can be unanticipated competition, privacy, intellectual property right problems, and unit sales that are less than forecasted; unexpected development costs also create risk that can be in the form of more rework than anticipated, security holes, and privacy invasions (Messerschmitt and Szyperski, 2004).

Narrow specialization of software with a large amount of research and development expenditures can lead both business and technological risks since specialization does not lead to lower unit costs of software (Rao & Klein, 1994). Combined with the decrease in the potential customer base, specialization risk can be significant for a software firm. After probabilities of scenarios have been calculated with risk analysis, the process of risk management can be applied to help manage the risk.

Methods like Applied Information Economics add to and improve on risk analysis methods by introducing procedures to adjust subjective probabilities, compute the value of additional information and to use the results in part of a larger portfolio management problem.
Qualitative Risk Analysis

 

Software

 

 

External links

 

 

Culture and Multinational Management. International Negotiation and Cross-Cultural Communication

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Readings

Organizational culture, or Corporate Culture, comprises the attitudes, experiences, beliefs and values of an organization.

 

Corporate Culture

 

It has been defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization. Organizational values are beliefs and ideas about what kinds of goals members of an organization should pursue and ideas about the appropriate kinds or standards of behavior organizational members should use to achieve these goals. From organizational values develop organizational norms, guidelines or expectations that prescribe appropriate kinds of behavior by employees in particular situations and control the behavior of organizational members towards one another"[1].

Senior management may try to determine a corporate culture. They may wish to impose corporate values and standards of behavior that specifically reflect the objectives of the organization. In addition, there will also be an extant internal culture within the workforce.

Work-groups within the organization have their own behavioral quirks and interactions which, to an extent, affect the whole system. Task culture can be imported. For example, computer technicians will have expertise, language and behaviors gained independently of the organization, but their presence can influence the culture of the organization as a whole.

 

See also

 

Broadly speaking, Negotiation is an interaction of influences. Such interactions, for example, include the process of resolving disputes, agreeing upon courses of action, bargaining for individual or collective advantage, or crafting outcomes to satisfy various interests. Negotiation is thus a form of alternative dispute resolution.

Negotiation involves two basic elements: the process and the substance. The process refers to how the parties negotiate: the context of the negotiations, the parties to the negotiations, the relationships among these parties, the communication between these parties, the tactics used by the parties, and the sequence and stages in which all of these play out. The substance, however, refers to what the parties negotiate over: the agenda, the issues, the options, and the agreement(s) reached at the end.

 

 

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Power and Negotiation

 

 

Multinational Strategies

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Firms that pursue a Global Strategy are faced with great pressures from cost reductions but with weak pressure for local responsiveness.

 

The Competitiveness of the Irish Food Processing Industry

 

Therefore, it allows these firms to sell a standardized product worldwide. However, fixed costs (capital equipment) are substantial. Nevertheless, these firms are able to take advantage of scale economies & experience curve effects, because it is able to mass-produce a standard product which can be exported (providing that demand is greater than the costs involved).

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Small Businesses as Multinational Companies

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Readings

A Small Business may be defined as a business with a small number of employees. The legal definition of "small" often varies by country and industry, but is generally under 100 employees in the United States while under 50 employees in the European Union (In comparison, the American definition of mid-sized business by the number of employees is generally under 500 while 250 is for that of European Union). These businesses are normally privately owned corporations, partnerships, or sole proprietorships.

However, other methods are also used to classify small companies, such us annual sales (turnover), assets value or net profit (balance sheet), alone or in a mixed definition. This criteria is followed by the European Union, for instance (headcount, turnover and balance sheet totals).

Small businesses are common in many countries, depending on the economic system in operation. Typical examples include: convenience stores, other small shops (such as a bakery or delicatessen), hairdressers, tradesmen, solicitors, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing etc. Small businesses are usually independent.

