...Moving Headquarters Overseas MBAA 604 – International Business Administration Embry – Riddle Aeronautical University April 10th, 2015 Instructor Dr. Thomas O’Meara Table of Contents Introduction 3 Case Discussion Questions 4 Summary 7 References 9 Introduction The following case study examines the decision by a multinational enterprise (MNE) to relocate its businessunit and/or corporate headquarter(HQ) overseas.The next section will answer the case discussion questions related to the benefits and drawbacks associated to moving unit and corporate HQ to another country. Case Discussion Questions 1. What are the drawbacks and benefits associated with moving business unit and corporate HQ to another country? According to the closing case, the benefits associated with moving business unit and corporate HQ(headquarters) to another country must significantly outweigh their drawbacks. At the business unit level, it is likely to achieve efficiency gains by moving business unit HQ closer to the center of gravity of the business. The greater the percentage of business activities (sales units, manufacturing units) overseas, the greater the likelihood of business unit headquarters moving overseas. It makes more effective interaction between the different unit activities and encourages development of firm’s core competence. According to Peng, there are five strategic advantages at the corporate level. First, the firm becomes a global player. Second, stakeholders...
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...In moving some of the headquarters from United States, GE is trying to escape the sluggish domestic spending in US hence turning more of their focus in overseas to get hold of the increasing demand for its products. The current state of the US economy is uncertain making it worth the while for multinationals to shift some of their headquarters to other more potential parts of the world. Additionally, the company has had the advantage of increased revenues as a result of the dynamism of the Asian economies making it shift some of its jet engine headquarters to India and China who are the main purchasers of the same. Again, compared to the US market, the Asian market in china and India has huge investments in infrastructure mainly in Airports, Railways and power stations. With this advantage, analysts have it that by 2012, the company will generate 55 to 60 percent of international business. This is therefore a means of achieving the true multinational or global company image. By GE moving some of its headquarters to foreign countries they are trying to achieve a closer relationship with the people and government of the country. In many cultures like China, it is necessary to have great level of cultural sensitivity in order to be successful. This is very difficult for outsiders to obtain, so by having a local office you can gain this by bringing people of that culture into the company. By getting to know the culture and customs of the country GE would be less likely to make...
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...55 to 60 percent of its business internationally. When GE was led by Jack Welch, to reach the goal, he sanctioned an aggressive and often opportunistic foreign direct investment strategy. In present, under the leadership of Jeffery Immelt, GE is moving towards seeing a more global corporation with an interest. The expansion of GE is mainly powered by dynamics economies of Asia. Question 1 GE has invested so aggressively in foreign expansion is due to the fact that they want to achieve their main goal which was to be number 1 or 2 globally in every business in which it participate. They took opportunities to exploit countries which having economic downturn. For example, in Europe from 1989 to 1995, they manage to invest $17.5 billion in the region, half of which was used to acquire some 50 companies; in 1995, when the Mexican peso collapsed in value, they purchase companies throughout Latin America; and during the economic crisis in Asian currency markets in 1997 and 1998, which led to the company spend $15 billion on acquisition within six months in Japan only. As a result, by the end of Welch’s tenure in 2001, their international sales revenues increase from 20 percent until 40 percent. Question 2 By moving some of the headquarters of its global business to foreign locations,...
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...Globalization at General Electric Case Directions: Develop a detailed corporate profile and address the questions in the case. General Electric, the company that Thomas Edison founded, and now the largest industrial conglomerate, in America produces a wide array of goods and services, from medical equipment, power generators, jet engines, and home appliances, to financial services and even television broadcasting (GE owns NBC, one of America’s big three network broadcasters). This giant company with revenues close to $180 billion is no stranger to international business. GE has been operating and selling overseas for decades. During the tenure of the legendary CEO Jack Welch, GE’s main goal was to number 1 or 2 globally in every business in which it participated. To further this goal, Welch sanctioned an aggressive and often opportunistic foreign direct investment strategy. GE took advantage of economic weakness in Europe from 1989 to 1995 to invest $17.5 billion in the region, half of which was used to acquire some 50 companies. When the Mexican peso collapsed in value in 1995, GE took advantage of the economic uncertainty to purchase companies throughout Latin America. And when Asia slipped into a major economic crisis in 1997-1998 due to turmoil in the Asian currency markets, Welch urges his managers to view it as a buying opportunity. In Japan alone, the company spent $15 billion on acquisition in just six months. As a result, by the end of Welch’s tenure in 2001, GE...
