THE GLOBAL ENVIRONMENT:

STRATEGIC CONSIDERATION FOR MULTINATIONAL FIRMS

CHECKLIST OF FACTORS TO CONSIDER IN CHOOSING A FOREIGN MANUFACTURING SITE

ECONOMIC FACTORS
Size of GNP and projected rate of growth Foreign exchange position Size of market for the firms product; rate of growth Current or prospective membership in a customs union.

POLITICAL FACTORS
Form and stability of government Attitude toward private and foreign investment by government, customers, and competition Practice of favored versus neutral treatment for state industries Degree of antiforeign discrimination.

CHECKLIST OF FACTORS TO CONSIDER IN CHOOSING A FOREIGN MANUFACTURING SITE

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GEOGRAPHIC FACTORS
Efficiency of transport (railways, waterways, highways) Proximity of site to export markets Availability of local material Availability of power, water, gas

LABOR FACTORS
Availability of managerial, technical, and office personnel able to speak the language of the parent company Degree of skill and discipline at all levels Presence or absence of militant or communist-dominated unions. Degree and nature of labor voice in management

CHECKLIST OF FACTORS TO CONSIDER IN CHOOSING A FOREIGN MANUFACTURING SITE

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TAX FACTORS
Tax-rate trends (Corporate & personnel income, capital, withholding, turnover, excise, payroll, capital gains, customs, and other indirect and local taxes) Joint tax treaties with home country, and others Duty and tax drawbacks when imported goods are exported Availability of tariff protection.

CAPITAL SOURCE FACTORS

Cost of local borrowing Local availability of convertible currencies Modern banking systems Government credit aids to new businesses

CHECKLIST OF FACTORS TO CONSIDER IN CHOOSING A FOREIGN MANUFACTURING SITE

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BUSINESS FACTORS
State of marketing and distribution system Normal profit margins in the firms industry Competitive situation in the firms industry; do cartels exist? Availability of amenities for expatriate executives and their families.

REASONS FOR GLOBAL STRATEGIC PLANNING

The increased scope of the global management task
Growth in the size & complexity of global firms need a coordinated action plan.

The increased globalization of firms

Difference among the environmental forces in difference countries Greater distance The interrelationship of global operations

The information explosion

The worlds stock of knowledge is doubling every ten years

REASONS FOR GLOBAL STRATEGIC PLANNING

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The increase in global competition

Firms must constantly adjust to changing conditions and to search for methods of increasing efficiency and economy

The rapid development of technology

Shortened product life cycle

Strategic management breeds managerial confidence

Simplify the managerial jobs

INTERNATIONAL STRATEGY OPTIONS

High

High Foreign investment with extensive coordination among subsidiaries

Global Strategy

Coordination of activities
Country-centered strategy by multinationals with a number of domestic firms operating in only one country Export-based strategy with centralized marketing

Low

Geographically dispersed

Geographically concentrated

Location of activities

INTERNATIONAL STRATEGY OPTIONS

High
Joint Venture Foreign Branch Foreign Subsidiaries

Product Diversity

Licensing/Contract Manufacturing

Joint Venture

Foreign Branch

Export

Licensing/Contract Manufacturing

Joint Venture

Low Market Complexity

High