MULTINATIONAL CORPORATIONS Flashcards
WHAT IS AN MULTINATIONAL CORPORATION?
The company has operations in other countries, but headquarters in one country->Apple.
Usually shows a developed country or an infant industry->SA very unique bc developing country practicing MNC (MTN).
Most modern countries open to MNC.
Coca-Cola, Adidas, Vodacom, Toyota, KFC, etc.
RELATIONSHIP BETWEEN MNC AND FDI
3 types FDI through MNC:
>FDI: investment made by MNC host country-> in form of finance, equipment, technology, etc)
>Greenfield FDI: investment in a new foreign business-> entirely new, not offered to any other countries —> Toyota Motor Corp. in Mexico 2015 est a new manufacturing facility in Mexico
>Mergers and Acquisitions FDI: merging/taking over an existing foreign company-> Walmarts acquisition of Massmart in 2011
CHANGING PATTERNS OF FDI FLOWS/MNC OPERATIONS
After ww2 most MNC followed a N-N pattern
Today, developing countries become attractive for MNC investment->bc offer range of assets, lower costs, growth prospects, untapped natural resources.
Many MNC operate on a regional market basis-> FNB in SACU, Tanzania, Zambia and Mozambique
WHY COMPANIES INVEST ABROAD
Skilled pool labour force->advantage to migration.
Exploit cheap labour and raw materials.
Better understand and adapt to the needs of foreign customers->specialisation is different for different countries.
Protect competitive advantage.
Get around trade barriers.
Avoid currency problems
DRIVERS OF GLOBAL GROTH OF MNC
Fall of Soviet Union lead to a lot of ec comp-> Marxism no longer promoted, but rather capitalism
Preponderance of neo-liberal ec policies is a direct result of the fall-> create favorable environment for MNC to invest in, bc most gov subscribe to this idea.
Technological advancement also accelerated the FDI and growth of MNC->by reducing transportation and communication costs->also facilitated the flow of finance (not worked for the most part).
Growing comp that comes w/ a globalized economy also forces firms to seek opportunities for growth + competitive advantage abroad.
Regionalism also drives the growth of MNC-> inter-regionalism driven growth of MNC bc of globalization
