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5
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Typically have Headquarters (HQ) in the country of origin
Build or acquire affiliates or subsidiaries in other countries (the host nation)
This kind of expansion is referred to as Foreign Direct Investment (FDI)
What is a MNC?
Definition
A corporation that owns and operates production facilities in two or more countries
A corporation with power to coordinate and control operations in two or more countries
without owning them
...
Export stage
initial inquiries => firms rely on export agents
expansion of export sales
further expansion of foreign sales branch or assembly operations (to save transport cost)
2
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Licensing
Licensing is usually first experience (because it is easy)
e
...
: Kentucky Fried Chicken in the U
...
it does not require any capital expenditure
it is not risky
payment = a fixed % of sales
o Problem: the mother firm cannot exercise any managerial control over the licensee
(it is independent)
The licensee may transfer industrial secrets to another independent firm, thereby creating a
rival
...
it is risky (lack of information) (US Canada vs
...
)
plants are established in several countries
licensing is switched from independent producers to its subsidiaries
...
Multinational Stage
The company becomes a multinational enterprise when it begins to plan, organize and
coordinate production, marketing, R&D, financing, and staffing internationally
...
Rule of Thumb
o
o
o
o
o
o
A company whose foreign affiliates’ sales are 25% or more of total sales
...
S
...
Petroleum companies: 6/10 located in the U
...
Multinational Corporation (MNC)
o
A business with extensive foreign operations in more than one county
...
“Fortune’s” Top 10 Multinational Corporations
1
...
DaimlerChrysler
2
...
Toyota Motor
3
...
General Electric
4
...
Total
5
...
Chevron
MNC Issues
•
Protectionism
–
•
A call for tariffs and special treatment to protect domestic firms from foreign
competition
...
Transparency International gives these countries its poorest corruption scores:
• Indonesia
• Nigeria
• Tajikistan
• Bangladesh
• Haiti
• Paraguay
• Myanmar
The Coca-Cola Company Opening Case
Asa Candler formed the Coca-Cola Company in 1882
...
The company has transformed itself from a single-product firm into a producer and marketer
of a beverage portfolio which encompasses 400 brands and 2,600 beverage products
...
Why do firms become MNEs
to diversify themselves against the risks and uncertainties of the domestic business cycle;
to tap the growing world market for goods and services;
in response to foreign competition;
to reduce costs;
to overcome barriers to entry into foreign markets;
to take advantage of technological expertise by manufacturing goods directly