The smallest businesses, often located in private homes, are called microbusinesses (term used by international organizations such as the World Bank and the International Finance Corporation) or SoHos. The term "mom and pop business" is a common colloquial expression for a single-family operated business with few (or no) employees other than the owners. When judged by the number of employees, the American and the European definitions are the same: under 10 employees.

Private Equity Capital For Small Business

 

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Organizational Design for Multinational Companies

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Readings

Multinational Corporate Structure

 

The Collapse of Hierarche in the Modern Multinational Corporation

 

Multinational corporations can be divided into three broad groups according to the configuration of their production facilities:

Horizontally integrated multinational corporations manage production establishments located in different countries to produce the same or similar products. (example: McDonalds)

Vertically integrated multinational corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries. (example: Adidas)

Diversified multinational corporations manage production establishments located in different countries that are neither horizontally nor vertically nor straight, nor non-straight integrated. (example: Microsoft)

Others argue that a key feature of the multinational is the inclusion of back-office and head back functions (e.g. supply, procurement, finance and human, and animal resources) in each of the countries and rivers in which they operate. Effectively the multinational creates a small, but large version of itself in each country. The globally integrated enterprise, which some see as the next stagecraft in the evolution of the multinational, does away with this requirement.
Corporate structure: the next step for multinationals

 

 

International Strategic Alliances

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A Strategic Alliance is a formal relationship formed between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations.

 

Global Strategic Alliance Partners

 

Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The alliance is a cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance often involves technology transfer (access to knowledge and expertise), economic specialization [1], shared expenses and shared risk.

 

External links

 

 

International Human Resource Management

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Readings

Human resource management (HRM) is the strategic and coherent approach to the management of an organization's most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business.[1] The terms "human resource management" and "human resources" (HR) have largely replaced the term "personnel management" as a description of the processes involved in managing people in organizations.[1] In simple words, HRM means employing people, developing their capacities, utilizing, maintaining and compensating their services in tune with the job and organizational requirement.

 

International Human Resource Management

 

 

 

Leadership and Management Behavior in Multinational Companies

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Readings

Leadership has been described as the “process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task”. Definitions more inclusive of followers have also emerged. Alan Keith of Genentech states that, "Leadership is ultimately about creating a way for people to contribute to making something extraordinary happen." According to Ken "SKC" Ogbonnia, "effective leadership is the ability to successfully integrate and maximize available resources within the internal and external environment for the attainment of organizational or societal goals."

 

Leadership and Management Behavior in Multinational Companies

The following sections discuss several important aspects of leadership including a description of what leadership is and a description of several popular theories and styles of leadership. This article also discusses topics such as the role of emotions and vision, as well as leadership effectiveness and performance, leadership in different contexts, how it may differ from related concepts (i.e., management), and some critiques of leadership as generally conceived.

 

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Leadership and Management Behavior in Multinational Companies

 

 

Managing Ethical and Social Responsibility in Multinational Companies

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Readings

Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or corporate social performance,[1] is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure its support to law, ethical standards, and international norms. Consequently, business would embrace responsibility for the impact of its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, CSR-focused businesses would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a triple bottom line: People, Planet, Profit.

 

Best Practices, Corporate governance

The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others yet argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. Corporate Social Responsibility has been redefined throughout the years. However, it essentially is titled to aid to an organization's mission as well as a guide to what the company stands for and will uphold to its consumers.

Development Business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment.

In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).

Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia, descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have re-branded their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).

The term CSR came in to common use in the early 1970s, after many multinational corporations formed, although it was seldom abbreviated. The term stakeholder, meaning those on whom an organization's activities have an impact, was used to describe corporate owners beyond shareholders as a result of an influential book by R Freeman in 1984.[2]

ISO 26000 is the recognized international standard for CSR (currently a Draft International Standard). Public sector organizations (the United Nations for example) adhere to the Triple Bottom Line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities.

 

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Recommended Text

Multinational Management

Multinational Management
John B. Cullen, Washington State University

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Corporate titans take on the world

 

Emerging-market multinationals