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Management Notes International Management Notes

International Management Entry Strategies And Organisational Structures Notes

Updated International Management Entry Strategies And Organisational Structures Notes

International Management Notes

International Management

Approximately 120 pages

Comprehensive bullet pointed notes on all areas of the International Management module.

Also includes an extensive case study and example document which will help back up points in your essays.

I received a 1st in this module based on these notes....

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Entry Strategies and Organisational Structures

TERMS

  • Wholly Owned Subsidiary – An overseas operation that is totally owned and controlled by an MNC.

  • Merger/Acquisition – The cross border purchase or exchange of equity involving two or more companies.

  • Alliance – Any type of cooperative relationship among different firms.

  • Joint Venture – An agreement under which two or more partners own or control a business.

  • License – An agreement that allows one party to use an industrial property right in exchange for payment to the owning party.

  • Franchise – A business agreement under which one party (the franchisor) allows another (the franchisee) to operate an enterprise using its trademark, logo, product line and methods of operation in return for a fee.

  • International division Structure – A structural agreement that handles all international operations out of a division created for this purpose.

  • Global Product Division – A structural agreement in which domestic divisions are given worldwide responsibility for product groups.

  • Global Area Division – A structure under which global operations are organised on a geographic rather than a product basis.

  • Global Functional Division – A structure that organises worldwide operations primarily based on function and secondarily on a product,

  • Mixed Organisation Structure – A structure that is a combination of a global product, area, or functional arrangement.

  • Transnational Network Structure – A multinational structural arrangement that combines elements of function, product and geographic designs, while relying on a network arrangement to link worldwide subsidiaries.

  • Formalisation – The use of defined structures and systems in decision making, communicating and controlling.

  • Specialisation – An organisational characteristic that assigns individuals to specific, well defined tasks.

  • Horizontal Specialisation – The assignment of jobs so that individuals are given a particular function to perform and tend to stay within the confines of this area.

  • Vertical Specialisiation – The assignment of work to groups or departments where individuals are collectively responsible for performance.

  • Centralisation – A management system in which important decisions are made at the top.

  • Decentralisation – Pushing decision making down the line and getting the lower level personnel involved.

ENTRY STRATEGIES AND OWNERSHIP STRUCTURES

  • There are a number of common entry strategies and ownership structures in international operations.

  • The most common entry approaches are wholly owned subsidiaries, mergers and acquisitions, alliances and joint ventures, licensing, franchising and basic export and import operations.

  • Depending on the situation, any one of these can be a very effective way to implement an MNC’s strategy

Export/Import

  • New ventures, exporting and importing often are the only available choices for small and new firms wanting to go international.

  • These choices also provide an avenue for larger firms that want to begin their international expansion with minimum investment and risk.

  • The paperwork associated with documentation and foreign currency exchange can be turned over to an export management company to handle, or the firm can handle things itself by creating its own export department.

  • Additionally the firm can turn to major banks, or other specialists that for a fee, will provide a variety of services including letters of credit, currency conversion and related financial assistance.

  • A number of potential problems face firms that plan to exports.

  • An MNC with a contractual agreement with a distributor could be stuck with that distributor. On the other hand if the firm decides to get more actively involved it may make direct investments in marketing facilities such as warehouses, sales offices and transportation equipment without making direct investment in manufacturing facilities overseas.

  • When importing goods many MNC’s source products from a wide range of suppliers from all over the world.

  • Exporting and importing can provide easy access to overseas markets; however the strategy usually is transitional in nature. If the firm wishes to continue doing business internationally, it will need to get more actively involved in terms of investment and take on new risks.

Wholly Owned Subsidiary

  • This option is often pursued by smaller companies especially if international or transaction costs such as the cost of negotiating and transferring information are high.

  • When MNC’s make an initial investment in the form of a wholly owned subsidiary in a foreign country, it is sometimes referred to as greenfield investment.

  • The primary reason for the use of wholly owned subsidiaries is a desire by the MNC for total control and the belief that managerial efficiency will be better without outside partners.

  • Due to the sole ownership it has been found that profits can be higher with this venture and that there are clearer communications and shared visions.

  • However, there are some drawbacks. Typically wholly owned subsidiaries face a high risk with such a large investment in one area and are not very efficient with entering multiple countries or markets. This can also lead to low international integration or multinational involvement.

  • Furthermore, host countries often feel that the MNC is trying to gain economic control by setting up local operations but refusing to include local partners.

  • Some countries are concerned that the MNC will drive out local enterprises as opposed to helping developing them.

  • In dealing with these concerns many newly developing countries prohibit wholly owned subsidiaries.

  • Another drawback is that home country unions sometimes oppose the creation of foreign subsidiaries which they see as an attempt to export jobs particularly when the MNC exports goods to another country and the decides to set up manufacturing operations there.

  • As a result today many multinationals opt for a merger, alliance or joint venture rather than a wholly owned subsidiary.

Mergers/Acquisitions...

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