MNB3702 Global Business Management EXAM PREP

Unit One- Contemporary Global business operations 1. Define multinational corporations (MNCs). MNC’s are business enterprises that operate in more than one country. These organisations operate across international borders irrespective of their size or contextual orientation. 2. Analyse the stages of MNC development. 2.1. The Pre-Export Stage  Indicates start-up phase of a firm that aims to expand its operations overseas.  The firm has a good management team to oversee research and development (R&D) initiatives, which usually accompany this stage.  Limited capital and financial difficulties may be encountered as the firm progresses through its startup phase owing to a lack of access to capital markets and government incentives.  Here the firm makes enquiries about the possibility of launching its product(s) overseas, either through a foreign agency or a domestic exporter.  A domestic exporter could operate through the facilities provided by an export intermediary such as a contractor or distribution agency but such an agency service could also be provided by an export merchant, an export commission house, a resident buyer, a broker or an export manager,  Should this initiative be successful, it could lead to profitable sales overseas and the beginning of exports by the domestic firm. 2.2. The Immature Export Stage  After gaining experience the firm may eventually establish its first international office abroad in a bid to facilitate overseas sales. This office could take the form of a joint venture, an overseas export manager or an overseas agent.  Many firms would prefer to engage in direct exporting, which allows them to have control over the exporting process- so far as constraints in the foreign market allow for this.  In contrast, indirect exporting means that the exporting process is placed in the hands of a domestic export agent, leaving the firm with little control over the process.  Alternatively, the parent firm could decide to establish overseas branches and subsidiaries. This presumes further growth in export sales, which calls for the establishment of sales branches abroad to handle sales and promotional work.  Clearly, this requires a more mature approach to exporting, involving a more permanent presence in selected locations overseas. 2.3. The Mature Export Stage  With the needed capital and expertise, domestic firms that have established overseas branches and subsidiaries may be in a better position to formalise their sales initiatives overseas by appointing a branch manager who is directly accountable to the home office, while the branch distributes the products overseas through intermediaries operating in foreign markets.  Depending on the resilience of the initiatives taken, such an international operation could eventually evolve into a sales subsidiary that is legally domiciled in the foreign country, thereby forming an autonomous sales branch.  The home country firm may decide to assemble and, eventually, manufacture the product overseas. This would lower costs, including transport costs, tariffs and the cost of labour. It is cheaper to export disassembled products than whole products, often thanks to lower transport and tariff costs on disassembled components. S - The study-notes marketplace Downloaded by: sohnehilscher | sohne@vod