CASE 9

Two Senior executives of world’s largest firms with extensive holdings outside the home country speak.
Company A : “We are a multinational firm. We distribute our products in about 100 countries. We
manufacture in over 17 countries and do research and development in three countries. We look at all new
investment projects both domestic and overseas using exactly the same criteria”.
The execution from company A continues, “ of course the most of the key ports in our subsidiaries are held by home country nationals. Whenever replacements for these men are sought, it is the practice, if not the policy, to look next to you at the lead office and pick some one (usually a home country national) you know and trust”.
Company B : “ We are multinational firm. Our product division executives have worldwide profit
responsibility. As our organisational chart shows, the united states is just one region on a par with Europe,
Latin America, Africa etc, in each division”.
The executive from Company B goes on to explain, “the worldwide Product division concept is rather difficult to implement. The senior executives incharge of this divisions have little overseas experience. They have been promoted from domestic ports and tend to view foreign consumers needs as really basically the same as ours. Also, product division executives tend to focus on domestic market, because it generates more revenue than foreign market. The rewards are for global performance, but strategy is to focus on domestic. Most of the senior executives simply do not understand what happens overseas and really do not trust foreign executives, even those in key portions?

Questions :

1 Which company is truly Multinational ? Why?
2 List three differences between Company , Multi National company and Trans Multi National Company ?

Answer

1 Which company is truly Multinational ? Why?

A Truly Multinational Company

The Axel Johnson Institute, the predecessor to Nordic Water, was founded as early as in the beginning of thesixties in Nynäshamn. It was an exceptional institute, as it was privately owned. From the beginning the businessconcept was clean water. Here they should develop, design, manufacture and deliver machines and equipment for water and wastewater treatment.  It appears to have been an excellent business idea. At the Institute they were innovative and soon they obtained patents for a number of products which were exported under the name of Axel Johnson Engineering with greatsuccess. The business was doing well and soon we became leaders on the international market. A position whichwe have managed to keep over the years.The company has developed and changed in many ways but it has always adhered to the original business idea.Today our name is Nordic Water and our head-office is in Göteborg. Besides we have offices and servicedivisions in Nynäshamn, Mariestad, Klippan and Hanhals. Our main market is outside Scandinavia. So far wehave offices in Norway, Germany, The Netherlands, Spain and China.We may not be the biggest but we are world leaders when it comes to water purification From the standpoint of the multinational marketer, the differences between nations overseas are great. In the past, these differences generally led a U.S. company to view its strategy in each country strictly as a local problem. However, in recent years the situation has been changing, and the experiences of a growing number of multinational companies suggest that there are real potential gains to consider in standardizing various elements of the marketing programs used in different areas. These gains range from substantial cost savings and more consistent dealings with customers to better planning, control,and exploitation of ideas with universal appeal.

One of the most widely discussed developments of the past decade has been the emergenceof

multinational companies as important competitors in an ever-growing number of industries. As thetrade barriers in Western Europe and elsewhere have diminished, more and more companies have foundattractive opportunities for expansion in countries other than their traditional home markets. For some ofthese companies, operations abroad have become so extensive and so complex as to require significantchanges in organization and operating methods. The problems confronting management in a trulymultinational company are clearly different in degree, if not in kind, from those of traditional firms.

At a time when most CEOs would be drawing their retirement plans, Sundram Fasteners’ (SFL) CMD SureshKrishna, 67, is busy plotting the company’s growth strategy. Over the next five years, his target is to take SFLand its associate companies’ turnover from Rs 800 crore this fiscal to Rs 2,000 crore.Naturally when I met him, my question was: Forty four years of hard work at SFL, what keeps you going? Hisreply was: Set a target, achieve it and keep raising the bar to prevent complacency from setting in.A look back at the history of SFL reveals how Mr Krishna not only set bigger and bigger targets but moreimportantly, looked at the big picture to transform SFL into where it is today. Production facilities in three countries with the fourth likely to commence manufacturing soon in China; an export market that encompassesover 15 countries and a quality.

We tend to read the following terms and think they refer to any company doing business in anothercountry.

•Multinational

•International

• Transnational

•GlobalAndrew Hines over atBNET has brief and clear definitions of each of these terms, Get your international business terms right.Each term is distinct and has a specific meaning which define the scope and degree of interaction withtheir operations outside of their “home” country.

•International companies

are importers and exporters, they have no investment outside of theirhome country.

•Multinational companies

have investment in other countries, but do not have coordinated productofferings in each country. More focused on adapting their products and service to each individual localmarket.

•Global companies

have invested and are present in many countries. They market their productsthrough the use of the same coordinated image/brand in all markets. Generally one corporate officethat is responsible for global strategy. Emphasis on volume, cost management and efficiency.

•Transnational companies

are much more complex organizations. They have invested in foreignoperations, have a central corporate facility but give decision-making, R&D and marketing powers toeach individual foreign market.Andrews’s advice is if in doubt about the right term to use, try the generic term

“international business”

.

A

Multinational Corporation

(MNC)

is a corporation with extensive ties in international operations in more thanone foreign country. Examples are General Electric, Exxon, WalMart, Mitsubishi, Daimler Chrysler, etc...A

Transnational Corporation

is a MNC that operates worldwide without being identified with a national homebase. It is said to operate on a border less basis