Lecture 5 Flashcards
What are the eight ways of differentiating Multi National Corporations?
Size Industry Country of origin Geographic diversification Motivation Integration methods Subsidiary type Type of owner
What are the five main reasons that a company chooses to become a Multi National Corporation?
Resource seeking Market seeking Efficiency seeking Knowledge seeking Haven seeking
What are the main issues with resource seeking MNCs?
The native country with the resource is not paid a fair price
Corruption and bribery are common
Excessive use of resources can cause environmental damage
What are resource seeking MNCs?
MNCs which become multinational for the purpose of utilising a host nation’s resources
What are market seeking MNCs?
MNCs which become multinational to establish a subsidiary in other country rather than simply trade through an agent, giving them complete access to an overseas market
What are efficiency seeking MNCs?
MNCs who go overseas to exploit cheap labour in developing countries
What are some of the main issues with efficiency seeking MNCs?
They move from country to country chasing the cheapest labour, leaving the original town with hundreds of unemployed people
What are knowledge seeking MNCs?
MNCs which travel overseas to find specialists in a particular field
What are haven seeking MNCs?
MNCs which go overseas to countries with lower tax rates and lower regulations
What is vertical integration?
Integration by acquisition, either upwards or downwards on the value chain eg. manufacturers buying intellectual property
What is horizontal integration?
Integration by buying out competitors in the same field, usually to expand the geographical reach of a company
