Luiss
Libera Università Internazionale
degli Studi Sociali Guido Carli
International Business and Management
Master Course in Strategic Management
Antonio Majocchi – Instructor
Gabriele Galli - TA
Slides 1
Course information, data and trend on internationalization
Overview, Formats, Requirements, Assignments, Exams,
and Grades
What are you going to learn?
The main topics covered in the course are the following:
1. Introduction to international management and multinational
corporations (MNCs): definitions, data and trends (slides 1)
2. Entry mode strategies (slides 2)
3. The theory of Foreign direct investments: FDIs (Slides 3)
4. The international strategies options (Slides 4)
5. The organizational structures of MNCs (Slides 4)
6. Control in MNCs: case studies and best practices (Slides 5)
4
A tentative Time Table
• The course blends theory, case
studies discussions, applications
and presentations
• 3 mini-assignments: prepare 4-5
slides to present an issue
discussed in class
• Amplifon Business case
• Please refer to Luiss Learn
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Compulsory reading for attending students
Students will be asked to study the slides and the carefully read the
following 2 texts:
• Economics of Strategy, D. Besanko; D. Dranove; M. Shanley and S.
Schaefer, Sixth Edition; Chapter 3 and 4. Reading of chapter 2 is also
suggested (suggested means that is not compulsory)
• How bundling benefit sellers and buyers by "CDixon blog"
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Suggested Readings
Suggested readings are readings that are not compulsory but helps to
understand and exemplify the topics and the issues discussed in class.
1. Besanko et al. Chapter 2
2. Press news (mainly from the FT) of firm strategy
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Assessment Method
• Students’ evaluation will be based on three different criteria:
- 3 small assignments (20% of the final evaluation)
- the Amplifon business case (40 % of the final evaluation)
- final written exam (40% of the final evaluation).
• In order to test their knowledge, students will have the opportunity,
during the course, to use a dedicated app. Students regularly using of the
app are eligible for a “cum laude”
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Small assignments
• Small assignments are group works where students should present 5-6
slides on a specific topic
• For these assignment you are free to define the group components as you
want. Group should not exceed 4 components. Larger groups are not
admitted
• Group composition should be the same for all three assignments
• In order to avoid Free-riding behaviors: peer review valuation will
complement instructor evaluation
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Small assignments
• Groups must be defined in the first week: please send the groups
composition to the course TA (ggalli@luiss.it)
• Each group should present at least once (presentations are scheduled for
Thursday lectures)
• Each member of the group should be ready to present for the all group
• Which group present will be decided by me
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Amplifon Assignement
• The Amplifon assignement counts for 40% of the final grade. Three
Steps
1. Amplifon mangers will present the challenge (online): 23 February
Kick-off meeting
2. Q&A with Amplifon managers: March 16th
3. Final presentation of best assignment: April 29th
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Amplifon Assignment
• Every assignment (Amplifon & mini-assignments) will be introduced by a
lecture by me
• A dedicated seminar on how to collect data, report a bibliography, avoid
plagiarism, quote correctly will be scheduled in cooperation with the
library. The lecture is optional
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Non-attending students • World Investments Report 2020 – (annual report). From:
www.unctad.org Chapter 1
• World Investments Report 2011 – (annual report). From:
Non attending students do not www.unctad.org. Chapter 4 pg. 124-147
have to deliver assignments • Economics of Strategy, D. Besanko; D. Dranove; M. Shanley and
S. Schaefer, Sixth Edition; Chapter 3 and 4 (Suggested also Ch. 2)
They can still sustain the exam • Bartlett, Christopher A. & Sumantra Ghoshal. 1987a. Managing
across borders: New strategic requirements. Sloan Management
but they should study the slides Review, 28: 7-18.
and the following texts (both • Bartlett, Christopher A. & Sumantra Ghoshal. Organizing for
Worldwide Effectiveness: The Transnational Solution
compulsory) California management review, 10/1988, Volume 31, Fascicolo 1
• Using the Balanced Scorecard as a Strategic Management
The exam will count for 100% of System, R.S. Kaplan and S.P Norton, Harvard Business Review
(available on the web)
the final evaluation
• How bundling benefit sellers and buyers by "CDixon blog"
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What are we going to learn?
A laptop production map
Source: https://open.sourcemap.com
The “Vans” production map
“Vans” production map Anche i semplici prodotti richiedono una global value
chain. È necessario coordinare attività in tutto il
mondo. In questa global value chain, ci sono molti
processi che vengono coordinati simultaneamente.
The ****** production map
Key dimensions in international production 3 DIMENSIONS, or CRITERIA
“The term “value chain”
can be a misnomer –
many production
processes are “spiders”
rather than “snakes”, (trasferire uno dei
processi di produzione
with intermediate inputs in un altro paese)
or components coming
from many directions to
be integrated or
assembled into final
products.” (Unctad, 2020: 129)
Source: World Investment Report 2020. Available at: https://unctad.org/
Some necessary definitions and measurements
Modified Model of the Value Chain 21
Organisation
Management Control and Information Management
Processes
Human Resource Management
Finance/Taxation
Supply Chain Processes
Core Sourcing Logistics Operations
Processes
Demand Processes
Research & Development Marketing
Source: Adapted by Support Processes
Zentes/Swoboda/
Morschett 2004.
A definition of MNC
• MNC is a company that carry out (any) value added activities in more
than one country.
