GLOBAL BUSINESS MANAGEMENT (MNB370-2)
TABLE OF CONTENT PG#
STUDY UNIT 1: CHAPTER 1: GLOBAL BUSINESS OPERATIONS............................................ 2
STUDY UNIT 2: CHAPTER 2: GLOBAL DIVERSITY MANAGEMENT AND LEADERSHIP ................... 7
STUDY UNIT 3: CHAPTER 3: BUILDING STRATEGIES FOR GLOBAL COMPETETIVE ADVANTAGE .... 15
STUDY UNIT 4: CHAPTER 4: STRUCTURING GLOBAL ENTERPRISES AND OPERATIONS .............. 20
STUDY UNIT 5: CHAPTER 5: THE POLITICAL ECONOMY OF FOREIGN EXPANSION ................... 27
STUDY UNIT 6: CHAPTER 6: COUNTRY ATTRACTIVENESS ................................................ 34
STUDY UNIT 7: CHAPTER 7: FOREIGN MARKET ENTRY STRATEGIES & ALLIANCES (P 110 – 117) .. 41
STUDY UNIT 8: CHAPTER 8: EXPANSION STRATEGIES IN EMERGING MARKETS: .................... 49
▪️STUDY UNIT 9: CHAPTER 9: GLOBAL OPERATIONS AND SUPPLY CHAIN MANAGEMENT: .......... 58
STUDY UNIT 10: CHAPTER 10: GLOBAL MARKETING STRATEGIES ...................................... 68
STUDY UNIT 11: CHAPTER 11: INTERNATIONAL HUMAN RESOURCE MANAGEMENT ................. 73
Page 1 of 81
, STUDY UNIT 1: CHAPTER 1: GLOBAL BUSINESS OPERATIONS
Define multinational corporations (MNCs).
MNC’s are business enterprises that operate in more than one country. These organisations operate across
international borders irrespective of their size or contextual orientation.
The Evolution of MNC’s
• MNC’s are the driving force behind globalisation.
• MNC’s are business enterprises that operate in more than one country.
• They operate across international borders irrespective of their size or contextual orientation.
Trends in the evolution of MNC’s:
• MNC’s production chains have been defragmented: with activities outsourced o situated offshore in
various locations.
o Referred to as the co-ordination of global value chains.
o Undertaken in an effort to minimize and MNC’s worldwide tax liability.
o Usually use complex tax planning structures, incl. intra-group transfer pricing, investment through
offshore financial centers and special purpose entities, to alleviate tax liabilities.
• MNC’s need a change in attitude regarding environmental and social issues.
o Because of tighter regulations and higher environmental and social standards imposed by host countries,
apart from its own self-regulation and CSR requirements.
• The application of the principles of corporate governance and the crafting of global business strategies.
o MNC’s are being influenced by the global economy, with its transmission of foreign direct investments
(FDI) in developed and developing countries. (Often motivated by market-seeking an efficiency-seeking
considerations.)
• Complex ownership structures and sophisticated technology and strategies to support their
internationalization initiatives. (For SME’s too)
• MNC’s in developed countries expanding into developing countries.
o Has implications for the differences between conventional and unconventional MNCs and their modus
operandi, in host countries.
Globalisation and the Transience of MNCs
• MNCs from developing countries: less conventional, late comers.
• MNCs from developed countries: conventional, early movers. (in terms of when and how they achieve
competitive advantage)
o Emphasises strategic importance of the time and method of entry into global competition.
• Typically unconventional MNCs are small, obscure, and operate in fragmented, low tech industries through
joint ventures to exploit low cost advantages of developing countries. Also found in developed countries.
Already investing directly in developed countries through acquisitions and joint ventures: thereby gaining
access to more sophisticated tech and market channels. They follow unconventional modes of operating by
Page 2 of 81
, following abnormal paths of internationalization to catch up with their rivals in developed countries. They do
this by adopting accelerated strategies as latecomers.
Analyse the stages of MNC evolution (the development of the stages of MNCs)
1. The pre-export phase: o Start-up phase that aims to expand overseas.
o Limited capital and financial difficulties can occur, due to lack of
access to capital markets and government incentives.
o Firm can make enquiries about launching its product overseas through
a foreign agency or a domestic exporter.
o A domestic exporter could operate through the facilities of an export
intermediary, e.g. contractor, distribution agency.
o Can also be provided by an export merchant e.g. export commission
house, a resident buyer, broker or export manager.
