G&P - Chapter 9 - Multi-National Business

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G&P - Chapter 9 - Multi-National Business

  1. 1. Global Finance and Business<br />CHAPTER NINE<br />International Relations 9/e<br />Goldstein and Pevehouse<br />Pearson Education, Inc. <br />publishing as Longman © 2010 <br />
  2. 2. Multinational Business<br />Although states are the main rule makers for currency exchange and other international economic transactions, these are carried out mainly by private firms and individuals, not governments.<br />Most important among these are multinational corporations (MNCs).<br />Pearson Education, Inc. <br />publishing as Longman © 2010<br />
  3. 3. Multinational Corporations<br />Companies based in one state with affiliated branches or subsidiaries operating in other states<br />Most important: industrial corporations<br />Automobile, oil, and electronics<br />Usually based in G8 states<br />Financial corporations<br />Service corporations<br />McDonald’s <br />AT&T<br />Pros and cons<br />Pearson Education, Inc. <br />publishing as Longman © 2010<br />
  4. 4. Foreign Direct Investment<br />MNCs do not just operate in foreign countries; they also own capital (standing wealth) there.<br />U.S. and German MNCs own some of the capital located in Japan.<br />Japanese MNCs own capital located in the United States and Germany.<br />Direct foreign investment involves tangible goods such as factories and office buildings.<br />Role of foreign investment<br />Pros and cons<br />Pearson Education, Inc. <br />publishing as Longman © 2010<br />
  5. 5. Figure 9.2<br />Pearson Education, Inc. <br />publishing as Longman © 2010<br />
  6. 6. Host and Home Government Relations<br />A state in which a foreign MNC operates is called the host country.<br />The state where the MNC has its headquarters is called its home country.<br />Pearson Education, Inc. <br />publishing as Longman © 2010<br />
  7. 7. Host and Home Government Relations<br />Conflicts may arise<br />Distribution of new wealth<br />Incentives<br />Breaking agreements<br />Nationalization<br />Trade regulations<br />Ex: NAFTA<br />Monetary policy<br />Issues of international security<br />Corruption<br /><ul><li>In general, an MNC cannot operate in a state against the wishes of its government.
  8. 8. In theory, an MNC operates in host countries only when it is in the interests of both the MNC and the host government.</li></ul>Pearson Education, Inc. <br />publishing as Longman © 2010<br />
  9. 9. Host and Home Government Relations<br />Conflicts with home governments<br />Taxation<br />Trade policies<br />Security<br />Occasionally, MNCs can get their home governments to provide security when host governments fail to do so.<br />Need for stable international security<br />Corporate alliances: Impact on liberalism rather than economic nationalism<br />Interests more intertwined <br />Pearson Education, Inc. <br />publishing as Longman © 2010<br />

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