MNEs

The American Model of the Multinational Firm and the "New" Multinationals From Emerging Economies (Guillen & Garcia-Canal, 2009)

The authors address three questions:

1. "Do these firms (new MNEs) share some common features that distinguish them from the traditional model of the MNE?"
2. "What advantages have made it possible for them to operate and compete not only in host countries a the same or lower level of economic development but also in the richest economies?"
3. "Why have they been able to expand abroad at dizzying speed, in defiance of the conventional wisdom about the virtues of a staged, incremental approach to international expansion?"

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From the traditional viewpoint -

Why did multinational firms develop?

• What is the "liability of foreignness?"
• Vertical expansion - necessary condition? sufficient condition?
• necessary - comparative advantage
• Sufficient - uncertainty and asset specificity
• Horizontal expansion - necessary condition? sufficient condition?
• necessary - protectionists barriers, transportation costs, unfav currency exchange, local adaptation
• sufficient - intangible assets make licensing risky

(Think about Cadbury and Mars  - vertical or horizontal expansion)

Typical steps

• exports
• local agent exports
• sales subsidiary
• production and marketing subsidiary

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Main features of new MNEs.

• Speed of internationalization
• Competitive advantage
• Political capabilities
• Expansion path
• Default entry mode
• Organizational adaptability

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Motivations

• Backward linkages into raw materials
• Forward linkages into foreign markets
• Home-country government curbs
• Spreading of risk
• Movement of personal capital abroad
• Following home-country customer to foreign markets
• Investment in new markets in response to economic reforms in the home country
• Acquisition of firm-specific intangible assets
• Exploitation of firm-specific intangible assets
•  

 Patterns of expansion
 Remember when we read about Porter's diamond on Wed.....

MNE - still need some capability that allows to overcome "liability of foreignness."


1. Which of the drivers identified by Yip (2003) or Hill (2008) are represented in Guillen & Garcia-Canal's (2008) list? What important ones are missing?




2. Thinking about the motivations and intangible assets of the new MNEs develop a list of capabilities and skills required for managers of these new MNEs? Provide support for your list.

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The Tortuous Evolution of the Multinational Corporation (Perlmutter, 2008)

Multinational firm - ownership, structure, nationality of execs, investment overseas....

Orientation - Ethnocentric, Polycentric, Geocentric
(What did the different chocolate companies use?)

—Multinational Corporation Definition

Requires substantial direct investment in foreign countries and actively manage and regard those operations as integral parts of the company, both strategically and organizationally.

—UN definition

—comprising entities in 2 or more countries, regardless of the legal form and fields of activity of those entities.

—which operates under a system of decision making centers

—in which the entities are so linked, by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the activities of the others, in particular to share knowledge, resources, and responsibilities.

3. Perlmutter outlines three types of orientation companies can have in conducting global business. Given the drivers and motivations for global competition what perspective/orientation would you recommend a company adopt? Why?

4. Rank the skills and capabilities you listed in the question 2 in terms of their contribution toward the perspective you recommended.

5. Outline how companies can attract people with these S & C or develop S & C within their own employees.


When You Shouldn't Go Global (Alexander & Korine, 2008)

Alexander & Korine (2008) suggest not all companies should go global. One of the questions they believe companies should ask is "Do we have the necessary management skills?'

6. Come up with 6 questions you would ask about a company's management skills if the suggestion to enter a global market was raised.