93793
Has the allure of developing world to
multinational enterprises been
affected by recent events
- A Multinational is not simply a
company which trades
internationally by exporting its
products, it actually owns or
controls productive facilities in
countries outside its home
country
- They enagage in
investment which is
called FDI
- They enagage in
investment which is
called FDI
- The developing world
refers to the nations of
the world which are less
economically and
technologically
advanced
- Dunnings Electic Paradigm
- 3 preconditions for a firm internationalising
- Ownership specific
advantages: Size
and Power, R&D
Expertise,
Management or
Organisational
Skills
- A firm can best exploit by producing abroad
- It is more profitable to exploit
assets abroad then at home.
Location Specific advantages:
acquiring raw materials,
exploiting cheap or skilled
labour, avoiding trade
barriers
- Ownership specific
advantages: Size
and Power, R&D
Expertise,
Management or
Organisational
Skills
- 3 preconditions for a firm internationalising
- Lean Production and
Mass Production
- Lean Production: its aim is to
combine the flexibility and
quality of craftsmanship with
the low costs of mass
production
- Outsource: Ford to Milan
- Outsource: Ford to Milan
- Based on the principles of
specialisation and division
of labour as first described
by Adam Smith
- Lean Production: its aim is to
combine the flexibility and
quality of craftsmanship with
the low costs of mass
production
- Employment
- Faced with persistently high levels
of unemployment in many European
countries, it is perhaps
understandable that so many states
should court foreign multinationals in
the belief that their investments will
create local employment
- Trojan Horse Effect: namely
the displacement of domestic
incumbents by the more
efficient multinational company,
which depends upon the latter's
market power
- Trojan Horse Effect: namely
the displacement of domestic
incumbents by the more
efficient multinational company,
which depends upon the latter's
market power
- Faced with persistently high levels
of unemployment in many European
countries, it is perhaps
understandable that so many states
should court foreign multinationals in
the belief that their investments will
create local employment
- Oligopolist Kinked Demand curve
- Have to minimise costs, move
your plant to parts of the world
where labour costs are low
(China). Because Labour costs
are the biggest costs a firm has.
- Firms move to China
Coastal Area, due to
low labour costs, but
that area will get better
wages than the rest of
the country
- Higher wages in China may cause some
firms that were going to scale back in the
US to keep their options open by
continuing to operate a plant in America
- Higher wages in China may cause some
firms that were going to scale back in the
US to keep their options open by
continuing to operate a plant in America
- Have to minimise costs, move
your plant to parts of the world
where labour costs are low
(China). Because Labour costs
are the biggest costs a firm has.
- Transaction Costs: Risk of Terrorism,
can firms risk investing or locating in
those regions/ areas?
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