Expanding abroad
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Expanding abroad l.jpg

Expanding Abroad

Motivations, Means, and Mentalities


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Multinational Enterprise (MNE)

What is it?

An enterprise that has a substantial direct investment and active management of entities in a foreign country.


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Scope

  • In 1984, the UN’s definition of MNE changed.

  • An MNE is an enterprise:

    • Comprising entities in two or more countries

    • Operates under a system of decision making permitting coherent policies and a common strategy through one or more decision-making centers

    • The entities are linked in a way that allows one or more to exercise significant influence over the activities of the others


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Influence

Top 500 MNE’s account for:

MNEs produce __% of the world’s automobiles, __% of computers, __% of toothpaste, and __% of soft drinks.

85

70

35

65


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The Motivations: Pushes and Pulls to Internationalize


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Traditional Vs. Emerging

Traditional

Emerging

  • Need to secure key supplies

  • Market-seeking behavior

  • Access to low-cost factors of production

  • Increasing scale economies, ballooning R&D investments, and shortening product life cycles

  • Global scanning and learning capability

  • Competitive positioning


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Going International Prerequisites

  • Motivation

  • Strategic Competencies

  • Organizational Capabilities


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Uppsala Learning Model of Internationaliztion


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Approaches to Foreign Market Entry


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Evolving Mentalities

  • International Mentality

  • Multinational Mentality

  • Global Mentality

  • Transnational Mentality


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International Mentality

  • Overseas portions are distant outposts whose role is to support the parent company

  • Products are developed for the domestic market and are only subsequently sold abroad


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Multinational Mentality

  • Growing sales convince managers that the foreign branches have more than marginal significance

  • The parent company will modify its main products to fit the needs of foreign markets


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Global Mentality

  • Provide standardized products at low costs

  • Provides the company with more central coordination and control


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Transnational Mentality

  • Companies are more responsive to local needs and pressures to develop global scale competitive efficiency

  • Resources and activities are dispersed but specialized to for efficiency and flexibility



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