FOUR BROAD MULTINATIONAL STRATEGIES Solutions to the global--local responsiveness dilemma Multilocal Transnational International Regional 5

11

Partner’s different capabilities Partner's knowledge of the market WHY SEEK ALLIANCES? Partner’s different capabilities Partner's knowledge of the market Government requirements To share risks To share technology Economies of scale Low cost raw materials or labor 35

REASONS TO INVEST IN FOREIGN COUNTRIES To extract raw materials To find low cost sources of labor, components, parts, or finished goods To penetrate new markets, the major motivation 39

POSSIBLE ADVANTAGES OF FDI Greater control Lower costs of supplying host country Avoiding import quotas Greater opportunity to adapt product to the local markets Better local image of the product 40

POSSIBLE DISADVANTAGES OF FDI INCLUDE Increased capital investment Increased investment of managerial and other resources Greater exposure of the investment to political and financial risks 41

GEOGRAPHIC DISTANCE Transportation costs More difficult for managers to communicate face-to-face and local managers may feel "out of the loop" in corporate decision making 49

With very different cultures, direct investment more risky CULTURAL DISTANCE With very different cultures, direct investment more risky Joint ventures, licensing and exporting Local partners deal with local cultural issues 50

POLITICAL AND FINANCIAL RISK Economic risk Currencies, markets, etc. Political risk Governments change Policies regarding foreign firms change 51

NEED FOR CONTROL Key areas for concern Product quality in the manufacturing process, product price, advertising and other promotional activities, where the product is sold, and after market service 52

54