Has the allure of developing world to multinational enterprises been affected by recent events

Has the allure of developing world to multinational enterprises been affected by recent events

1. A Multinational is not simply a company which trades internationally by exporting its products, it actually owns or controls productive facilities in countries outside its home country

   • They enagage in investment which is called FDI

2. The developing world refers to the nations of the world which are less economically and technologically advanced

3. Dunnings Electic Paradigm

   • 3 preconditions for a firm internationalising
     • Ownership specific advantages: Size and Power, R&D Expertise, Management or Organisational Skills
     • A firm can best exploit by producing abroad
     • It is more profitable to exploit assets abroad then at home. Location Specific advantages: acquiring raw materials, exploiting cheap or skilled labour, avoiding trade barriers

4. Lean Production and Mass Production

   • Lean Production: its aim is to combine the flexibility and quality of craftsmanship with the low costs of mass production
     • Outsource: Ford to Milan
   • Based on the principles of specialisation and division of labour as first described by Adam Smith

5. Employment

   • Faced with persistently high levels of unemployment in many European countries, it is perhaps understandable that so many states should court foreign multinationals in the belief that their investments will create local employment
     • Trojan Horse Effect: namely the displacement of domestic incumbents by the more efficient multinational company, which depends upon the latter's market power

6. Oligopolist Kinked Demand curve

   • Have to minimise costs, move your plant to parts of the world where labour costs are low (China). Because Labour costs are the biggest costs a firm has.
   • Firms move to China Coastal Area, due to low labour costs, but that area will get better wages than the rest of the country
     • Higher wages in China may cause some firms that were going to scale back in the US to keep their options open by continuing to operate a plant in America

7. Transaction Costs: Risk of Terrorism, can firms risk investing or locating in those regions/ areas?