Multi national enterprises and

Global functions
Module 5

International Investments based on

Competitive Strategy
Strategy:
"Strategy is the direction and scope of an organization over
the long-term
which achieves advantage for the organization through its
configuration of resources within a challenging environment,
to meet the needs of markets and to fulfill stake
holder expectations".

International Investments based on

Competitive Strategy
Strategy at Different Levels of a Business

Corporate Strategy - is concerned with the overall purpose and

scope of the business to meet stakeholder expectations. Corporate
strategy is often stated explicitly in a "mission statement".
Business Unit Strategy - is concerned more with how a business
competes successfully in a particular market. It concerns strategic
decisions about choice of products, meeting needs of customers,
gaining advantage over competitors, exploiting or creating new
opportunities etc.

Operational Strategy - is concerned with how each part of the

business is organized to deliver the corporate and businessunit level strategic direction. Operational strategy therefore
focuses on issues of resources, processes, people etc.

Competitive Strategy

Competitive Strategy is an integral part of Business

Unit Strategy
It refers to how a company competes in a particular
business
Competitive strategy is concerned with how a
company can gain a competitive advantage through
a distinctive way of competing.
Four Types of Competitive Strategy

International Strategy
Multi-domestic Strategy
Global Strategy
Trans-National Strategy

Global Integration

High

Low

Competitive Strategy

Global Strategy

TransNational
Strategy

International
Strategy

Multi-Domestic
Strategy

Low
High
Nation Responsiveness

Global Enterprises

MNCs
TNCs
MNEs
Micro Multinationals

Multi National Corporations (MNCs)

Multi National Corporation is a corporation

that has its management headquarters in one
country, known as the home country, and
operates in several other countries, known as
host countries.
Generally MNCs does not set up production
facilities in host countries, they will source
raw materials, semi finished goods & finished
goods from host countries
as well as, They sell finished goods in host
countries.

Multi National Corporations (MNCs)

MNCs are national companies with foreign

subsidiaries
MNCs tend to follow Autocratic control mechanism
They are Ethnocentric in Nature
They overlook national differences
Ignores important local factors
Believes in fulfillment of the objectives of home
country
Thinks change is easy and can be force on people
They employ most of the people from home country
The first modern MNC was East India Company
The last modern MNC could be Accenture !!!

Trans National Corporations (TNCs)

Transnational Corporation (TNC) differs from a MNC

It does not identify itself with one national home

TNCs spread out their operations in many countries.
High levels of local responsiveness.
An example of a TNC is Nestl which employs senior
executives from many countries.
Tries to make decisions from a global perspective rather
than from one centralized headquarters.

These companies follow Geocentric approach

The control is not Autocratic
Mainly the member countries of UNCTAD were
using the term TNC since it was preferred in
UNCTAD

Multi National Enterprises (MNEs)

MNE's are headquartered all over the world.

Many of them are owned by a mixture of
domestic and foreign stock holders.
The Importance is more on local needs and
demands
They follow Polycentric approach
Most of the companies which are operating
today are either TNCs or MNEs.

Micro - Multi Nationals

These are the new breed of multinational companies

Enabled by Internet based communication tools
They start operating in different countries from the
very early stages
To begin with they are small businesses, they grow
big with their operations in many countries in later
stages
Particularly software development companies &
Service sector companies are good examples.
The Style & structure of Management dependents
the values, principles and objectives of the company

Special Economic Zones in India

India was one of the first in Asia to recognize the

effectiveness of the Export Processing Zone (EPZ)
model in promoting exports, with Asia's first EPZ set
up in Kandla in 1965.
With a view to overcome the shortcomings
experienced on account of the multiplicity of controls
and clearances
absence of world-class infrastructure, and an
unstable fiscal regime and with a view to attract
larger foreign investments in India, the Special
Economic Zones (SEZs) Policy was announced in
April 2000.

SEZ

This policy intended to make SEZs an engine for

economic growth supported by quality infrastructure
complemented by an attractive fiscal package, both
at the Centre and the State level.
Objectives of SEZ
Generation of additional economic activity
Promotion of exports of goods and services;
Promotion of investment from domestic and
foreign sources;
Creation of employment opportunities;
Development of infrastructure facilities;

Incentives and facilities offered to the

SEZs

Duty free import/domestic procurement of goods for

development, operation and maintenance of SEZ units
100% Income Tax exemption on export income for SEZ units
under Section 10AA of the Income Tax Act for first 5 years, 50%
for next 5 years thereafter and 50% of the ploughed back export
profit for next 5 years.
Exemption from minimum alternate tax under section 115JB of
the Income Tax Act.
External commercial borrowing by SEZ units upto US $ 500
million in a year without any maturity restriction through
recognized banking channels.
Exemption from Central Sales Tax.
Exemption from Service Tax.
Single window clearance for Central and State level approvals.
Exemption from State sales tax and other levies as extended by
the respective State Governments.

Problems With SEZs in India

PPP Model

Private Ownership
Profit Orientation
Problems in Land allocation
Problems in Land acquisition
Higher maintenance charges

SEZs in India
SEZs in India
SEEPZ (Santacruz Electronics Export Processing Zone)

Largest SEZ in India, Reliance Navi Mumbai and

Maha Mumbai SEZ, is mere 14,000 hectares.

Kandla Special Economic Zone

Cochin Special Economic Zone
Madras Special Economic Zone
Visakhapatnam SEZ
Falta Special Economic Zone
Noida Export Processing Zone

SEZs
in
China

Global Manufacturing Management

Manufacturing Configuration:

Centralized
Regionalized
Multinational
Outsourced

Where to Manufacture ?

Country Factors : Differences in Political Economy,

Factor Costs, Trade Barriers, Location Externalities,
Exchange Rates.
Technology Factors : Fixed Costs, Efficiency Scale,
Flexible Manufacturing Technology.
Product Factors: Value to Weight Ratio, Serves
Universal Needs.

Global Supply Chain Management

Managing Global Supply Chain

Strategic Alliance with Suppliers ( OEM's)

Role of JIT
Role of IT and Internet (EDI, ERP, VPN)
TPL ( 3PL) : Functional, Sectorial & Geographical
Integration.

Global Human Resource Management

Staffing Policy

Ethnocentric
Geocentric
Polycentric

Expatriate Employees/Managers

Expatriate Selection
Expatriate Training
Expatriate Compensation, Facilities & Benefits
Expatriate Promotion.

Foreign Exchange

USA, EU, JP: Free Floating Economy

India : Partially Regulated By RBI
China: Fully Regulated by PBC
Forex Trading:

Trade Driven
Speculation Driven

Currency Convertibility

Current Account Convertibility

Capital Account Convertibility

Thank You - Wish You All The Best

End of the Modules 5