* Multinational Corporations - Jan-15!16!2016

7/24/2019 * Multinational Corporations - Jan-15!16!2016

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Multinational

Corporations

Khurram Zafar


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Organizing Proverb

How can you pour tea into acup that is already full?

(Suf proverb)

How can you teach someone

who already knows?

January 15,16 - 2016 1 - Lecture - ManagingMultinational Corporations yKhurram Zafar

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Defnition

Multinational corporations (MNCs) arecompanies based in one state but

operate globally with !"ed facilitiesand employees in se#eral countries$

Multinational corporation (MNC) also bereerred to as an International Corporation


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How Is A Company ClassifedAs An MNC?

#usi$iaries inforeign

countries

%perations in anumer of

countries

&igh proportion ofassets in or' an$re(enues from gloal

operations)

#ta*ehol$ersare from$i+erent

countries


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ypes

Industrial Corporations

Corporations that manufacture goo$s an$ sellthem in (arious countries .cars, electronics/

!inan"ial Corporations

an*s that operate in se(eral countries

#ervi"e Corporations

ntities that pro(i$e ser(ices in se(eralcountries .telephone ser(ices, airlines/


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#tructure

&oriontally 3ntegrate$

MultinationalCorporations

4ertically 3ntegrate$MultinationalCorporations

i(ersie$Multinational

CorporationsJanuary 15,16 - 20161 - Lecture - ManagingMultinational Corporations y

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%rganiation of M8Cs

9arent Corporation in home country

.country in :hich the M8C is registere$an$ ase$/, :hich is su;ect to the la:san$ regulations of the home country

9arent Corporation may e engage$ inmanufacturing, nance or ser(ices


ranchise &ol$ers

urn Key 9ro;ect


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#?% @nalysis of M8Cs

#trengt$s

Lo: Cost ?ell e(elope$

3nfrastructure

%ea&ness Location is often (ery $istant Lac* of ransportation facilities Aelati(e 3nBeiility

Opportunities

Le(erage Do(ernment @ttract ne: in$ustries

'$reats Do(ernment Aestrictions Euotas


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Aeasons for he stalishment ofM8Cs

1 o increase market share$2 o secure cheaper premises andlabour$

! mployment an$ &ealth F #afety%egislationsin other countries may bemore rela"ed$

" o a#oidor minimisethe amount of ta"

to be paid$5 o ta*e a$(antage of go#ernment

grantsa(ailale

6 o sa#e on costsof transporting goo$sto the mar*et laceJanuary 15,16 - 2016 1 - Lecture - ManagingMultinational Corporations y

Khurram Zafar12


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%$at is (ood about MNCs1 ring in(estment to $i+erent parts of the

:orl$ .also inno(ation, technology,management s*ills/

2 9ro(i$e etter consumption choices.more goo$s, cheaper/

! >acilitate specialiation, an$ promoteeconomic gro:th .China/

" 9ro(i$e competition to complacent$omestic rms


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%$at is )ad about MNCs?

1 ploitation of laour, (iolation of laour

la:s2 n(ironmental $egra$ation

! estruction of local economies

" Gsing nancial po:er to change pricingcycles

5 @(oi$ing local taes

6 3nBuencing Do(ernments


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9ossile Aelations of M8CHs to #tates

Mercantilist &iewM8Cs ta*e on the i$entity of a state, pursue a stateHs

interests an$ generally act as an agent of a state in thegloal economy

'e#olutionary or 'e#isionist &iew

M8CHs control a state, :hose go(ernment acts asthe M8CHs agents an$ uses pulic policy to pushfor:ar$ the interests of the M8C

%iberal &iew

M8Cs are in$epen$ent of any state, pursuing theiro:n interests in the form of prots, o:ing no loyaltyto any state, acting as its o:n agent an$ neithercontrolling nor un$er the control of any state


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M8Cs an$ &ome Do(ernment

Aelations et:een an$ M8C an$ its home

country can e complicate$ y the factthat the M8C has susi$iaries inparticular countries that may or may note frien$ly to the home country

hus a M8C may in(est in a country thatthe home country :ishes to isolateeconomically an$ politically) thus, it

might e punishe$ y the home countrythrough nes, or its $irectors su;ect tocriminal prosecution

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M8Cs an$ &ost Countries

ecisions to ase a susi$iary in a hostcountry usually follo:s negotiations :ith thehost country go(ernment

>a(orale ta treatment

Creation of infrastructure

3n(estment in rele(ant e$ucation of:or*force

Aelief from en(ironmental, safety an$other regulations

>a(orale treatment for goo$s importe$ aspart of manufacturing processJanuary 15,16 - 2016

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ConBict ': M8Cs F &ost Countries

1 Do(ernments rea* agreement on taes,

infrastructure, etc2 &ost country nationalies the susi$iary

! Changes in host countryHs tra$e policies

" Changes in monetary policy5 Ci(il :ars or $omestic (iolence may hurt

usiness

January 15,16 - 20161 - Lecture - Managing

Multinational Corporations yKhurram Zafar

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* Multinational Corporations - Jan-15!16!2016

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