Stages of Internationalism

Despite the long and interesting history of international trade, until recently little attention has been paid to management aspects. Some early companies such as the East India Company and the Hudson Bay Company operated as political subdivisions of colonial powers long before management became a separate discipline.

A second stage of international development involved international finance and investment. Those countries with available capital sought to invest outside the home countries. These investments were treated strictly from the financial viewpoint and involved the flow of funds through banks, investment firms, and governments. The management of the operations was chiefly within national boundaries, with the flow of goods treated solely as imports and exports.

Beginning in the twentieth century, however, some large firms entered a third stage, in which the management of overseas operations was controlled by subsidiaries which handled all international business. These subsidiaries were treated as appendages of the parent company and served chiefly as export agencies. The countries outside the home nation view these business operations as efforts by foreigners to gain profits from their economies while providing only minimal employment for local people and without contributing to the local economies. The headquarters of these subsidiaries were usually located in the home country, with only warehouses, service offices, and sales agencies located in other countries. Management functions were handled as they were in the domestic company.

A fourth stage in the development of international companies (immediately after World War II) was seen in the appointment of vice-presidents of international operations as members of the domestic companies. The vice-president of a firm acted as contact and liaison with the various subsidiaries involved in international manufacture and trade his was the first time that management began top recognize the unique problems of international operations.

A fifth stage saw the evolution of a global company in which the overseas operations were integrated into a single organizational structure. This stage developed during the 1960s and resulted in the forming of division in foreign countries to handle not only sales but also production, personnel, and finance. It was at this stage that international management emerged as a separate field of study, concentrating on management problems of a multinational nature. The emergence if this fifth stage was directly related to the formation of regional trade groupings of countries, such as common markets and free trade areas, which created markets enough to warrant separate production and distribution organizations. Thus the managerial problems of the multinational company a separate area of study.

In addition to the different types of organization for foreign operations, two special cases of international business forms deserve mention. One type is the company organized in a particular country for legal, tax, or political reasons. This type of firm chooses as its headquarters a small country which offers special advantage to firms seeking location for legal headquarters. The differences among these firms are usually based on tax or legal rather than managerial grounds. Another kind of international firms is evolving from the growth of several distinct companies in different countries which maintain a loose coalition but not necessarily have common overall policies. The managements of these companies tend to operate as domestic firms with no centralized policies or organizational structure.

Multinational companies can be relatively small and operate in only a few countries. Many are very large and operate in more than 100 countries. Large American companies earn over percent of their profits from foreign operations. Coca-Cola, Exxon, Goodyear Tire, Pfizer, Inc., IBM, and Ford Motor are only a few of the American companies with major international interests. In addition to American multinational, we all have become aware of foreign multinational companies operating in the United States, such as the Japanese companies (Bridgestone, Toyota and Sony), the German companies (Volkswagen and Bausch and Lomb), the French companies (Michelin and Renault), the British companies (British Petroleum and
Baskin Robbins), the Dutch companies (Philips and Heineken), and the Swiss companies (Ciba-Geigy and Nestle). With this trend of increase in the number and size of multinational companies, some observers have estimated that, within the next decade, over 50 percent of the combined gross national products (GNPs) of all countries will be generated by multinational companies.