2. What are MNEs? Flashcards
Tangled Webs: Unravelling Complexity In The Global Economy
Key words: Global production networks, financialization, transnational corporations, processes of globalization, connectivity, complexity, geographical clusters
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A simplified analytical framework of the global economy
-> Folie 3 ansehen und beschriften
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Global Production
Networks (GPNs)
GNPs are networks which are ?(1)? and ?(2)? across national boundaries rather than actually spanning the whole world.
(1) geographically extensive
(2) functionally integrated
Traits (Eigenschaften) of Global Production Networks (GPNs): ?? (4)
Turning inputs into outputs through production circuits
Unevenness of power relations
Involved in both cooperation and competition at the same time
Integrate firms into structures which blur traditional organizational boundaries (Deutsch: Integration von Unternehmen in Strukturen, die die traditionellen Organisationsgrenzen verwischen)
What are the basic components of a production circuits? (4)
Inputs (of materials and non-materials)
<–>
Transformation (of inputs into semi-finished or finished goods or services)
<–>
Distribution (of the goods or services)
<–>
Consumption (of the goods and services)
(
–> : Flow of materials and products
<– : Flows of information
)
The basic components of a production circuits
Welche Inputs treten entlang von Produktionskreisläufen auf? (4)
Technology Inputs (Research, design, quality control, product and process technologies)
Energy Inputs (Electricity, oil, coal, gas, nuclear and renewables)
Service Inputs (Procurement, accountancy, insurance, human resources, legal, advertising, marketing, sales, maintenance)
Logistical Inputs (Coordination of supply chains, movement of materials, products, people and information)
–> Abbildung Folie 6!
The basic components of a product circuits
Folie 7 ansehen !!!
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Who are the actors of Globalization? (5)
Transnational Corporations
States
Civil Society Organizations
Labour
Consumers
Major actor-centred networks in the global economy
–> Abb Folie 9 !
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What are Transnational Corporations?
= firms with the power to coordinate and control operations in more than one country, even if they do not own them
firms with the power to coordinate and control operations in more than one country, even if they do not own them
Definition of what?
Transnational Corporations
Transnational Corporation
The firm owns the activity across the globe
What mode does the firm follow?
equity mode
Transnational Corporation
The firm do not own the activity but it is made by independent firms across the globe.
What mode does the firm follow?
non-equity mode
A Transnational Corporation has the ability to coordinate and control different processes and transactions.
True/False?
True
Transnational Corporations take advantages of ?? differences
geographical
-> i.e. factor of production, state policies
Transnational Corporations have the ability to change location according to international events.
True/False?
True
-> geographical flexibility
Transnational Corporation
The coordination process depends on what?
the boundary of the TNC
Transnational Corporation
The coordination process depends on the boundary of the TNC:
- The boundary is the property of the firm
- any activity can be ?(1)? or ?(2)?
(1) internalized (=made inside the firm)
(2) externalized (= made by somebody else via contractual arrangements)
Transnational Corporation
Any activity can be internalized (= made inside the firm) or externalized (= made by somebody else via contractual arrangements)
1) Internalized transaction when?
2) Externalized transaction when?
1) when all the activities are internalized
2) when all the activities are externalized
Transnational Corporation
Power relationship highly influence firms’ network shape. Some actors can have more power over others.
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The Role of State
Nation-state is the most important bounded territory, but to follow a global rule is not possible –> MNE’s subsidiaries are bounded to ??
-> political structure of that state influence economics relationships
national law
The Role of State
Taxes and incentives überarbeiten
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Minimum Global Tax for MNEs
https://www.oecd.org/tax/beps/statement-on-a-two-pillar-solution-to-address-the-tax-challenges-arising-from-the-digitalisation-of-the-economy-october-2021.htm
https://www.youtube.com/watch?v=aj2zymlPqow
The triangular nexus of relationships between firms and states
-> Folie 16!!
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Knowledge
Workers embody the knowledge.
each products needs direct or indirect workers for its production process
Mobility of workers is limited according to their culture but they have freewill to decide where to go
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Consumers
Consumptions change according to the sector
B2B = Consumers of inntermediary goods
B2C = Consumers of finished goods
Influenced by: ?? (3)
Income
Social and Cultural process (i.e. fashion)
Role of Marketing Managers
Apple is 8th (500 Fortune List)
-> Folie 19
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Global civil society organizations
-> read slide 20 !!
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Geography Clusters
Generalized clusters reflect what?
the agglomeration of people due to common human activities (i.e. commuters, communities)
(Deepl: Allgemeine Cluster spiegeln die Agglomeration von Menschen aufgrund gemeinsamer menschlicher Aktivitäten wider (z. B. Pendler, Gemeinden) -> Agglomeration: räumliche Ansammlung)
Geography Clusters
Specialized clusters reflect what?
the specificity of a firm to agglomerate to other firms for leveraging economies of scale (so called industrial district)
(Spezialisierte Cluster spiegeln die Besonderheit eines Unternehmens wider, sich mit anderen Unternehmen zusammenzuschließen, um Größenvorteile zu nutzen (so genannte Industriegebiete).)
