Stopford - multinational corporations

Global Strategic Management Angelina Nasonenko

MULTINATIONAL CORPORATIONS by Stopford

Partially true, some MNCs are “locked” in the specific place due to related assets or specialized infrastructure – e.g. Silicon Valley
MNCs may be dependent upon the skills of specialized teams of local workers – e.g. Volkswagen in Brazilian innovation center

Not always do MNCs put national interests above all else – e.g. Japanese MNCs protecting lower-cost international assets at the expense of local ones
MNCs place higher priority on the innovation process - regardless of where that process is centered – e.g. Tokyo is home to IBM’s personal computers
MNCs are becoming stateless – e.g. promotion of foreign nationals to top management

No, most of the firms that operate internationally employ fewer than 250 people
Not necessarily “the bigger the better” – e.g. problems of big banks’ mergers, small upstarts in the oil industry challenge big traditional players, flexible organizational structures can better respond to diverse consumers’ needs

No, MNCs that possess organizational hierarchies suited to the creation and deployment of human resources and intangible assets - such as patents or brands - can enter the traditional long-built industry and succeed on it in just a few years and take business from larger incumbents – e.g. Microsoft, Cisco
Some giants lack ability to quickly develop strategies and learn new skills in order to create the necessary flexibility in the supply chain – while many smaller companies excel in that

Assumption: Only some industries are going global
No, no sector in any country can be confident that it will never be confronted by foreign competitors and in order to survive even local businesses must adopt global standards

Assumption: MNCs are bigger than their assets
True, the annual flow of global FDI: $400 billion, but with inclusion of the capital mobilized by local borrowings and the equity shares of partners, the “real” figure of foreign corporation’s “presence” in a home country is $1.4 trillion per year
Explosion of strategic alliances among firms is transforming the competitive landscape - competition is no longer defined solely by the ownership of assets; it is also a matter of who is in league with whom
the real power of the MNCs lies in their ability to exert control far beyond their legal “boundaries”

Assumption: MNCs are inherently exploitative
Yes and no, exploitation of local resources by MNCs remains a problem, but smaller, local firms often can be much more exploitative than foreigners and MNCs typically pay at or above the going wage and provide superior training

Assumption: Investments by MNCs are good, investments by international money managers are bad
Not necessarily, FDI by MNCs has a long-term effect and is not always mobile, foreign portfolio investment (FPI) is mostly volatile money that can go away overnight
FDI might be more stable than FPI, but there have been periods of volatility – e.g. companies running away from Malaysia in the 1970s
While the principal objective of FPI is to maximize the return to the investor, FDI has a more complex set of motivations: resource seeking - gaining access either to natural resources or man-made resources, market seeking - in an expanding local market, efficiency seeking - a series of investments linked across borders can lower total system costs below what could be achieved in one territory alone

Assumption: MNCs are creations of wealthy countries
Not anymore, many of the newcomers are based in developing countries - e.g. Taiwan´s Acer

Assumption: MNCs are beyond government control
Absolutely not, once MNCs enter a country, they are locked in by the commitments that they have made to develop local operations and provide job training and both sides have a strong incentive to work on building partnerships that create wealth in the first place