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Globalisation and
Multinational
Corporations
Multinational Corporations
Diversity among MNCs
size
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
Diversity among MNCs
size
the nature of the business
Multinational Corporations
Diversity among MNCs
size
the nature of the business
overseas business relative to total business
Multinational Corporations
Diversity among MNCs
size
the nature of the business
overseas business relative to total business
production locations
Multinational Corporations
Diversity among MNCs
size
the nature of the business
overseas business relative to total business
production locations
ownership patterns
Multinational Corporations
Diversity among MNCs
size
the nature of the business
overseas business relative to total business
production locations
ownership patterns
organisational structure
Multinational Corporations
Diversity among MNCs
size
the nature of the business
overseas business relative to total business
production locations
ownership patterns
organisational structure
Trends in multinational investment
Multinational Corporations
Diversity among MNCs
size
the nature of the business
overseas business relative to total business
production locations
ownership patterns
organisational structure
Trends in multinational investment
the growth and geography of FDI
0
5
10
15
20
25
1985 1990 1995 2000
FDI inflows (% of gross fixed capital formation)FDIas%ofgrossfixedcapitalformation
0
5
10
15
20
25
1985 1990 1995 2000
FDI inflows (% of gross fixed capital formation)FDIas%ofgrossfixedcapitalformation
Advanced countries
0
5
10
15
20
25
1985 1990 1995 2000
FDI inflows (% of gross fixed capital formation)FDIas%ofgrossfixedcapitalformation
Advanced countries
Developing countries
Multinational Corporations
Diversity among MNCs
size
the nature of the business
overseas business relative to total business
production locations
ownership patterns
organisational structure
Trends in multinational investment
the growth and geography of FDI
FDI and the UK
0
50
100
150
200
250
1986 1988 1990 1992 1994 1996 1998 2000 2002
$billion Direct investment into and out of the UK
0
50
100
150
200
250
1986 1988 1990 1992 1994 1996 1998 2000 2002
$billion
Inward
investment
Direct investment into and out of the UK
0
50
100
150
200
250
1986 1988 1990 1992 1994 1996 1998 2000 2002
$billion
Outward
investment
Inward
investment
Direct investment into and out of the UK
Types of multinational expansion
horizontally integrated multinational
vertically integrated multinational
conglomerate
Going global to reduce costs
international differences in input prices
international differences in productivity
labour skills
entrepreneurial and managerial skills
learning by doing
low-cost access to local markets
economies of scale
taking advantage of government policies
Business Strategy in a Global Economy
Going global to access new markets
increased demand
spreading risks
can exploit advantages over local firms
ownership of superior technology
entrepreneurial and managerial skills
R&D capacity
access to local technology
learning from experience in diverse markets
Business Strategy in a Global Economy
The product life cycle and the MNC
the launch phase
multinational spread likely to be limited
the growth phase
MNC likely to shift production abroad in order
to retain cost competitiveness
maturity
MNC increasingly seeks markets abroad as
growth in home market slows
late maturity and decline
MNC increasingly seeks both markets and ever
lower cost production abroad
Business Strategy in a Global Economy
Problems facing multinationals
language barriers
selling and marketing
cultural issues
relations with host governments
relationships between subsidiaries
possible diseconomies of scale
easier if subsidiaries are run independently
The global strategy trade-off
economies of scale of standardisation or
higher costs of customisation?
determinants of trade-off
Problems Facing Multinationals
MNC Investment and the Host State
Advantages of MNC investment
employment
balance of payments
technology transfer
tax revenues
Disadvantages
uncertainty
power and control by the MNC over the host
transfer pricing
the environment
Is Globalisation a 'Good Thing'?
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
The costs
can exacerbate inequality
erodes national cultures
environmental costs
domination by MNCs

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Business strategy in global economy

