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LESSON 2:
WHY GO INTERNATIONAL?
of these companies in various countries. . live in the United States, were out headquarters is located.
vi) Adaptation: Global and transnational companies adapt American executives are more mobile. In addition, American
their products, marketing strategic and other functional have the drive and initiate we like. In fact, the European
strategies to the environmental factors of the market concerned, nationals would prefer to report to an American rather than to
For example, Mercedes Benz is a super luxury car in North so other European”.
America, luxury automobile in Germany, standard taxi in Company C: “We are a multinational firm. Our product
Europe. division executives have world w profit responsibility. As our
(vii) Extensions: Some products do not require any change organizational chart shows, the United States is just one region
when they are marketed in other countries. Their market is just o par with Europe, Latin America, Africa, etc. in each division”.
extension. For example, Casio calculators of Japan, Hero pens of The executives from company C go on to explain, “the
China, and BIC’s line of pens, butane lighters and razors. worldwide product division cone is rather difficult to imple-
ment. The senior executives in charge of these divisions have Ii
(viii) Creation through Extension: Transnational companies
overseas experience. They have been promoted from domestic
create the global brand through extending the product to the
posts and tend to view fore consumer needs as really basically
new market. Rothmans Cigarette extended its product to many
the same as ours. Also, product division executives tend focus
European countries and African countries and created it as
on the domestic market because the domestic market is larger
global and national basis
and generates more revenue than the fragmented foreign
(ix) Human Resource Management Policy: The markets. The rewards are for global performance, but strategy is
transnational company’s human resource policy is not restricted focus on domestic. Most of our senior executives simply do
by national political or legal constraints. It selects the best not understand what happens overseas and really do not trust
human resources and develops them regardless of nationality, foreign executives, even those in key positions”.
ethnic group etc. But the international company reserves the top
Company D (nonAmerican) : ‘We are a multinational firm.
and key positions for nationals
We have at least 18 nationalities represented at our headquarters.
(x) Purchasing: Transnational company procures world-class Most senor executives speak at least two languages. About 30
material from the best source across the globe. percent of our staff at headquarters is foreigners.
Tutorial He continues by explaining “since the voting shareholders must
Questions for Discussion by law come from the home country, the home country’s
interest must be given careful consideration. But we are proud
Q:1 what are the various reasons which motivates the domestic
of our nationality; we should not be ashamed of it. Infact,
firms to go for international business?
many times we have been reluctant to use homecountry ideas
Q:2 what are the stages of internationalization? overseas, to our detriment, especially in our U.S. Subsidiary. Our
Tutorial country produces good executives’ who tend to stay with us a
long time. It is harder to keep executives from the United
Case Discussion States.
Which Company is Truly Multinational? Questions for Discussion
Four senior executives of the world’s largest firms with 1. Which company is truly multinational?
extensive holdings outside the host country speak.
2. What are the attributes of a truly multinational
Company A: “We are a multinational firm. We distribute our company?
products in about 100 countries We manufacture in over 17
3. Why quibble about how multinational a company is?
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 most of
the key posts in our subsidiaries are held by homecountry
nationals. Whenever replacements for these men are sought, it
is practice, if not the policy, to look next to you at the head
office and pick someone (usually a ho country national) you
know and trust”.
Company B. “We are a multinational firm. Only 1 percent of
the personnel in our affiliate companies are nonnational. Most
of these are US executives in temporary assignments. In major
markets, the affiliates managing director is of the local national-
ity”. He continues, “Of course there are very few nonAmericans
in the key posts at headquarter. The few we have are so Ameri-
canized that we usually do not notice their nationality.