| Foreign direct investment (FDI) has seen phenomenal growth during the last century. One of its most apparent indications is the increasing importance of multinational corporations (MNCs). In 1969, there were only 7276 MNCs. While in 2001, the figure had gone up to 65,000. These 65,000 MNCs control 40% of GDP, 60% of international trade and 90% of FDI.FDI does not only mean the internationalization of fund but also the improvement of company management. With the fast changing international environment and the increasingly complex business operation, large MNCs have developed a series of management theories in the fields of strategy management, investment decision management and control of subsidiaries.Successful MNCs tend to have a clear and complete global strategy. They focus on the world market as a whole and manage their business internationally. Strategy is the long-term plan of a company. It combines the goal, policy and timing of activities together. A sound strategy will take the strength and weakness of the company, the changing business environment and competition into consideration. There are different kinds of strategies. Each MNC should make sure what its mission is, set the strategy accordingly, then execute and evaluate it. This process is called strategy management. An enterprise must enjoy unique advantages and favorable domestic and international environment in order to go global. Enterprises must analyze these factors thoroughly so as to make a sound investment decision. First of all, each enterprise should make sure whether it has any advantages over other businesses, what they are and what are the major goals of going international. Only those who have unique favorable resources and will benefit from internationalization should go on to the next step, which is environment analysis. The aim of environment analysis is to delineate the target investment area, industry and partner. The process starts with the global business environment and then drills downs to specific countries and industries.A correct investment decision can not guarantee the success of FDI. A decision will do good to the company as a whole only when the MNC is able to execute effective control over its overseas subsidiaries. Effective control over subsidiaries is carried out in three ways: control of organization, control of business and control of information. In different phases of development, MNCs have different percentage of domestic and international business. Therefore, the organizations of MNCs can be quite different. No matter what type of organization is used, it must ensure high efficiency, easy coordination, effective control and communication. Control of business includes plan management and supervision through adequate accounting and auditing system. Subsidiaries of an MNC spread all over the world. As a result, it is requisite to set up a powerful information system in order to ensure effective communication.With 20 years efforts, the Chinese MNCs have made a lot of progress in terms of investment amount and target industries. By the end of 2002, China has set up 6960 overseas subsidiaries. The contract investment amount is $13.78 billion and Chinese enterprises invested $9.34 billion. The business volume of these overseas subsidiaries is as high as $82.72 billion in the same year. However, due to lack of FDI experience, 67% of these subsidiaries are in red. In some way, competition of businesses equals to the competition of management. The Chinese MNCs mustlearn from their successful counterparts and improve management in order to survive and thrive.Compared with successful MNCs, most Chinese MNCs suffer from the following problems. The first one is lack of strategy. Some MNCs focus on the short-term interest instead of long-term development. They will start an overseas project as long as it makes money in the short run. But sometimes these projects are not compatible with the development of the MNC as a whole. Inevitably the scope will exceed the ability of the parent company, which wi... |
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