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Negotiations between Host Governments and MNEs

Home and host countries evaluate business propositions of  Multinational Enterprises (MNEs) from their points of view. The evaluation relates to size, place, product, price, process, people and partnership related issues. Negotiations are take place between MNEs and host government whenever consensus is not reached on major issues. Here comes the importance of business-government relationships. The business negotiations and diplomacy between companies and governments determine the terms of international business operations.

MNEs attitude to Governmental Stipulations

Multinational Enterprises (MNEs)  attitude to Governmental Stipulations may be one of complying. This is highly positive. In a hierarchical view of governmental authority, companies accept regulations as ‘givens’, and MNEs comply with.… Read the rest

Abey Francis

Decentralized Decision Making in Multinational Enterprises

Where does the decision making power in Multinational Enterprises (MNEs) rests? Is the decision power vested with the parent’s headquarters or with the subsidiary? Decisions made at the foreign-subsidiary level may be considered decentralized, while those made above the foreign-subsidiary level, that is the parent level, are considered centralized. The location of decision making power may vary within the same company over time as well as by product, function, and country. In addition, actual decision making is seldom as one-sided as it may appear. A manager who has decision-making authority may consult other managers before exercising that authority.

Centralized decision making is a global strategy while decentralized decision making is a multi-domestic strategy.… Read the rest

Abey Francis

Structural Design of Multinational Enterprises(MNEs)

Organizational structure gives the framework or lines of communication, authority, responsibility and accountability. Organizational structure specifies the firm’s reporting relationships, procedures, controls and authority and decision processes. It is a critical component of effective strategy implementation process. Organizational structure provides for specialization and interfaces among specializations for collaborative synergism and competitive dynamism. For Multinational Enterprises(MNEs) deciding the organization structure is very important because it cannot be the same for all units and at the same time cannot be just one design for all. Whatever the design, it must be organic enough to adapt to situations. The structure must have stability to facilitate day to day activities to go on consistently and flexibility to facilitate taking advantage of opportunities that environment throws up.… Read the rest

Abey Francis

Managing Political Risk in International Business

Political environment could involve a risk to businesses, domestic and foreign. Such risk is called political risk. Political risk is that perception by the businesses that their interests will get deteriorated when certain political upheaval happens. Political risk can occur in both democracies as well as in the totalitarian set ups as well.

Political Risks are of different types. There are micro and macro political risks. Micro political risk is the one that affects a particular firm or class of firms. Usually firms owned by one class of businessmen, say, the foreigners from certain country, a particular business family or region/state.… Read the rest

Abey Francis

Forex Operational Risk Management through Production Management

There are four production related strategies available to deal with foreign exchange operational risk. These are input-mix, plant location, relocation of production and cost cutting.

  1. Input-mix: Global sourcing is a great strategy to deal with operating risk. In a survey of 152 manufacturing companies world over, the Machinery and Allied Products Institute, a research firm, found that 77% of them had increased their global sourcing since the rise of the dollar, which rises dollar cost. This is as it should be. The principal effect of a real exchange rate change is to change the price of domestically produced goods relative to foreign goods.
… Read the rest
Abey Francis

Forex Operational Risk Management through Marketing Management

Operating risk in foreign exchange operations can be negotiated ably through marketing management strategies as well. These are: market selection, product strategy, pricing strategy and promotion strategy.

Market Selection:

Impact of exchange rate fluctuations on operating profit can be dealt through right mix of markets. Major strategic operations for an exporter are the markets in which to sell and the relative marketing support to devote to each market. Marketing management must take into account its economic risk and selectivity, adjust the marketing support, on a nation-by-nation basis, to maximize long-term profit. From the perspective of non-US companies, the strong U.S. dollar is a golden opportunity to gain market share at the expense of their U.S… Read the rest

Abey Francis