Lecture 1 Flashcards
What is a MNC?
A firm that engages in FDI (Foreign Direct Investment), A firm which is comprised of multiple companies situated in multiple countries.
2x boxes represent 2x countries (MNC has to involve at least 2x countries)
Home country = where MNC is registered = Parent Entity
Host country = where MNC has invested and has property rights = Shell/Subsidiary Area Entity
What is Fonterra?
Sells its products in over 100 countries
Many Directly owned assets
No directly owned assets with products sold in those countries
Assets/own= 1. Farms in china 20k-30k cows which produce milk. 2. Partnership with (owns 1/2) Beingmate Baby & Child Food co. in China (have property rights to) 3.Manufacturing Facilities in Australia
DONT have FDI in most of the countries (other 100) they sell products too
Is Trading Direct Investment?
No trading ISNT direct investment
Is having Property Rights Direct Investment?
Yes
because by having Property Rights you Own that asset in the host country to some degree
What is FDI?
Foreign Direct Investment
What does F mean in FDI
Foreign= involves some other country’s interest
What does I mean in FDI?
Investment= (interest of the foreign country)
Making an Outlay of money, time and effort
Quantified financially/in dollars(a currency) or in political power and influence
Negotiating effort or political power
Expecting a return from money, time, effort and negotiating in the future.
What does D mean in FDI?
Direct = there is ownership by the MNC of the asset in the other country with Property Rights
Hard to define as there are so many different ways countries define property rights.
Not all owners are equal.
Land or Intellectual Property/Patents/Copyright/Trademarks
Govt is able to exert power to take your home away, buying it at market price. Do this in war, times of great need, when building new transportation corridor.
Varying degrees of Property Rights
What are the degrees of property rights?
May have 99 year Lease
China= shorter Lease
Have to own certain assets in partnership (only up to 49% owner)
Many people are deceived and think they have full ownership
What does a Copyright consist of?
Right to display the Label
Earn the stream of benefits from it
Important to run a capitalist society
What is Capitalism?
Founded on the Strength of Property Rights
What are Property Rights like in Centrally Controlled Nations?
Centrally controlled nations= China
Property Rights still present just Less strong
Government exerts more power
What is Property Rights?
The rights to Buy and Sell the stream of benefits that are measured in dollars, being for Land or for Patents, Trademarks or Copyrights
means cannot be copied, and another company cannot cash in on the stream benefits
What is the relationship between MNC and Capitalism?
MNC are at the Forefront of Capitalism Influence
Strong Property Rights on their Assets
When assets become Directly Owned (FDI) means they can exert their influence on other countries
How can MNC exert influence on other countries?
Only when their assets become Directly Owned
Process
1. Build a Subsidiary new in (all benefits, slower)
2. Buy and Existing Company and putting your label on it (percentage of benefits, slower)
Risk andOpportunities in both, not easy to discover
Lots of aspects
