CHAPTER: 8

1. What particular conditions that MNCs face in emerging markets may require
specialized strategies? What strategies might be most appropriate in response? How might
a company identify opportunities at the “base of the pyramid” (i.e., low-income markets)?
Answer: Particular conditions that MNCs face in emerging markets may require specialized
strategies as there are exceptional risks due to their political and economic volatility and their
relatively underdeveloped institutional systems. These risks show up in the following conditions.
1. Corruption,
2. Failure to enforce contracts,
3. Red tape and bureaucratic costs,
4. General uncertainty in the legal and political environment
MNCs must adjust their strategy to respond to these risks. For example, in these risky markets, it
may be wise to engage in arm’s-length or limited equity investments or to maintain greater
control of operations by avoiding joint ventures or other shared ownership structures. In other
circumstances, it may be wiser to collaborate with a local partner who can help buffer risks
through its political connections.
A group of researchers and companies have begun exploring the potentially untapped markets at
the base of the pyramid (BOP). They have found that incremental adaptation of existing
technologies and products is not effective at the BOP and that the BOP forces MNCs to
fundamentally rethink their strategies. The BOP may also be an ideal environment for incubating
new, leapfrog technologies, including “disruptive” technologies that reduce environmental
impacts and increase social benefit such as renewable energy and wireless telecom.
A company can identify opportunities at the “base of the pyramid” (low income market) by-
1. Collaboration and making alliances with nonprofit nongovernmental organizations
(NGOs) can be a means to jump-start market entry in BOP markets.
2. Targeting low income consumers through innovative strategy and marketing.
3. Following a distinct distribution strategy.
4. Making and packaging products in small portion for budget friendly market consumers.

2. What conditions have allowed some firms to be born global? What are some examples of
born global companies?
Answer: A born global firm is a business organization that, from inception, seeks to derive
significant competitive advantages from inception, seeks to derive significant competitive
advantage from the use of resources and the sale of outputs in multiple countries. Many
researchers found some conditions that are driving some firms to be born global. Because the
born global firms are posing the following benefits-
1. Born global companies pose innovative culture, as well as knowledge and capabilities.
2. Successful born-global firms leverage a distinctive mix of orientations and strategies that
allow them to succeed in diverse international markets.
3. Born-global firms tend to survive longer than other seemingly global companies.
4. Brought into the world global firms have a worldwide intrigue and focus on the broadest
arrangement of clients and are driven by quick-moving preferred position as far as
adaptability with respect to buyer inclinations and conduct. Their readiness and
adaptability assist them with serving both unfamiliar and residential clients better.
Some examples of born global companies-
 Amazon
One clear example of a born-global firm is California-based Amazon.com. Like most
U.S. Internet firms, Amazon.com has been able to distribute its products and services on
an international scale from the outset.
 E*Trade
Another example is New York–based online trading and investing services E*Trade was
able to bring in revenues from 33 countries in only three years. It allows customers to
actively participate in their investments while offering multilingual technical and
professional customer support.
 Fiweex and Platzi
Fiweex and Platzi are just two examples of born global firms. These firms do not seek to
follow the traditional growth paths taken by multinationals like IBM or Siemens, They
either start with a regional or global presence or acquire one in very little time. They are
small firms that seek to meet the needs of customers in a global niche.
 Skype
Skype is another born global company which shows potential for development and
distinct outline.
 Zara and htc
Zara and htc are other born global companies that are doing great in market because of its
leverage of technology for design, production and supply chain management.
 CHAPTER: 9