2. The immature export stage: o Given domestic experience, the firm may eventually be able to open
an office abroad to facilitate overseas sales.
o This can take the form of a joint venture, an overseas export manager
or an overseas agent.
o Most firms prefer direct exporting- full control over process.
o If there are constraints they can use a domestic export agent: little
control over process.
3. The mature export stage: o Once necessary capital and expertise are accumulated, firms that have
opened overseas branches can begin to formalize their sales initiatives
overseas.
o This can be done by appointing a branch manager (directly accountable
to HQ), while the branch distributes through intermediaries in foreign
markets.
o Home country may decide to assemble and manufacture the product
overseas.
o This lowers costs e.g.: transport, tariffs, labour. Cheaper to export
disassembled products than whole products.
o Sometimes the firm will have difficulty in increasing their sales
further.
o If available capital and technical support are at hand, then the firm
may decide to expand into related business.
o This can improve the export process and regular sales in overseas
markets.
o The firm has become an MNC.
4. The initial MNC stage: o It can take up to 2 years to reach this stage and start exporting larger
volumes overseas.
o The success of the MNC will show when it is able to hunt for
executives with rich international experience, capable of spearheading
its international business operations. This could open the way to
additional overseas sales offices.
o Apart from expanding its sales network, logistically, this can lead to
the firms’ first overseas warehouse being established, followed by
subsidiaries and franchises.
o This is often accompanied by increased market share, both home and
abroad.
o This would be significant if sales abroad overtook domestic sales.
o Brand recognition remains a challenge.
Page 3 of 81
, 5. The intermediate MNC stage: o This is the most chaotic and troubled phase.
o Misguided efforts to expand can render the young MNC vulnerable to
the unpredictability of the global business environment.
o The response is often impulsive, e.g. recruiting more international
managers and increase of international brands, market channels,
foreign capital and higher value-added products. This will test the
resilience of the value chain.
o This can lead to premature outsourcing and miscalculated moves. The
MNC can also prematurely acquire related forms in the industry, or
other up- or downstream participants in similar industries.
o All these failures put a huge financial burden on the MNC and its
investors, this can also have an impact on the viability of the firms’
present org. structure and its control mechanisms.
o They could lose valuable managerial staff and might be forced into
survival mode. The MNC could try change its entry mode and may need
to try joint ventures instead of a more desirable wholly owned foreign
subsidiary.
o This will inhibit the MNC’s progress to the mature stage.
6. The mature MNC stage: • Evolution to the mature stage is often characterised by a fundamental
restructuring of the MNC. To this end, three key strategic initiatives
are usually adopted, namely:
1. The re-engineering of production processes
2. Reviewing customer service delivery mechanisms with a view to
improving customer relations, usually accompanied by the radical
restructuring of the existing organisational structure
3. Exploring the localisation of global brands in response to the need
for greater responsiveness in the foreign destination. This calls
for a renewed managerial outlook: a transformation from a
traditional to a global mindset. This transformation process would
form part of the MNC’s pursuing a revolutionary approach to
globalisation, and the MNCs transition from operating in a
developing country to a developed country.
Defend the importance of a MNCs’ strategic orientation.
1. The staffing policy an MNC should adopt in the host country and the corporate culture it aims to established
must be raised.
2. The implementation of this global strategy depends on a strong corporate culture; it also calls for the
recruitment of people who have the specific skills required for jobs to be performed in the host country. It
requires people whose behaviour styles, beliefs and value systems are consistent with the MNC’s ethos and
management’s mindset; a convergence which will facilitate their contribution to the MNC’s higher
performance.
3. The MNC’s strategic orientation will reflect its approach to strategic initiatives of foreign expansion,
particularly through its staffing policy. The implementation of these foreign expansion processes and
approaches will reflect the degree of multinationality of the MNC’s overseas operations.
4. All MNC’s strategic orientation can be classified as one of four approaches, each of which can be linked to
the firm’s global business strategy of choice. The approaches include ethnocentrism, polycentrism,
geocentrism, and regiocentrism.
Page 4 of 81
