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Competing in Global Markets

Competing in Global Markets. Chapter # 2. MNC: Multi National Companies FDI : Foreign Direct Investments MNB : Multinational Banks WWC: World Wide Companies/corporations. Multinational Corporations (MNC’S).

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Competing in Global Markets

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  1. Competing in Global Markets Chapter # 2 Aaftab Ullah

  2. MNC: Multi National Companies FDI: Foreign Direct Investments MNB: Multinational Banks WWC: World Wide Companies/corporations Aaftab Ullah

  3. Multinational Corporations (MNC’S) • A multinational enterprise (MNE) is a company that has a worldwide approach to markets and production or one with operations in more than a country. An MNE is often called multinational corporation (MNC) or transnational company (TNC). OR • Any corporation that is registered and operates in more than one country at a time. Generally the corporation has its headquarters in one country and operates wholly or partially owned subsidiaries in other countries. Its subsidiaries report to the corporation’s central headquarters. Aaftab Ullah

  4. MNC’S (CONT.) Well known MNCs include fast food companies such as McDonald's and Pizza Hutt vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony, and ETC Most of the largest corporations operate in multiple national markets. Aaftab Ullah

  5. International Business Strategy The way firms make choices about acquiring and using scarce resources in order to achieve their international objectives. International business strategy involves decisions that deal with all the various functions, products and regional unit activities of a company. Aaftab Ullah

  6. The Theory of Absolute Advantage by Adam Smith “Each country should specialize in the production and export of that good which it produces most efficiently, that is with fewest labor hours” Smith notified that some countries, owing to the skills of their workers or the quality of their natural resources, could produce the same products as others with fewer labor hours. He termed this efficiency as “Absolute advantage”. Aaftab Ullah

  7. Absolute Advantage The ability to produce a good or service more cheaply then it can be produce else where. A country that has an absolute advantage produces greater output of a good or service than other countries using the same amount of resources. Aaftab Ullah

  8. Absolute Advantage Smith extended this division of labor in the production process to a division of labor and product specialization across the countries. He said that countries would specialize in products for which it was uniquely suited. In this way countries can produce more and exchange products-trade-for goods that were cheaper in price then those produced at home, and this process will be maximizing nation’s income and per capita income. Aaftab Ullah

  9. The Theory of Comparative Advantage by David Ricardo “Even one country was most efficient in the production of two products, it must be relatively more efficient in the production of one good, it should then specialize in the production and export of that good in exchange for the importation of the other good” Aaftab Ullah

  10. Comparative Advantage The principle of comparative advantage states that a country should specialize in producing and exporting those products in which is has a comparative, or relative cost, advantage compared with other countries. They should import those goods in which it has a comparative disadvantage. Out of such specialization, it is argued, will accrue greater benefit for all. Aaftab Ullah

  11. Theories of Advantage Comparative U. S. China China U. S. Output per Unit of Input Software Clothing Aaftab Ullah

  12. Specialize & Trade Software Clothing Aaftab Ullah

  13. China is a manufacturing super power * Cheap labor * Talented engineers * Good infrastructure * Open to foreign competition Aaftab Ullah

  14. Global Business Strategy • UNDERSTAND YOUR COMPETITORS • Analyze their mission and strategic directions • Examine their national history (e.g., dominant religion, govt.-business relationships, level of economic development) • Analyze their managerial values, goals and strategy Aaftab Ullah

  15. Global Business Strategy • UNDERSTAND YOUR POTENTIAL PARTNERS • Analyze their structure and operating systems to combine with information on top executives’ strategic orientation • Analyze how the specific alliance fits into the partner’s overall strategy • Analyze partner’s costs and benefits from the alliance, both tangible and intangible Aaftab Ullah

  16. Global Business Strategy • UNDERSTAND DIVERSE MEMBERS OF YOUR MANAGEMENT TEAM • Examine the culture of their country of origin and its other relevant characteristics • Analyze the types and amount of experiences they have achieved • Analyze their previous major strategic decisions • Use this information to profile their strategic orientation Aaftab Ullah

  17. Firms could not be expected to effectively service a foreign market that is significantly different from the domestic market, because the ability to compete comes from experience in the home market. Aaftab Ullah

  18. End of Chapter Thank you Aaftab Ullah

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