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
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
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