"Staffing" in MNEs

The ways in which multinationals hire, educate, post and promote the corps on whom they rely to manage and lead the organization

European multinationals have emphasized staffing with long-time associates for overseeing international affiliates

"Shared Values" in MNEs

The means by which multinationals develop the shared governing ideas affecting what employees believe about their organization--its mission, vision and 'how we do things around here'.

Japanese multinationals have used cultural bonding to exert hegemony over international operations

Operational Distance

Forces affecting multinational enterprises

• Increased pace of technological change has increased dependence on technology transfer
• Sophistication and cost of R&D has sometimes led to bigger plants, more extensive distribution networks and greater brand promotion
• Overall, fixed costs have gone up

Industry Factors: Petroleum

• Separation of upstream from more lucrative downstream markets requires complex logistics
• Upstream and downstream require large capital outlays
• Similarity of end products means high cost of brand promotion
• Political nature of industry requires active role for country managers
• Diversification means complex organizations

Industry Factors: Motor Vehicles

• Japanese competition forced U.S. firms to streamline
• Number of parts means intricate logistical systems
• Massive sums of capital required
• Diversification (aerospace, information systems) requires complex coordination
• Vulnerability to protectionism requires active role for country managers

Industry Factors: Electronics

• Rapid pace of technological change--shorter cycle times--requires capital and close coordination of R&D, manufacturing, distribution
• Diversity of product range is vast
• companies have incentive to deploy their core competencies in different industries
• Industrial and consumer electronics have vastly different marketing requirements

Industry Factors: Food/Packaged Goods

• Tastes of consumers in developed countries converging
• Advent of mass communication increased opportunity to promote brands worldwide
• Interest in acquiring food companies has acceleratedCentralized brand management
• Geography vs product more difficult to handle

Multinational Mission

from Prahalad and Doz

Examines businesses:

• businesses are sets of related product markets and tasks
• can be more than a product but less than an industry
• Introduces notion of change in pressures over time

Dynamics of Global Competition

• Managing cash flow can be more important than cost reduction
• However, internal systems (planning, performance measures, compensation) sometimes impede strategic coordination

P&D: Managing Cash Flows

Factors determining net cost

• Factor costs
• Exchange rates
• Scale economies

P&D: Manufacturing Systems

• Technology

quality and age of plants

productivity

• Exchange fluctuations
• Factor costs

labor

raw materials

cost of capital

P&D: Creating Strategic Infrastructure

Portfolio of manufacturing locations

Constant attention of technology and productivity improvements

Multimarket presence

Global brand and distribution presence

Product family