Leeds Metropolitan University

International Business

Individual Assignment

Strategy, Structure, and Control of

Multinational Enterprises in International

Business Environments.

Student:

80

2.01.2007

Word Count:

3715

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Table of Content

List of Figures II

1 Introduction 1

1.1 Context 1

1.2 Focus 1

1.3 Globalisation 2

2 Environment 3

2.1 Internal

Environment 4

2.1.1 S.W.O.T.-Analysis 4

2.2 External

Environment 4

2.2.1 P.E.S.T.-Analysis 4

2.2.2

Porter′s Five Forces 5

3 Strategy 7

3.1 International

Strategy 7

3.2 Global

Strategy 8

3.3 Multidomestic

Strategy 9

3.4 Transnational

Strategy 10

4 Decision

Making 11

5 Organisational

Structures 13

5.1

Functional and Divisional Structures 13

5.1.1

International Division Structure 14

5.1.2

Area or Geographic Structure 15

5.1.3

Global Product Structure 16

5.1.4

Global Functional Organization 17

5.1.5 Matrix

Structure 18

6

Coordination and Control Systems 20

6.1 Control

Mechanisms 21

7 Case

Study 22

7.1 Case:

Nestlé 22

7.2

Case: Johnson & Johnson 23

8 Conclusion 25

Bibliography 26

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List of Figures

Figure 1-1: World FDI stock 1980-2002 1

Figure 2-1: Strategic Planning 3

Figure 2-2: PEST-Analyses 5

Figure 2-3: Five Forces 6

Figure 3-1: International Strategy 8

Figure 3-2: Global Strategy 9

Figure 3-3: Multidomestic Strategy 10

Figure 3-4: Transnational Strategy 11

Figure 4-1: Centralization v. Decentralization 12

Figure 5-1: International Division Structure 14

Figure 5-2: Area or Geographic Structure 15

Figure 5-3: Global Product Structure 16

Figure 5-4: Global Functional Structure 17

Figure 5-5: Matrix Structure 18

II

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1 Introduction

1.1 Context

In the last 25 years of the twentieth century companies faced strong competition caused by

technological revolutions, changing of product designs and manufacturing processes. Figure 1

indicates that FDI stock increased dramatically over the last decades. This implicates that

multinational enterprises (MNEs) increasingly engage in international operations in order to

create competitive advantages. Also governments are removing international restrictions and

try to establish a common market by approximating the economic policies especially in the

European Union.

World FDI stock 1980-2002

8.000.000

S

U
n

6.000.000

io
i
ll

4.000.000

m
in

2.000.000

0

1980

1985

1990

1995

2000

2002

Inward FDI stock

Outward FDI stock

Figure 1-1: World FDI stock 1980-2002

(Source : http://www.unctad.org)

1.2 Focus

This report focuses on the environment in which MNEs operate which determines the control

strategies. After explaining these strategies this report will investigate organisational

1

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structures and control mechanisms which enables companies to coordinate and control their

activities. In the last part the report will describe in a case study the strategies and structures

of two "global players": Nestle and Johnson & Johnson.

1.3 Globalisation

Nowadays the increasing "globalisation" forces companies to compete on global markets. The

aim of most enterprises is to make profits. Nationally focused companies that were not able

to access foreign markets quickly enough were forced to act under increasing pressure

threatening loss of market share or even acquisitions. The drivers of globalisation have

created for several companies competitive advantages, like economies of scale, technological

improvements, transferable marketing, global distribution channels and greater networking

(Wright, Burns, 1998). However, operating abroad causes coordination, integration, and

control problems. To survive in a steady changing environment companies have to adopt

appropriate strategies and adequate operational structures and match them to a coherent

configuration (Stewart, 2006 /07).

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2 Environment

Every company operates in a continuously changing environment. There are macro-

environmental forces which affects a company′s business. In other words a firm which enters

foreign markets is not only facing opportunities but also threatening certain risks. Therefore

experienced managers are required to view all factors, particularly the determinants of control

strategies and scan the surrounding environment of a firm′s business, before suggesting a

suitable strategy.

Figure 2-1: Strategic Planning

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