Modern slavery is a widespread global issue that does not have one clear universal definition
True/False
True
Modern slavery includes practices such as forced labour, human trafficking, servitude slavery, child labour and forced marriage
Source: Anti-Slavery International
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How many people are victims of modern slavery worldwide?
40,3 million (estimated)
How much money is forced labour generating globally?
annual profits of over $150 billion (USD)
Source: International Labour Office
Networks of Networks
Global economy should be seen as a grounded network of: ?(1)?, ?(2)? and ?(3)? networks
(1) organizational
(2) geographical
(3) production
Networks of Networks
Organizational networks = production circuits and networks
Geographical networks = localized clusters of economic activities
production networks = nexus of interconnected functions and operations through which goods and services are produced and distributed
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Interconnecting dimensions in a globalizing economy
Name 3 dimensions!
(a) the ‘vertical’ dimension
-> Global production networks (individual manufacturing and service sectors)
(b) the ‘horizontal’ dimension
-> Territorial systems at different geographical scales (Nation, Local community, Region)
(c) the ‘global’ system
-> Global production networks (Territorial systems)
–> vereint vertikale und horizontale Dimension (!)
Folie 24!
Transnational Corporations: The Primary ‘Movers and Shapers’ of the Global Economy
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Nature of the TNC
What is a transnational corporation (TNC)? (Definition)
A transnational corporation is a firm that has the power to coordinate and control operations in more than one country, even if it does not own them.
Name two basic characteristics of TNCs
they are networks within networks
control and coordination is more complex than a domestic firm
Firms are going abroad for what?
Market seeking (Size)
Internal Structure
Accessibility (of some resources)
Asset Seeking (Knowledge, Labour, Costs)
New MNEs
- Latecomers
- Newcomers
- Born Global (e.g. Zara)
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Usually there is an Evolution of TNCs
Diverse pathways of TNC evolution
-> slide 30 ansehen !!!!!!!!!
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A global integration-local responsiveness framework
-> Folie 31!!
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A global integration-local responsiveness framework
Name Pressures for global strategic co-ordination! (7)
Importance of multinational customers
Presence of multinational competitors
Investment intensity
Technology intensity
Pressure for cost reduction
Universal needs
Access to raw materials and energy
A global integration-local responsiveness framework
Name pressures for local responsiveness! (5)
Differences in consumer needs
Differences in distribution channels
Availability of substitutes and the need to adapt
market structure
host government demands
Multinational corporation (MNC) = multinational enterprise (MNE) = transnational enterprise (TNE) = transnational corporation (TNC) = international corporation
(Wikipedia)
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TNCs as networks within networks
-> slide 32 ansehen !!!
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TNCs = MNEs
True / False?
True
?? are networks within networks, structured through a myriad of complex relationships, transactions, exchanges and interactions within their own internal corporate network and between that network and those of the other key actors with whom ??must interact.
TNCs
Why is it vastly more complex to coordinate and controle the internal and external networked activities of a TNC’s networks in comparison to a purely domestic firm?
Because TNC’s networks are spread across, and embedded within different national jurisdictions and contexts
Configuring the TNC’s international networks
When growth occurs, any organism (or organization) has to change
-> Change in ?(1)? becoming more specialized
-> Increase ?(2)? in the links with other functions
Not adding function but becoming more ?(3)?
(1) functional role
(2) complexity
(3) product oriented
Types of TNC organizational architecture
Name the 4
a) Product division structure with seperate international division
b) Global product division structure
c) Global geographical division structure
d) Simplified global matrix structure
-> Folie 35 ansehen!!!!!!!!!
-> Struktur den Schaubildern zuordnen und verstehen
Name 4 model of organization!
Multinational organization
International organization
Global organization
Matrix or Integrated network model
decentralize operations in response to national market differences
Which model of organization ist it?
= multinational organization
capitalize firm-specific assets of technological leadership or marketing power
Which model of organization ist it?
International organization
All assets are centralized, the HQ coordinates policies and actions of subsidiaries
Which model of organization ist it?
= global organization
flexible network for orchestrating production, inbound and outbound logistics, services etc.
Which model of organization ist it?
= matrix or integrated network model
HQs and subsidiary relationships
name 3 different types?
The local implementer
The specialized contributor
The world mandate
HQs and subsidiary relationships
The local implementer has limited ?(1)? and ?(2)?.
(1) geographical scope
(2) functions
HQs and subsidiary relationships
The specialized contributor: specific expertise tightly integrated into the activities of other subsidiaries in the TNC.
Narrow range of ?(1)? and a high level of ?(2)? with other parts of the firm.
(1) functions
(2) interdependence
HQs and subsidiary relationships
The world mandate:
worldwide (or possibly regional) responsibility for what?
a particular product or type of business
The Nutella global value chain
-> Folie 38!!
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Concepts to Review:
- FDI
- Global production networks (GPNs)
- Equity and Non-equity
- actors
- role of states
- MNEs configuration
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