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...Globalization at General Electric Case Directions: Develop a detailed corporate profile and address the questions in the case. General Electric, the company that Thomas Edison founded, and now the largest industrial conglomerate, in America produces a wide array of goods and services, from medical equipment, power generators, jet engines, and home appliances, to financial services and even television broadcasting (GE owns NBC, one of America’s big three network broadcasters). This giant company with revenues close to $180 billion is no stranger to international business. GE has been operating and selling overseas for decades. During the tenure of the legendary CEO Jack Welch, GE’s main goal was to number 1 or 2 globally in every business in which it participated. To further this goal, Welch sanctioned an aggressive and often opportunistic foreign direct investment strategy. GE took advantage of economic weakness in Europe from 1989 to 1995 to invest $17.5 billion in the region, half of which was used to acquire some 50 companies. When the Mexican peso collapsed in value in 1995, GE took advantage of the economic uncertainty to purchase companies throughout Latin America. And when Asia slipped into a major economic crisis in 1997-1998 due to turmoil in the Asian currency markets, Welch urges his managers to view it as a buying opportunity. In Japan alone, the company spent $15 billion on acquisition in just six months. As a result, by the end of Welch’s tenure in 2001, GE...
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...to exploit? General Electric CEO main goal was to be number 1 or 2 globally for one reason. Also General Electric also sees foreign expansion as a great way to capitalized abroad. Also international revenues grow faster than domestic revenue. 2. What is General Electric trying to achieve by moving some of the headquarters of its global businesses to foreign locations? How might such moves benefit the company? Do these moves benefit the United States? 3. What is the goal behind trying to “internationalize” the senior management General Electric ranks General Electric? What do you think it means to “Internationalize” these ranks? 4. What does the General Electric example tell you about the nature of true global business? Company name/corporate headquarters location Company size (number of employees) Description of products/services Description of manufacturing operations - how and where the products/services are produced Description of marketing activities Where the company advertises and promotes its products/services The type of marketing the company emphasizes (newspaper, TV, magazine advertising, etc.) Identify where the company's corporate headquarters are located and how many people the company employs. History of the company (When was the company founded and by whom?) What are the major events in its history and when did they occur (major events pertain to key developments in the company's growth, major acquisitions/mergers, important...
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...Implementing Strategy in Companies That Compete Across Industries and Countries 13 - 1 Managing Corporate Strategy Through the Multidivisional Structure • Functional or product structures are not sufficient when a company enters new industries • Multidivisional structure innovations – Divisions (operating responsibility) – Corporate headquarters staff to monitor divisions (strategic responsibility) – Each division may be organized 13 - 2 Multidivisional Structure 13 - 3 Advantages of a Multidivisional Structure • • • • Enhanced corporate financial control Enhanced strategic control Growth Stronger pursuit of internal efficiency 13 - 4 Problems in Implementing a Multidivisional Structure • Establishing the divisional-corporate authority relationship • Distortion of information • Competition for resources • Transfer pricing • Short-term R&D focus • Duplication of functional resources 13 - 5 Structure, Control, Culture, and Corporate-Level Strategy • Unrelated diversification – Easiest and cheapest strategy to manage – Allows corporate managers to evaluate divisional performance easily and accurately – Divisions have considerable autonomy – No integration among divisions is necessary 13 - 6 Structure, Control, Culture, and Corporate-Level Strategy (cont’d) • Vertical integration – More expensive than unrelated diversification – Multidivisional structure provides necessary controls to achieve benefits from the control of resource transfers...
