Research a major multinational firm (MNE) of your choice. Include in your resear

Question

Research a major multinational firm (MNE) of your choice. Include in your research the characteristics the major industry(s) it competes in as well as the MNE's global rivals. Avoid selecting a multinational conglomerate to avoid arn unnecessarily complex analysis. Answer the following questions: 1. Which of the four multinational strategies is the MNE pursuing? 2. What organizational structure has it developed? 3. Considering the three legs of the strategy tripod, evaluate thee "strategic fit" and alignment of the MNE's strategy-structure multinational approach? 4. Does this approach offer any innovation or learning advantages over the approaches of the MNEs top rivals? Suggested Resources: MNE 2012 Annual Report and media releases

Explanation / Answer

Four multinational strategies which MNE is pursuing –

1) Franchising : In this form, a multinational enterprise grants firms in foreign countries the right (franchise) to use its trade marks, brand names, patents, technology, etc. The firms getting the right or license operate as per the terms and conditions of the franchise agreement. They pay a periodical royalty or license fee to the multinational enterprise. In case the firm, holding franchise violate the terms of the agreement, the license may be cancelled. This system is popular for products which enjoy good demand in host countries.

(ii) Branches : A multinational enterprise open branches in different countries. These branches work under the direction and control of the head office. The headquarters lay down policy guideline to be followed by the branches. Every branch follows the laws and regulations of the country in which it is located. Multinationals find it easiest to operate through branches.

(iii) Subsidiaries : A multinational enterprise may establish wholly owned subsidiaries in foreign countries.In case of partly owned subsidiaries people in the host country also own shares. The multinational controls the Board of Directors of the subsidiary company and the subsidiary follows the policies laid down by the parent company. The holding company undertakes responsibility for the management and working of the subsidiaries. Subsidiaries are considered to be more profitable than franchising. A multinational can expand its business operations through subsidiaries all over the world.

2) The operations of a Multinational enterprise extend beyond the country in which it is incorporated. Its headquarters are located in one country (home country) and in addition it carries on business in other countries (host country). A multinational enterprise controls production and marketing facilities in more than one country. Firms that participate in international business, however, large they may be, solely by exporting or by licensing technology are not multinational enterprise. The assets and sales of a multinational are quite large. The sales turnover of some MNE exceed the Gross National Product of several developing countries. A multinational enterprise has at its command advanced

technology so as to provide world class products and services. It employs capital intensive technology not only in manufacturing but in marketing and other areas of business. Multinational eneterprise play both positive and negative roles. As a positive force, multinationals can be a dynamic force or instrument for wider distribution of capital, technology and employment. As a negative force, multinationals can be monsters beyond the control of national governments and working against public interest.

3) A multinational enterprise has its headquarters in the home country. It exercises

control over all branches and subsidiaries. The local managements of branches and subsidiaries operate within the policy framework of the parent corporation. On account of its vast resources and superior marketing skills, a multinational enterprise has vast access to international markets. Therefore, it is able to sell whatever product/ service it produces in different countries. Multinationals create large scale employment opportunities in host countries. They increase the investment level and thereby the employment and income levels. Multinationals offer excellent pay scales and career opportunities to managers, technical and clerical staff. Multinationals help to professionalise management in host countries. They employ modern management techniques and trained managers. Several concepts and techniques like corporate planning, and job enrichment were evolved by multinational enterprise . As carriers of knowledge and experience, multinationals build up ‘knowledge base’ and thereby assist the development of human resources in host countries.

4) A multinational approach has developed various production, marketing and other facilities in several countries. It operations through a network of subsidiaries, branches and affiliates in host countries. It operates through a network of subsidiaries, branches and affiliates in host countries. It owns and controls assets in foreign countries. A multinational eneterprise has at its command advanced technology so as to provide world class products and services. It employs capital intensive technology not only in manufacturing but in marketing and other areas of business. In order to integrate and manage worldwide operations, a multinational enterprise employs professional skills. It employs professionally trained managers to handle advanced technology, huge funds and international business operations. Multinational eneterprise make investments in different countries with the following aims:

– to take advantage of tax benefits in host countries or to circumvent tariff barriers;

– to exploit the natural resources of the host country;

– to take advantage of Government concessions in host countries

– to mitigate the impact of regulations in the home country;

– to reduce costs of production by making use of cheap labour and lower transportation expenses in host countries;

– to gain dominance in foreign markets;

– to expand activities vertically.

Sufficient resources to carry on research and development. Multinationals serve as vehicles for the transfer of advanced technology to these countries. Advanced technological knowhow, improved skills and consultancy help the developing countries to improve the quality of products and reduce costs. Through continuous research and development, MNE serve as a source of inventions and innovations. Multinationals help to professionalise management in host countries. They employ modern management techniques and trained managers. Several concepts and techniques like corporate planning, management by objectives and job enrichment were evolved by multinational enterprise. As carriers of knowledge and experience, multinationals build up ‘knowledge base’ and thereby assist the development of human resources in host countries.

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