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Termpaper, 2006, 31 Pages
Author: Atilla Kibar
Subject: Economics / Business: Business Management, Corporate Governance
Details
Institution/College: Leeds Metropolitan University
Tags: Strategy, Structure, Control, Multinational, Enterprises, International, Business, Environments, International, Business
Year: 2006
Pages: 31
Grade: 74 / A (Excellent)
Bibliography: ~ 12 Entries
Language: English
ISBN (E-book): 978-3-638-04852-1
File size: 761 KB
Double spaced.
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Abstract
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 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. 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 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 (...)
Excerpt (computer-generated)
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
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
I
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
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
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).
2
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
3
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