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...18 Marks) International relocation has suggested the proposal of moving premises overseas. Andrew suggests that moving all production overseas would help achieve the company’s objectives of improving efficiency of factories and returning the business to profitability Many would suggest that Andrews proposal to move all production to overseas would be a good move. Andrew was appointed to improve profitability and efficiency as it is currently lower than competitors. In order to become more efficient Andrew had to find a method to increase production. Moving to a larger factory in China would allow Burkinshaw plc to produce 4 million more units. It also lowers unit costs from 100 in the UK factory to only 60 in China. Introducing new technology instead of making handmade products would result in Burkinshaw being able to produce more. Due to economies to this would result in the lowering of unit costs. As a result the business may become more profitable. Originally making an operating profit of -50 million, in 2010 profit is predicted to significantly increase to 175 million following the move. Therefore this suggests Andrew would achieve his objectives so the move would be a success. Although the potential move has upset the UK unions it could be argued that the new technology is a necessary compromise in order to cut costs and increase profitability. The handmade products were suffering from falling sales compared to competitors and were said to have an ‘old fashioned’...
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...business form scratch. From this start point, the main issue is to determinate the appropriate level of control in this given situation. The issue of performance measurement is closely linked to the one of the level of control. On one hand, standardization facilitates performance measurement and control, but can also lead to counter performances if excessive. In this respect, it is very important to determine the expected level of performance (the same everywhere?). On the other hand, tolerating exceptions tends to weaken the whole system. KFC development until the critical point of confrontation illustrates one of the existing methods of launching a new activity overseas (I). Conflicts between headquarters and KFC-J raise a number of issues which well depict the challenges that companies operating overseas usually face when striving to greater integration. (II) Given these elements we will try to propose an accurate strategy mix to Dick Mayer (III) KENTUCKY FRIED CHICKEN (JAPAN) Ltd. Page 2 sur 23 I. KFC DEVELOPMENT I.1 The Beginnings of the company The basic concept of the company is a good idea developed by Sander in 1890: a recipe for...
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... and provide employment for the government, which in turn provides tax revenue. In order to continue to grow the economy, and provide services for the populace, corporations need to be profitable. Many corporations, however, have been merging with overseas companies to avoid the US tax rate. Because economic policy is so intertwined in all aspects of public policy, this practice of moving revenue out of the country can have long-reaching implications. Recently, President Obama criticized these corporations, calling into question their “economic patriotism,” and making it clear that tax evasion might be profitable for a company in the short-term, but a threat to our nation’s stability in the long-term (Cohen). Although businesses have a tax rate of 35%, write-offs for equipment, expenses, and even advertising, whittle away at the amount of taxes corporations actually pay. Even with the many available tax loopholes, many corporations are still unhappy with their tax rate. It is true that some corporations have taken a large part (or all) of their operations overseas, but a new type of tax fleeing has companies merging with foreign businesses (often much smaller than the original), and using that foreign company as its headquarters. This practice, known as an inversion, has prompted two recent bills in the Senate attempting to prevent this...
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...operate R&D laboratories dispersed around the world. Both Matsushita Electric and Sony seem to have coped with this issue successfully by introducing new management systems and practices - redefining the mission and goals of their global R&D, assigning two types of projects at the same time, rather than specializing projects among different labs, coordinating not by large-scale committees or meeting but through human relationships among a small number of top R&D mangers, drastically changing their organizational structures. It appears that both companies have already realized some of the anticipated benefits. Full Text: Copyright Industrial Research Institute, Incorporated Mar/Apr 1999 [Headnote] A long tradition of conducting R&D overseas has helped these Japanese companies adapt to changing competitive conditions. [Headnote] OVERVIEW: As companies transfer their R&D activities abroad, they will have to confront a challenging management issue: how to...
