Page 107 - Introduction to Business

CHAPTER 2 The Environment of Business 81

Case in Point

DaimlerChrysler: Expanding Its Technological Reach

In June 2000, DaimlerChrysler of Ger- of commercial vehicles for the global market.
many and Hyundai Motor Company of However, since commencement of the strategic
South Korea announced the formation alliance in 2000, DaimlerChrysler’s financial
of a 50-50 joint venture for the production of commer- performance has been below expectations, which
cial vehicles and engines in Chonju, South Korea. This resulted in a re-prioritization of both companies’
venture was made possible through DaimlerChrysler’s strategic objectives. On May 12, 2004, the two
acquisition of a 10.5 percent stake in Hyundai Motor companies agreed to terminate plans regarding the
Company for U.S. $428 million. Together with the exist- commercial vehicle joint venture in South Korea and
ing DaimlerChrysler–Mitsubishi Motors Corporation move forward with the joint development and
partnership, the DaimlerChrysler–Mitsubishi–Hyundai manufacture of a family of four-cylinder gasoline
Motor Company partnership hoped to become one of engines, with a focus on project-by-project
the strongest alliances in the automotive industry. collaborative efforts and without a shareholding
As part of the agreement, the trio planned to jointly relationship. To achieve cost efficiencies,
develop and produce a range of world-class, high- DaimlerChrysler and Hyundai will also cooperate in
quality gasoline engines for small cars and commercial R&D, joint procurement activities, and global supply
vehicles to compete in key global markets such as Asia, chain management. The joint venture will utilize the
NAFTA, Latin America, and Europe. Juergen E. companies’ respective global distribution network to
Schrempp, chairman of DaimlerChrysler AG, said, increase market share. As part of the strategic
“Hyundai Motor Company is an ideal partner to alliance realignment, DaimlerChrysler sold its
expand DaimlerChrysler’s growing presence in Asia. 10.5 percent stake in Hyundai Motor at a profit of
Hyundai is successful, profitable, and by far the several hundred million dollars.
strongest player in the Korean automotive market. It
Source: www.daimlerchrysler.com/new/top/2002;
has an excellent distribution network throughout Asia www.daimlerchrysler.com/homepage/homepage_e.htm.
and in particular the fast-growing ASEAN countries.
The commercial vehicle joint venture will also further
Questions
strengthen our position as the number one commercial
vehicle producer in the world.” 1. Does the DaimlerChrysler joint venture with
Under the terms of the commercial vehicle joint Hyundai Motor Company make business sense?
venture, Hyundai agreed to provide its state-of-the-art Why?
commercial vehicle plant in Chonju and Daimler- 2. What are some potential challenges that these
Chrysler was to contribute its innovative technology, two companies could face as they move forward?
thereby creating an ideal platform for the production

In general, MNEs are large corporations with a significant amount of resources
(capital, management talent, and technology) at their disposal. Given these assets,
MNEs are willing and able to take on the risk needed to operate internationally.
Exhibit 2.12 (on p. 82) provides a list of the top ten MNEs in the world (in 2003) in
terms of valuation (company stock price times the number of stocks outstanding in
the world market). The Financial Times annually publishes the list of the world’s
largest 500 companies (www.ft.com/ft500). In 2003, U.S. MNEs continued to dom-
inate the Financial Times Global 500 list with 240 companies ranked in the top 500,
followed by Japan with 47 companies and the United Kingdom with 34 companies.
Multinational enterprises are also sometimes called multinational corporations
(MNCs) or transnational corporations (TNCs).
While the emergence of MNEs can be traced to the early part of the twentieth
century, their growth greatly accelerated only after World War II, when various inter-
national organizations (and international rules of the game) were established and

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