1.One of the most common entry strategies for MNCs is the joint venture. Why are so
many companies opting for this strategy? Would a fully owned subsidiary be a better
choice?
Answer: A joint venture (JV) can be considered a specific type of alliance agreement under
which two or more partners own or control a business. An international joint venture (IJV) is a
JV composed of two or
more firms from different countries. Alliances and joint ventures can take a number of different
forms, including cross-marketing arrangements, technology-sharing agreements, production-
contracting deals, and equity agreements. In some instances, two parties may create a third,
independent entity expressly for the purpose of developing a collaborative relationship outside
their core operations. Just like mergers and acquisitions, alliances and joint ventures can pose
substantial managerial challenges. Most MNCs are more interested in the amount of control they
will have over the venture rather than their share of the profits. Similarly, local partners feel the
same way, which can result in problems. Nevertheless, alliances and joint ventures have become
very popular in recent years because of the significant operational benefits they offer to both
parties. Some of the most commonly cited advantages include-
1. Improvement of efficiency
The creation of an alliance or JV can help the partners achieve economies of scale and scope that
would be difficult for one firm operating alone to accomplish. Additionally, the partners can
spread the risks among themselves and profit from the synergies that arise from the
complementary resources.
2. Access to knowledge
In alliances and JVs, each partner has access to the knowledge and skills of the others. So one
partner may bring financial and technological resources to the venture while another brings
knowledge of the customer and market channels.
3. Mitigating political factors
A local partner can be very helpful in dealing with political risk factors such as a hostile
government or restrictive legislation.
4. Overcoming collusion or restriction in competition
Alliances and JVs can help partners overcome the effects of local collusion or limits being put
on
foreign competition by becoming part of an “insider” group.
2. In what way do the concepts of formalization, specialization, and centralization have an
impact on MNC organization structures? In your answer, use a well-known firm such as
IBM or Ford to illustrate the practical expressions of these three characteristics.

Formalization
1. Formalization is the use of defined structures and systems in decision making,
communicating, and controlling. MNCs now realize there are two dimensions of
formality-informality that must be considered: internal and external.
2. These networking relationships is that each places a different set of demands on the
MNC. In particular, external networking with joint-venture partners often involves
ambiguous organizational mandates, less emphasis on systems and more on people, and
ambiguous lines of authority. External networking characteristics, where formality is
much stronger than informality and the enterprise can rely on a shared vision, clear
organizational mandates, and well-developed systems and lines of authority.
Specialization
1. As an organizational characteristic, specialization is the assigning of individuals to
specific, well-defined tasks. Specialization in an international context can be classified
into horizontal and vertical specialization.
2. Horizontal specialization assigns jobs so that individuals are given a particular function to
perform, and people tend to stay within the confines of this area. Vertical specialization
assigns work to groups or departments where individuals are collectively responsible for
performance.
3. Vertical specialization also can result in greater job routinization. Because one is
collectively responsible for the work, strong emphasis is placed on everyone’s doing the
job in a predetermined way, refraining from improvising, and structuring the work so that
everyone can do the job after a short training period. Japanese organizations make much
wider use of job routinization than do U.S. organizations.
Centralization
1. Centralization is a management system in which important decisions are made at the top.
In an international context, the value of centralization will vary according to the local
environment and the goals of the organization.
2. Many U.S. firms tend toward decentralization, pushing decision making down the line
and getting the lower-level personnel involved. German MNCs have been very successful
with such a decentralization strategy. In some cases, large firms have also been very
successful using a decentralized approach.
3. The Japanese manage to maintain strong control over their lower-level personnel by
limiting the amount of authority given to the latter and carefully controlling and
orchestrating worker involvement and participation in quality circles.
Features of Ford Motor Company’s Organizational Structure
Ford’s organizational structure is based on the need to control operations according to regional
market conditions. Markets belonging to the same region have similarities used as basis for
regional structuring. The following are the main features of Ford Motor Company’s
organizational structure:
1. Corporate hierarchy
2. Regional geographic divisions
3. Global functional groups
Corporate Hierarchy- Ford has a traditional corporate hierarchy in its organizational structure.
For example, Executive Vice Presidents report to CEO Mark Fields. Middle managers report to
these executive VPs. This characteristic of Ford’s organizational structure supports traditional
business management approaches that aim for effective top-down control.
Regional Geographic Divisions- Ford has large geographic divisions in its organizational
structure. Typically, global companies divide their operations into several regions per continent
or subcontinent. However, Ford’s organizational structure is divided into only three regional
geographic divisions that cover all its markets around the world. A potential effect of this feature
of the organizational structure is the relative ease of integration of business strategies. Ford’s
main regional geographic divisions are (a) The Americas, (b) Europe, Middle East, and Africa,
and (c) Asia Pacific. An executive VP heads each division.
Global Functional Groups- Ford Motor Company’s organizational structure also has functional
groups, each of which represents a specific business function. A Vice President heads each of
these groups.