  • 2. Multinational Corporations Diversity among MNCs size the comparative size of MNCs and countries' GDP
  • 3. Comparison of the 10 largest multinational corporations (by gross revenue) and selected countries (by GDP): 2002
  • 4. Comparison of the 10 largest multinational corporations (by gross revenue) and selected countries (by GDP): 2002
  • 5. Multinational Corporations Diversity among MNCs size the nature of the business
  • 6. Multinational Corporations Diversity among MNCs size the nature of the business overseas business relative to total business
  • 7. Multinational Corporations Diversity among MNCs size the nature of the business overseas business relative to total business production locations
  • 8. Multinational Corporations Diversity among MNCs size the nature of the business overseas business relative to total business production locations ownership patterns
  • 9. Multinational Corporations Diversity among MNCs size the nature of the business overseas business relative to total business production locations ownership patterns organisational structure
  • 10. Multinational Corporations Diversity among MNCs size the nature of the business overseas business relative to total business production locations ownership patterns organisational structure Trends in multinational investment
  • 11. Multinational Corporations Diversity among MNCs size the nature of the business overseas business relative to total business production locations ownership patterns organisational structure Trends in multinational investment the growth and geography of FDI
  • 12. 0 5 10 15 20 25 1985 1990 1995 2000 FDI inflows (% of gross fixed capital formation)FDIas%ofgrossfixedcapitalformation
  • 13. 0 5 10 15 20 25 1985 1990 1995 2000 FDI inflows (% of gross fixed capital formation)FDIas%ofgrossfixedcapitalformation Advanced countries
  • 14. 0 5 10 15 20 25 1985 1990 1995 2000 FDI inflows (% of gross fixed capital formation)FDIas%ofgrossfixedcapitalformation Advanced countries Developing countries
  • 15. Multinational Corporations Diversity among MNCs size the nature of the business overseas business relative to total business production locations ownership patterns organisational structure Trends in multinational investment the growth and geography of FDI FDI and the UK
  • 16. 0 50 100 150 200 250 1986 1988 1990 1992 1994 1996 1998 2000 2002 $billion Direct investment into and out of the UK
  • 17. 0 50 100 150 200 250 1986 1988 1990 1992 1994 1996 1998 2000 2002 $billion Inward investment Direct investment into and out of the UK
  • 18. 0 50 100 150 200 250 1986 1988 1990 1992 1994 1996 1998 2000 2002 $billion Outward investment Inward investment Direct investment into and out of the UK
  • 19. Types of multinational expansion horizontally integrated multinational vertically integrated multinational conglomerate Going global to reduce costs international differences in input prices international differences in productivity labour skills entrepreneurial and managerial skills learning by doing low-cost access to local markets economies of scale taking advantage of government policies Business Strategy in a Global Economy
  • 20. Going global to access new markets increased demand spreading risks can exploit advantages over local firms ownership of superior technology entrepreneurial and managerial skills R&D capacity access to local technology learning from experience in diverse markets Business Strategy in a Global Economy
  • 21. The product life cycle and the MNC the launch phase multinational spread likely to be limited the growth phase MNC likely to shift production abroad in order to retain cost competitiveness maturity MNC increasingly seeks markets abroad as growth in home market slows late maturity and decline MNC increasingly seeks both markets and ever lower cost production abroad Business Strategy in a Global Economy
  • 22. Problems facing multinationals language barriers selling and marketing cultural issues relations with host governments relationships between subsidiaries possible diseconomies of scale easier if subsidiaries are run independently The global strategy trade-off economies of scale of standardisation or higher costs of customisation? determinants of trade-off Problems Facing Multinationals
  • 23. MNC Investment and the Host State Advantages of MNC investment employment balance of payments technology transfer tax revenues Disadvantages uncertainty power and control by the MNC over the host transfer pricing the environment
  • 24. Is Globalisation a 'Good Thing'? 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 The costs can exacerbate inequality erodes national cultures environmental costs domination by MNCs

Editor's Notes

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