Michael Porter's Research Project on the 5 Forces Framework

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THE IMPACT OF MULTINATIONAL CORPORAIONS ON DEVELOPMENT OF DEVELOPING COUNTRIES

BY

ONDABU IBRAHIM TIRIMBA HD333-C003-0138/2012

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE FINAL RESEARCH PROJECT PROPOSAL OF THE MASTER OF BUSINESS ADMINISTRATION JOMO KENYATTA UNIVERSITY OF AGRICULTURE, SCIENCE AND TECHNOLOGY

JULY 2012

ABSTRACT

This study shall be aimed at critically studying the impact of multinational corporations on the development of developing countries taking Kenya as a reference developing country.

It shall touch on areas like employment creation, poverty and dependency reduction and foreign direct investment.

The study shall be geared towards the historical background of global investments while tracing their evolution from small businesses to their giant investments that today their massive capital is a real threat to the nation when issues of capital flight fall due.

The study shall be conducted at the Kenya Commercial Bank and the KenGen Corporations with a sampling frame being all those multinational corporations whose Head Quarters are located in Nairobi Kenya region.

The study is shall be important to policy makers in deciding whether to continue depending upon multinational corporations whose income goes back to their parent companies or to nurture the local companies for sustainable development.

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE PROBLEM
The relevance of the highlights on the effects of international business becomes more urgent due to the following: the subject has been handled before in various stand points. Most writers have written on the subject but few have concentrated on the effects of The MNC on development of the nation-state.

Given majority are either Americans or Europeans, focusing on the effects of MNCs would amount to self gratification.

The study seeks to highlight the risks involved by developing countries dealing with the MNCs.

Different terms are used for MNCs. Apart from MNC, the mostly widely used terminologies include multinational enterprise (MNE) (Rugman, 2005), transnational corporation (TNC) (Morrison and Roth, 1992), and international corporation (Caves, 1971).

In this work we use the term MNC, as corporate multinationality – the degree of internationalization reflected in the activities of firms (Riahi, 1999) being organized in more than one national economy, (Kreikebaum et al. 2002: 6) – effectively describes the varying geographic spread of corporate activities.

Since the end of the Second World War, either on the basis of FDI or on trade, MNCs have increasingly penetrated international markets (Morrison and Roth, 1992: 38). From the 1960s onwards, cross-border economic activity increased significantly, even breaking pre-war records (Ghemawat, 2003: 150).

This time was popularized as globalization, while still in the 1980s, the triad was limited to the US, Japan, and Western Europe, declaring the expansion across triad regions as the key route for MNC growth (Scholz, 1998: 182–183; Westney, 2006: 447).

Abdullah (1998) early multinational corporations took the form of alliances with the parent country’s military or political powers in extending their activities to foreign areas.

According to Clicker (1990) the dominant player in the modern world investment set up is the multinational corporations.

According to Root (1994), an MNC is a parent company that engages in foreign production through its affiliates located in several countries, exercises direct control over the policies of its affiliates, and implements business strategies in production, marketing, finance and staffing that transcend national boundaries.

Robbok and simmonds (1989) assert that the rise of the multinational corporations has confronted the nation state with challenges of the operations of the...
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