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...affect how the company manages the business. This paper identifies how Nike successfully manages their business through the four functions of management and the various factors that affect them The four functions of management at Nike can be affected by various factors such as globalization, technology, innovation, diversity, and ethics. Globalization affects planning because Nike is a global company and needs to set objectives for growth in markets inside many countries. Nike announced on January 9, 2012 that they are building a 600,000 square foot headquarters in Shanghai, China to centralize their employees in China, which would allow them to develop a greater focus and competitive advantage in the China market (Nike, 2012). With such an increasing growth in the global market, the challenges of planning can be seen in many ways. Being able to establish headquarters within the United States is hard enough, but moving them overseas can be harder. Knowing the regulations that a country has on building codes, how to incorporate the local community, or dealing with the language barrier are things Nike will be challenged with. Having...
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...Agreement with Canada and Mexico was enacted in January 1994. Soon after the Northa America Trade Act was set into motion, the China Trade Relations Act (Pub. L. 106-286) was signed. This occurred in 2000. Smith Corona manufactured typewriters, however, they were slow to update along with technology. As a result of their lack of progress, Smith Corona closed their doors in Cortland NY in 1992. This led to the loss of employment for 875 employees. The company moved their headquarters to Tijuana, Mexico to take advantage of cheaper labor after NAFTA was implemented. In their new location of Mexico they were able to manufacture keyboards, computer printers, and computer screens much cheaper than any production in the United States of America. (http://www.nytimes.com/1992/09/01/business/company-news-global-issues-weigh-on-town-as-factory-heads-to-mexico.html) Mexican employees, in Tijuana, were receiving $1.92 an hour; compared to the $11.00 an hour Cortland NY employees were receiving. Smith Corona spent $15 million moving to Mexico they believed that the company would be able to recoup these funds and prosper as a result of the cheaper labor costs. This was not the way events unfolded for Smith Corona. Only three years after they moved production to Mexico the company had not prospered but was forced to file bankruptcy in 1995. I'm not sure if the bankruptcy was caused by the high costs associated with the move to Mexico or due...
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...it must find a way to expand its brand internationally. All thirty two of the NFL’s teams currently operate within the United States, though three games a year are played at Wembley Stadium in London, UK. Expanding football globally presents a challenge to the NFL because the game is not widely played throughout the world. While its television contracts of $7 million per year (Kottasova 2014) remain the world’s most lucrative, interest and participation outside the United States is much smaller than other sports. While it is agreed upon that the NFL needs to expand globally to continue to grow its business, they are presented with several options as to how to accomplish this. The current arrangement of playing several games a year overseas has been in place since 2007, and the NFL seems content to continue this practice. Some believe that the NFL ultimately wants to permanently move a franchise to a foreign country, with London, Toronto, and Mexico City being discussed as potential destinations. Despite last playing a game in Mexico City in 2005, the city presents an intriguing variety of opportunities and threats to the NFL. I believe that these threats outweigh the opportunities and the NFL should look into alternative strategies to capitalize on the growth of the Hispanic market. Like many American companies, the NFL would be wide to acknowledge the growth of the Hispanic community within the United States. Already the nation’s largest minority group, the Hispanic...
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...1. Human Resource TOPIC THIS PAPER IS ABOUT: This research paper is talks about managing human resources globally and solving HR issues in a world of global competition. 2. HOW THE TEXTBOOK COVERS THIS TOPIC: In the past few decades, more and more companies are entering global markets by building facilities in various countries and exporting their goods. Since the companies set up their operations overseas, it would decrease their operating cost and attract more new customers. On the other hand, according to the textbook (p.458), the international business increase and change the demands on human resource management, and companies and employees have to understand the different cultures and laws in foreign countries. As the textbook (p.462) says, there are four factors affecting HRM in the global markets, and they are culture, education, economic systems and political-legal systems. Among these four factors, the culture would be the most significant consideration if the companies operating facilities overseas. According to the textbook (p.462), culture often determines the other three international influences and the effectiveness of various HRM practices. For example, people with different culture background would have different opinions about how decision should be handled and what motivates employees. Additionally, according to Geert Hofstede study of culture, there are five dimension of culture, and they are Individualism/collectivism, power distance concerns, uncertainty...
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