week five - multinational firms Flashcards
define direct investment
is a category of cross-border investment made by a resident in one economy with the objective of establishing a lasting interest in an enterprise that is in another economy
what are FDI inflows
net direct investment coming from a foreign country into our country
what are FDI outflows
net direct investment exiting our country to enter a foreign country
what is net FDI
the difference between FDI inflows and outflows
what is a net receiver vs net investor
- receiver: inflows > outflows
- investor: inflows < outflows
what are some deterrents of globalisation
1) COVID containment policies
2) geopolitical tensions (e.g. ukraine war)
3) negative perceptions of globalisation
4) increased transportation costs and logistic problems
where has had the biggest increases of FDI flows globally
- flows to Asia increased by 19%, mainly to south east Asia
- flows to latin America and the Caribbean increased by 56%
what % of GNP was multi nationalisation in the 90s and 2000s
- 90s: 1%
- 2000s: 10%
what are the main sectors in Spain that receive FDI
- primary
- manufacture
- energy
- construction
- wholesale
- transport
- hospitality
what is the relationship between FDI and country development
- less developed countries are net FDI receivers
- more developed countries are net FDI issuers
why are less developed countries net FDI receivers
because MNCs often look for cheaper production, more permissive environments and investments at good prices
what does FDI tell about the behaviour of multinational companies
- the strength of their company
- local factors in countries that may attract foreign companies
- the position of a country in global value chains
why is it important to study FDI
- FDI is one of the factors that explain the development of countries
benefits of FDI
- new technology
- new business models
- innovation
- creation of employment
- increase country export
- introduce local competence
what is an emerging economy
countries that have some characteristics of a developed country/market but does not satisfy to be termed a developed country/market
what are the four largest emerging economies known as
BRIC countries (brazil, russia, india and china)
characteristics of emerging countries
- new FDI contributors
- volatile environments but growing at high rates
- deficiencies in infrastructures and institutions
what are multiLatinas
multinationals originated in Latin American countries as industry leaders, acquiring large companies in developed countries
what are MNCs in emerging countries called
EMNE - emerging markets multinationals
what are EMNE’s competitive advantages
- production efficiency (low production costs)
- technology adaptation and reverse innovation
- focus on market niches
- experience in acquisition processes
- political and entrepreneurial capabilities (experience in working in volatile environments)
EMNC traits
- execution capabilities and good at adaptation
- ability to move in adverse environments
- multicultural abilities
- ability to combine objectives with local approach
what is the internationalisation profile of new EMNCs
- accelerated processes are usual
- simultaneous entry in developed and emerging countries
- business development modality: mainly external (acquisitions, alliances)
- search for flexibility and global efficiency
what are the future challenges for EMNCs
- country brand image improvement
- enhancement of managerial capabilities
- global corporate social responsibilities
benefits of global value chains
allows firms to integrate activities, improve flexibility and increase added value
what is reshoring
the relocation of previously offshored value chain activities (e.g. production, sourcing, R&D, services)
what are the six main drivers of reshoring
1) reducing supply chain risks
2) automation of production process
3) rationalisation of costs
4) ‘made in’ effect (country of origin effect)
5) standardisation of business practices/quality
6) firms global reorganisation
what might force the redesign of global value chains
fragmentation of world trade, shortage of some item…
what is regionalisation
a solution between the local and the global, offering some of the benefits of both without some of the associated costs (complexity, distance, and liability of foreigness)
graph for regionalisation and reshoring
lecture slides 5
what is a digital economy
an economy where part of the economic output is derived from digital technologies with a business model based on digital goods or services, comprises digital infrastructures, e-commerce and digital media
what is digitalisation
changing hoe firms orchestrate their resources and interact with one another
according to UNCTAD (2022) how can the digital economy be broken up
1) core technologies and economic aspects
2) strict digital and information sector (IT)
3) diigitally enabled sectors, e.g. e-commerce
what are the main advantages of digitalisation for international firms
1) acceleration of knowledge creation, identification of new market opportunities and access to larger production factor markets in foreign countries
2) development of new product and service innovations and organisational capabilities to improve international competitiveness
3) expand connectivity and interconnection between network partners (suppliers, customers, distributors), facilitates vertical disintegration and creation of dispersed value creation
4) reconfiguration of operations supporting synergies in the supply chain by helping to make decisions to move, partially or entirely, production abroad - reduces location dependencies
benefits of digitalisation
- cost reduction
- time to market
- greater transparency
- better levels of customer audibility
what is sustainability
the seeking of human welfare, protecting the resources needed for human needs without compromising the possibilities of future generations
what is sustainable business practise driven by
pressures/expectations from stakeholders (customers, competitors, suppliers, investors)
what are some sustainable business practises related to social responsibility
voluntary work
what are some sustainable business practises related to environmental responsibility
environment protection measures, reducing water and noise pollution
what is a circular economy
an alternative way of thinking focussing on preserving product and material value, preventing waste and keeping products and resources within the system by cycling them
what is circular transition
a solution to great challenges and promoted by institutions
benefits of sustainable business practises
- reduces CO2 emissions
- firms contribute by pushing partner responsiveness
challenges for international firms to implement sustainable business practises
- implementation of novel business models
- organising costs of circular systems
- new external relationships with stakeholders: engage local suppliers and make GVC circular
- increasing complexity and coordination; increase of interdependencies
- requirements for digital transformation in the company to support sustainable practises
