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CHAPTER 16. Corporate Strategy and Foreign Direct Investment. THE THEORY OF THE MULTINATIONAL CORPORATION. I. THE THEORY OF THE MULTINATIONAL CORPORATION A. The MNC as an Oligopolist: Why FDI? 1. When is FDI justified? 2. Internalization 3. Market Integration a. Vertical

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Chapter 16

CHAPTER 16

Corporate Strategy and Foreign Direct Investment


The theory of the multinational corporation
THE THEORY OF THE MULTINATIONAL CORPORATION

  • I. THE THEORY OF THE MULTINATIONAL CORPORATION

  • A. The MNC as an Oligopolist: Why FDI?

  • 1. When is FDI justified?

  • 2. Internalization

  • 3. Market Integration

  • a. Vertical

  • b. Horizontal


The theory of the multinational corporation1
THE THEORY OF THE MULTINATIONAL CORPORATION

  • B. Financial Market Imperfections

  • 1. Hypothesis

  • 2. Diversification Effect of the MNC


The strategy of the mnc
THE STRATEGY OF THE MNC

  • II. THE STRATEGY OF THE MNC

  • A. Three strategies:

  • 1. The Innovation-based MNC


The strategy of the mnc1
THE STRATEGY OF THE MNC

  • Strategies (con’t)

  • 2. The Mature MNC

  • a. the importance of economies of scale and

  • b. economies of scope


The strategy of the mnc2
THE STRATEGY OF THE MNC

  • 3. The Senescent MNC

  • a. global scanning capability

  • b. the role of rationalization and integration.


The strategy of the mnc3
THE STRATEGY OF THE MNC

  • 4. FDI and Survival

  • a. Cost reduction

  • b. Economies of scale

  • c. Multiple sourcing

  • d. Keeping domestic customers


Designing a global expansion strategy
DESIGNING A GLOBAL EXPANSION STRATEGY

  • III. DESIGNING A GLOBAL EXPANSION STRATEGY

  • 5 Necessary Elements


Designing a global expansion strategy1
DESIGNING A GLOBAL EXPANSION STRATEGY

  • A. 5 Necessary Elements

  • 1. Awareness of profitable investments

  • -building competitive advantage

  • 2. Selecting a mode of entry

  • -evaluate systematically

  • 3. Adjusting the Effectiveness of the Entry Mode

  • - continual auditing

  • 4. Using appropriate evaluation criteria

  • 5. Estimating the longevity of competitive

  • advantage:

  • a. Develop competitive strength

  • transferable overseas.

  • b. Not easily duplicated


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