Operational Structure of Multinational Enterprises in Africa

Operational Structure of Multinational Enterprises in Africa

Edet E. Okon (University of Uyo, Nigeria)
DOI: 10.4018/978-1-5225-0276-0.ch017
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Abstract

The operational structures of Multinational Enterprises (MNEs) in Africa, a developing and emerging economy do not necessarily differ from those of the developed or even Less Developed Economies (LDEs) except in few areas such as size and capital outlay. Meanwhile, both MNEs of African origin and those which originate from outside Africa do have salient attributes: they have many foreign affiliates or subsidiaries in foreign countries; they operate in a wide variety of countries around the globe; the proportion of assets, revenues, or profits is high; their employees, stockholders, owners, and managers are from many different countries; and they are involved in much more than merely establishing sales office, but incorporate a full range of manufacturing, research and development activities. This chapter examined operational structures of MNEs with focus on meaning, attributes, financing, exchange rate risk and international financial investment, strategies for improved financing and outlay of MNEs in selected African countries.
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Background

The world of business is changing and we are now witnessing the beginning of the end of old economic order which has for decades been dominated by the triad economies (US, Europe and Japan). The new economic order is a multi-polar world characterized by multiple centres of economic power and activity (Accenture, 2007). What is most important change about this new order is the remarkable rise of emerging market multinationals (EMMs) while the share and influence of multinational companies from developed countries is declining. Fan (2008) asserts that the market intelligence has become more globalized than ever and this is a major challenge to most multinational organizations around the world. It is also important to note that market development can be viewed from the perspective of multinationals from developed countries and those from emerging markets. Fan (2008) argues that emerging markets multinational firms are more aggressive and ambitious in their operations and are likely to take western multinationals by storm just as Japanese companies did in the late 1970s. These emerging market multinationals are largely from Latin America, Asia Pacific and South Africa.

Mthombeni (2006) described a Multinational enterprises (MNEs), also known as Multinational corporation/company (MNC), Transnational corporation, and by many other names as a “firm that owns or controls income-generating assets in more than one country.” The author further posited that a transnational corporation would probably be achieved by linking the firm or company to the form of trade it engages in. Hence, MNE is a company that has established an international presence by engaging in foreign direct investment (FDI). This differs from general trade because FDI represents the physical extension of operations and the investment of equity funds and stock in several countries.

The degree of multi-nationality of firms, Spero and Hart (2003) highlighted as:

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