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Chapter 1

Chapter 1

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Chapter 1

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  1. Expanding Abroad Motivations, Means, and Mentalities

  2. Multinational Enterprise (MNE) What is it? An enterprise that has a substantial direct investment and active management of entities in a foreign country.

  3. 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

  4. 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

  5. The Motivations: Pushes and Pulls to Internationalize

  6. 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

  7. Going International Prerequisites • Motivation • Strategic Competencies • Organizational Capabilities

  8. Uppsala Learning Model of Internationaliztion

  9. Approaches to Foreign Market Entry

  10. Evolving Mentalities • International Mentality • Multinational Mentality • Global Mentality • Transnational Mentality

  11. 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

  12. 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

  13. Global Mentality • Provide standardized products at low costs • Provides the company with more central coordination and control

  14. 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

  15. Questions?

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