Promoting active learning

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12 Globalisation and Multinational Corporations
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Multinational Corporations

• Diversity among MNCs
• size
• the comparative size of MNCs and countries' GDP

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

• Diversity among MNCs
• size
• the nature of the business

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Multinational Corporations

• Diversity among MNCs
• size
• the nature of the business
• overseas business relative to total business

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Multinational Corporations

• Diversity among MNCs
• size
• the nature of the business
• overseas business relative to total business
• production locations

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Multinational Corporations

• Diversity among MNCs
• size
• the nature of the business
• overseas business relative to total business
• production locations
• ownership patterns

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Multinational Corporations

• Diversity among MNCs
• size
• the nature of the business
• overseas business relative to total business
• production locations
• ownership patterns
• organisational structure

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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

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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

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FDI inflows ( of gross fixed capital formation)
FDI as of gross fixed capital formation
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FDI inflows ( of gross fixed capital formation)
Advanced countries
FDI as of gross fixed capital formation
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FDI inflows ( of gross fixed capital formation)
Advanced countries
Developing countries
FDI as of gross fixed capital formation
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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

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Direct investment into and out of the UK
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Direct investment into and out of the UK
Inward investment
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Direct investment into and out of the UK
Outward investment
Inward investment
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Business Strategy in a Global Economy

• 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

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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
• RD capacity
• access to local technology
• learning from experience in diverse markets

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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

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Problems Facing Multinationals

• 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

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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

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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