Globalization and the Mnc

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Eden L. (1991) identifies three main components of globalization: 1.Convergence – production, financial, technology structures approach a common average standard 2.Synchronization- tendency for Triad nations (EU, Japan & USA) to move in tandem, experiencing the same business cycle patterns 3.Interpenetration- the growing importance of trade, investment & technology in each domestic economy Globalization is manifest through:

The rapid growth in international trade and international financial flows •The way economic booms (or recessions) spread more readily from one country to the next •The growing occurrence of mergers, acquisitions, & strategic alliances Opinions on Globalization:

It has ‘enfeebled the state’/undermines or limits the sovereignty of countries National governments are not able to independently decide their exchange rate, interest rates, investment. Output affected (negatively) by market forces Multinational Corporations (transnational)

MNCs are the agents of increased international interdependence They dominate all underlying structures & substructures of the economy: production, finance, etc They, not markets, control the way in which the flow of capital, finance, products, technology crosses national boundaries. (John Kenneth Galbraith (1973))

Global Competition & the Firm

In a globally competitive industry:
A company’s position in one country affects and is affected by its position in another country •A firm’s competitive advantage grows from its worldwide operations.

The rise of the newly industrializing countries (after the 1970’s) disproved Vernon’s Product Life Cycle theory- where the assumption that products are essentially independent of each other and every innovation gave birth to a new product life cycle. High tech products were difficult to establish from low tech industries/products…. What’s mature from what’s not at maturity stage?

Some MNCs can grow into complex international economic networks.

Global Firm:
A simple definition:
A firm able to manufacture its goods wherever it can find the best combination of price, quality and distribute them wherever it can discover and create demand Faults with the above:
- overemphasizes corporate structure & organization
- underemphasizes ownership, management culture & other variables key to the strategy-making process A more accurate definition would include:
-A firm that provides a range of global products with little differentiation in each country’s offering

Ellis & Williams (1995)
- to manage a company on an integrated basis, it is necessary to reshape along 3 dimensions if competitive advantage is to be gained: 1.Product
3.People/ Process
The internationalization process is a lengthy process that can take place over a period of years.

Multi-Domestic VS Globalization Strategy

Multi-Domestic Company:
-a company with international operations that allows operations in one country to be relatively independent of those in another.

Multi-Domestic Strategy:
-Multi-domestic strategy means companies implement a strategy that is more responding to local needs, values and demands. This usually happens on a regional basis, e.g. Western European countries or Northern part of Europe. -Appropriate for industries where multi-country competition dominates -The more diverse market conditions are the more multi-domestic strategies should be employed Global Strategy:

-Global strategy is based on a strategy implementation on the assumption of 'one' global village, thus one strategy is implemented for all countries regardless of their social and cultural differences. -Appropriate in markets that are globally competitive or beginning to globalize -When national differences are relatively insignificant, global strategy is more appropriate -With Global strategy, a firm can pursue sustainable competitive advantage by locating activities in the most cost-effective countries/ areas; &...
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