Globalization and the Multinational Enterprise

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Chapter 1: Globalization and the Multinational Enterprise

Multinational enterprise (MNE) - Company that has operating subsidiaries located in foreign countries

Transnational corporations - Managed at a global perspective rather than from the perspective of a single country

GLOBALIZATION AND CREATING VALUE IN THE MULTINATIONAL ENTERPRISE

Building firm value (generating profit and value for shareholders) requires combining 3 elements: (1) an open marketplace (2) Strategic management (3) access to capital

An open Marketplace:
Allows free movement and competition of labor, capital, technology, and innovation of entrepreneurship.

Strategic Management:
Discover business opportunities, design, develop and execute a corporate strategy through all levels of management.

Access to Capital
Ability of the enterprise to reach out and obtain resources from outside of the firm to pursue the firm’s vision and create the value

THE THEORY OF COMPARATIVE ADVANTAGE

Each country specializing in products for which it possessed absolute advantage and produce more for less and exchange products for the items they needed Governments interfere with comparative advantage for a variety of economic and political reasons, such as to achieve full employment, economic development, national self-sufficiency in defense related industries and protection of an agricultural sector’s way of life.

Factors considered in the location of production facilities worldwide include: Local and managerial skills
Dependable legal structure for settling contract disputes
Research and development competence
Educational levels of available workers
Energy resources
Consumer demands for brand name gods
Mineral and raw material availability
Access to capital
Tax differentials
Supporting infrastructure (roads, ports...etc)
Terms of trade are determined by supply and demand, but the process by which the terms are set are determined partly by administered pricing in...
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