• An enterprise:
• comprising entities in 2 or more countries, regardless of the legal form and fields of
activity of those entities,
• which operates under a system of decision-making permitting coherent policies
and a common strategy through one or more decision-making centers,
• in which the entities are so linked, by ownership or otherwise, that one or more of
them may be able to exercise a significant influence over the activities of the others,
and, in particular, to share knowledge, resources and responsibilities with others”
(UN 1984, p. 2; Bartlett/Ghoshal 2000, p. 3)
Definition of a subsidiary
The term subsidiary is used for any organisational unit of a MNC in a
foreign country:
• „A subsidiary is defined as any operational unit controlled by the MNC and situated
outside the home country“ (Birkinshaw/Hood/Johnsson 1998, p. 224).
• „subsidiary is any value-adding unit outside the home country – a sales unit, an
R&D-centre, or a manufacturing plant” (Birkinshaw 2001, p. 390).
Cross-border capital flows
FDIs
Source: World Investment Report 2019. Available at: https://unctad.org/
FDIs measurement problems
“The dividing lines between FDI and other types of flows are becoming
increasingly blurred:
• FDI contains components that behave like portfolio flows. They can be relatively short
term and volatile
• Portfolio equity flows can be used for FDI-like purposes. MNEs can acquire long-term
strategic stakes in foreign enterprises, with a measure of control (even if below the 10
per cent threshold)
• Flows used for identical purposes can be classified differently depending on how funds
are transferred across borders (WIR 2018: pg. 11)”
FDIs Stock and Flows – Inflow and Outflow
There are 4 different angles in FDIs statistics:
1. Stock refers to the value of net asset at a point in time
2. Flow refers to the change in value during a period
3. Inflow (stock and flows): investments direct to a specific geographical area
4. Outflow (stock and flows): investments from a specific geographical area
How FDIs are measured?
Source: World Investment Report 2019. Available at: https://unctad.org/
Is internationalization a relevant phenomenon?
Data, trends and future perspectives
How big are MNCs: Unilever
• € 51 billion turnover in 2018 in more
than 190 countries
• 58% of the business is in emerging
markets
• 12 brands have sales of more than €1
billion a year
• 161,000 people work for Unilever
Some numbers from FDI Markets
• In 2017, the top 100 global MNEs’ foreign operations represented 9% of
world foreign assets, 17% of world foreign sales and 13% of foreign
employment.
• Some 80 per cent of global trade is linked to the international production
networks of MNEs.
• The combined value added generated by MNEs in their home countries
and foreign affiliates amounts to about a quarter of global GDP and about a
third of private sector output.
Source: WIR; various years
Source: World Investment Report 2011. https://unctad.org/
The role of MNCs
The Long Term Trend
The pandemic effect
“The 1,000 largest global
MNEs and their suppliers
own more than 12,000
facilities (factories,
warehouses and other
operations) in the areas first
hit by mobility restrictions
(Hubei in China, Italy and
the Republic of Korea).”
(UNCTAD, WIR, 2020: pg 127)
Source: World Investment Report 2020. Available at: https://unctad.org/
Some key numbers
FDIs Inflow
FDIs look for cheap labour, but the data tells us that investments do not
look only for cheap labour, because in the high income countries the
wages are very high. So the cheap labour is NOT the main driver.
Source: World Investment Report 2019. Disponibile da:
https://unctad.org/
Inflows: Top host economies
(Target countries)
(top investors)
Outflows: top source economies
USA are big receivers and big investors
Greenfields and M&A The average value of a M&A is much more larger than the average value of greenfield, because in
the firt case you have to buy all the company (the field, the brand, the assets…) and not only the
“field”.
Source: World Investment Report 2020. https://unctad.org/
By sector
Internationalization trends of the largest MNEs
“In 2019, the internationalization rates of the top 100 MNEs remained
flat.
Falling rates among heavy industrial MNEs were offset by increases
among technology and telecommunication MNEs. Pharmaceutical
companies also expanded operations abroad, with GlaxoSmithKline
(United Kingdom) gaining 27 positions in the ranking as a result of deals
concluded in 2018; namely the acquisition of its share of a joint venture
with Novartis AG (Switzerland) for $13 billion and the acquisition of
Tesaro (United States) for $4.3 billion.
Internationalization trends of the largest MNEs
Other companies that made a significant increase in their foreign operations
included Amazon.com (United States), which continued to enter new
markets; Coca-Cola (United States), which expanded its production
network in Africa and entered the European coffee market;
pharmaceutical company Sanofi (France), which acquired biopharma
companies in the United States; and the technology company Huawei
(China), which continued to expand its global operations albeit at a slower
rate than in 2018. “ (Unctad 2021: pg. 23)
Internationalization trends of the largest MNEs
• The trend towards a stronger role for tech and digital firms in the top 100
thus continues. They included five emerging-market companies: Hon Hai
(Taiwan Province of China), Samsung (Republic of Korea), Tencent
(China), Huawei (China) and Legend Holding (China).
• The new entries from China were among the fastest companies to
internationalize their operations and pushed the industry average up. “
(Unctad 2021: pg. 24)
Digital technologies favouring asset-light forms of international production?
The smiling curve of value added
Testo
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Source: Adapted from Mudambi, 2007
Top investors in R&D
The State Owned MNCs
What’s next?
An example of the impact of the new technologies in the automotive industry
• The industry is highly GVC intensive, with complex networks of OEMs and
multiple layers of suppliers operating in many locations.
• 15 economies are major automotive hubs (88% of global production)
• The drivetrain for an average internal combustion engine has more than
2,000 moving parts, while EVs have 20…EV supply chains involve far
fewer suppliers. e
s
t
Q&A
