Past and Perspective
the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also through the more rapid and widespread diffusion of technology - IMF
All institutions have to make global competitiveness a strategic goal. No institutions, whether a business, a university or a hospital, can hope to survive, let alone to succeed unless, it measures up to the standards set by the leaders in its field, any place in the world - Peter Drucker
International trade
Financial flows Communication Technological advances Population (Labor) mobility
A guarantee of fiscal discipline and curb on budget deficit
A reduction in the public expenditure
Tax reforms Financial liberalization
Competitive exchange rates
Trade liberalization Promotion of foreign direct investment
Privatization of State enterprises
Deregulation of economy Protection of property rights
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Doing or planning to expand business globally
Global outlook of the business Global business dynamics (Locating production facilities) Product planning and development on global market Considerations
Global sourcing of factors of production
Global orientation of organizational structure and management culture
Corporate objectives
External Constraints
Geographic Regulatory Size of market
Internal Constraints Organizational Design
Market share Manpower Capital needs
Management Style
Ethnocentric Polycentric Geocentric
World level globalization
Country level globalization Industry level globalization Firm level globalization Globalization of Individuals
Trade measures
Foreign investment measures ECB measures Currency convertibility
Competition and Learning International economic problems and crises Technological gains Industrial and employment restructuring Larger markets Lesser control over domestic economy Outsourcing and subcontracting advantage Readymade technology Greater specialization Price stabilization International investments
Drain of basic raw materials Consumerism Shift in the pattern of industrialization
International economic co- Erosion of domestic operation production base
the essential nature of the multinational enterprises lies in the fact that its managerial headquarter are located in one country (home country) while the enterprise carries out operations in a number of other countries (host countries) as well.
a corporation that controls production facilities in more than one country, such facilities having been acquired through the process of foreign direct investment. Firms that participate in international business, how large they may be, solely by exporting or by licensing technology are not multinational enterprises.
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70,000 MNCs with 9,50,950 affiliates
Only about 12 per cent of these affiliates are in the developed countries The top 100 TNCs are the principal drivers of international production
Their foreign affiliates employ about 6 million people with foreign sales of about $2trillion
Concentrated on electronics and electrical, automobiles, petroleum, chemicals and pharmaceuticals. increasing number of Japan and European MNCs Japan has the largest number, i.e., 10 in the top 20 MNCs MNCs are growing from developing countries too. South Korea has MNCs like Samsung, LG, Hyundai.
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Why do companies go global?
Money in the overseas markets Rapid shrinking of time and distance Domestic markets are no longer adequate and rich Raymond Vernon theory
Petroleum and mining companies go global very often
Nationality of the company affect the decision of going global
To save high transportation cost
Try to remain nearer to sources of raw material and labor Motivation to go global for high-tech companies
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Manifestation to go global
Configuration anywhere in the world Interlinked and independent economies Lowering of trade and tariff barriers Effect on related industries and ancillaries Infrastructural resources and input at international prices Increasing trend towards privatization Entrepreneur and his unit enjoy a central economic role
Mobility of skilled resources
Market-side efficiency Formation of regional blocks
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Transfer of technology, capital and entrepreneurship Improvement in the balance of payment Creation of local jobs and career opportunities Competition and better utilization available resources
Greater availability of products and services to local people
High quality managerial talent Step towards world economy
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Acquisition of Raw material and other resources
Acquisition of technologies and management expertise form other markets
Export of product to other markets
Inflow of the income from overseas profits
Better job opportunities in the home countries.
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Host country may loose its economic sovereignty MNCS objectives may be guided by world wide trend and developments Problem of balance of payment Acquisition of local business Exploitation of local labor Sudden exit from local markets (FIIs) Cultural issues
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Whether to go global? Which market to enter? Deciding the mode of entry
Learning to handle differences
Adjusting to the management process Selecting a managerial approach Deciding an organization structure
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Thanks to economic reforms, Indian businessmen are now compelled to come out of their shell and see beyond the physical boundaries of the country. From now onwards our captains of industries must think and act, both actions being guided by international perspective
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A large market
A strong legal system
Well developed capital markets A class of private sector partners English speaking human resources Democratic setup Booming economy Huge skilled manpower Opportunities to diversify portfolio risks
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