By: Knights Multi-National

 “The process of providing goods and services in accord with a plan of action”

International Management must consider 3 General Areas in Strategic Implementation: 1) Multi-National Corporation must decide where to locate operations. 2) The MNC must carry out entry & ownership strategies. 3) Mgmt must implement functional strategies in areas such as marketing, production, & finance.

 When choosing a location, a MNC focuses on two (2) ideas: 1) The Country and 2) The Specific Local

 Traditionally: Highly Industrialized countries= substantial increase in annual investments Examples:  The acquisitions & mergers in Japan  Mexico: NAFTA : assists with getting merchandise into USA and Canada & is cost-effective.

 Advanced Industrialized Countries = Largest markets for goods & services, and have legal restrictions to encourage local presence.  Examples: ITT in 12 EU Countries

 Amount of Government Control & restrictions on foreign investment  Examples: More Free-Markets = Soviet Union & Eastern Europe Control of the Operation be in hands of local partners = India & China

 Examines the Specific Benefits offered by host countries:  Low tax rates, rent-free land, low-interest, subsidized energy, etc. These benefits will be weighed against any disincentives that must be met by the MNC  Export Minimums, Limits on Local market growth, labor regulations, wage and price controls, controls on the transfer of technology, etc.

You chose the implementation country? Well done... But where will you implement exactly?  Space prices  Access to transportation  Access to customers  Competition  Desirability  Etc…

What is your main criteria? Accessibility, financial approach… Are all MNCs having the same criterias? NO Depends on their nationality and their business… Banking companies will chose metropolitan areas. German & Japanese will focus on accessibility. Greenfield LocationsSpread risk Rural areas are By running small business less expensive

 Country-specific advantages (CSAs) Natural resources (minerals, energy, forests) Labor Intangibles (education, skills, intellectual property, entrepreneurship)  Firm-specific advantages Product or process technology Marketing Distribution Managerial know-how  Management should focus on building upon interaction of CSAs and FSAs

Cost Leadership Cost Leadership and/or Differentiation Differentiation

 Sleek, low cost, ready-to-assemble furniture  Owns the land and buildings it operates in  New stores offer 1000 construction and store jobs to local labor  Has problems with bureaucracy Not been able to open stores in France for 10 years What can be sold and where in Germany Ownership issues with India  Declining price of materials allowing lower price of furniture  Wants to produce in house Opening plants in China and Russia a-takes-aim-at-red-tape/

Marketing, Production, and Finance

 The implementation of strategy is determined by a country to country basis.  What works from the standpoint of marketing in one locale country may not necessarily succeed in another.  The steps are an overall strategic plan.

 The German auto firms in Japan use marketing analysis to meet customers needs. They have spent millions of dollars in the past 15 years to build dealer, supplier, and service support networks. They offer first class service which in recent years they have sold 3 times as many cars as their U.S. competitors do.  The Japanese also provide and excellent example of how marketing process works. They have build their market share at home before they drive out their imported goods.

The implementation of marketing strategy in the international arena is built around the well known “4ps” of market; Production - is handled in domestic operations Price - is a function of market demand Promotion and place – are determined by local conditions ex: a local manager implementing sales incentives for dealers and salespeople.

 Production plays a key role in strategy implementation  Production has traditionally been handled through domestic operations, now MNC’s sometimes have plants that will specialize in a particular product then export it to all MNC markets.  If the firm operates production plants in different countries but makes no attempt to integrate its overall operations, the company is known as a multi domestic. A recent trend has been away from this scattered approach and towards global coordination of operations.  If the product is labor intensive, for example micro computers then the trend is to farm the product out to low cost sites such as Brazil or Mexico where labor costs are low and infrastructure is sufficient.  Careful coordination of the production function is needed when implementing the strategy, and the result is a product that is truly global in nature.

 If the product is labor intensive, for example micro computers then the trend is to farm the product out to low cost sites such as Brazil or Mexico where labor costs are low and infrastructure is sufficient.  Careful coordination of the production function is needed when implementing the strategy, and the result is a product that is truly global in nature.

 Use of the finance function to implement strategy normally is developed at the home office and is carried out by the overseas affiliate or branch.  MNC’s have learned that transferring funds from one place in the world to another or borrowing funds in the international money markets, often is less expensive than relying on local sources. Unfortunately there are problems with these transfers.  One of MNC’s biggest recent headaches when implementing strategies in the financial dimension has been the reevaluation of currencies. For example MNC subsidiaries in Mexico had there profits devalued when the Mexican Government devalued the currency several years ago.

 A more recent example of financial issues is the expansive US trade deficit with China, where the potentially under valued Yuan has played a role.  When dealing with the risk of volatile monetary exchange rates, some MNC’s have bought currency options that for a price guarantee convertibility at a specified rate.