12

Globalisation and Multinational Corporations

Multinational Corporations
s

Diversity among MNCs
(

size
3 the

comparative size of MNCs and countries' GDP

Comparison of the 10 largest multinational corporations (by gross revenue) and selected countries (by GDP): 2002

Comparison of the 10 largest multinational corporations (by gross revenue) and selected countries (by GDP): 2002

Multinational Corporations
s

Diversity among MNCs
( (

size the nature of the business

Multinational Corporations
s

Diversity among MNCs
( ( (

size the nature of the business overseas business relative to total business

Multinational Corporations
s

Diversity among MNCs
( ( ( (

size the nature of the business overseas business relative to total business production locations

Multinational Corporations
s

Diversity among MNCs
( ( ( ( (

size the nature of the business overseas business relative to total business production locations ownership patterns

Multinational Corporations
s

Diversity among MNCs
( ( ( ( ( (

size the nature of the business overseas business relative to total business production locations ownership patterns organisational structure

Multinational Corporations
s

Diversity among MNCs
( ( ( ( ( (

size the nature of the business overseas business relative to total business production locations ownership patterns organisational structure

s

Trends in multinational investment

Multinational Corporations
s

Diversity among MNCs
( ( ( ( ( (

size the nature of the business overseas business relative to total business production locations ownership patterns organisational structure the growth and geography of FDI

s

Trends in multinational investment
(

FDI inflows (% of gross fixed capital formation)
25

FDI as % of gross fixed capital formation

20

15

10

5

0 1985

1990

1995

2000

FDI inflows (% of gross fixed capital formation)
25

FDI as % of gross fixed capital formation

20

Advanced countries
15

10

5

0 1985

1990

1995

2000

FDI inflows (% of gross fixed capital formation)
25

FDI as % of gross fixed capital formation

20

Advanced countries
15

Developing countries
10

5

0 1985

1990

1995

2000

Multinational Corporations
s

Diversity among MNCs
( ( ( ( ( (

size the nature of the business overseas business relative to total business production locations ownership patterns organisational structure the growth and geography of FDI FDI and the UK

s

Trends in multinational investment
( (

Direct investment into and out of the UK
250

200

$ billion

150

100

50

0 1986

1988

1990

1992

1994

1996

1998

2000

2002

Direct investment into and out of the UK
250

200

$ billion

150

100

50
Inward investment

0 1986

1988

1990

1992

1994

1996

1998

2000

2002

Direct investment into and out of the UK
250
Outward investment

200

$ billion

150

100

50
Inward investment

0 1986

1988

1990

1992

1994

1996

1998

2000

2002

Business Strategy in a Global Economy
s

Types of multinational expansion
( ( (

horizontally integrated multinational vertically integrated multinational conglomerate international differences in input prices international differences in productivity 3 labour skills 3 entrepreneurial and managerial skills 3 learning by doing low-cost access to local markets economies of scale taking advantage of government policies

s

Going global to reduce costs
( (

( ( (

Business Strategy in a Global Economy
s

Going global to access new markets
( ( (

increased demand spreading risks can exploit advantages over local firms
3 ownership

of superior technology and managerial skills

3 entrepreneurial 3 R&D

capacity

( (

access to local technology learning from experience in diverse markets

Business Strategy in a Global Economy
s

The product life cycle and the MNC
(

the launch phase
3 multinational

spread likely to be limited

(

the growth phase
3 MNC

likely to shift production abroad in order to retain cost competitiveness increasingly seeks markets abroad as growth in home market slows increasingly seeks both markets and ever lower cost production abroad

(

maturity
3 MNC

(

late maturity and decline
3 MNC

Problems Facing Multinationals
s

Problems facing multinationals
language barriers ( selling and marketing
(
3 cultural

issues

relations with host governments ( relationships between subsidiaries
(
3 possible

diseconomies of scale 3 easier if subsidiaries are run independently
s

The global strategy trade-off
(

economies of scale of standardisation or higher costs of customisation?
3 determinants

of trade-off

MNC Investment and the Host State
s

Advantages of MNC investment
employment ( balance of payments
(

technology transfer ( tax revenues
(

s

Disadvantages
uncertainty ( power and control by the MNC over the host
(

transfer pricing ( the environment
(

Is Globalisation a 'Good Thing'?
s

The benefits of globalisation
( ( ( ( (

benefits of trade benefits of increased FDI competition reduces costs and encourages innovation faster spread of technology political and social ties can exacerbate inequality erodes national cultures environmental costs domination by MNCs

s

The costs
( ( ( (

Sign up to vote on this title
UsefulNot useful