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Globalisation and Multinational Business

Globalisation and Multinational Business. DTK, After Todaro 2011. To increase the availability and widen the distribution of basic life-sustaining goods . Sustenance: The ability to meet basic needs. Three Core Values Of Development. Three objectives of D evelopment.

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Globalisation and Multinational Business

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  1. Globalisation and Multinational Business

  2. DTK, After Todaro 2011

  3. To increase the availability and widen the distribution of basic life-sustaining goods Sustenance: The ability to meet basic needs Three Core Values Of Development Three objectives ofDevelopment DimensionsofDevelopment Self-Esteem: To be a person To raise levels of living; e.g. Food, shelter, health, protection To expand the range of economic and social choices Freedom from servitude: To be able to choose DTK, After Todaro 2011

  4. Bearable Social Environmental Sustain- ability Equitable Viable Economic

  5. Create Value Profit Eliminate Waste Recognized Interdependence Sustainable Energy Flows Share Knowledge People Planet Humans Nature Co-exist Quality Of Life Accept Responsibility Model Nature

  6. Nature & Environmentalism Ecology Ecology/ Equity Ecology/ Economy Sustainable Equity/ Ecology Economy/ Ecology Economy Equity Society And Socialism Business & Capitalism Economy/ Equity Equity/ Economy

  7. Development • 2. Development is a comprehensive: • economic; 2. social -cultural and • 3. political process • aims at constant improvement of wellbeing of entire population and individuals on basis of active, free and meaningful participation in development • and fair distribution of benefits resulting there of . • (AUSAID, NGO information package, Canberra) Development process by which: political; 2. social and 3. economic structures of a country are improved for purpose of ensuring wellbeing of its populace. (Fisher, 1995) 4. Any adequate definition of development includes 6 dimensions: An economic component A social ingredient A political dimension, A cultural dimension, Ecological soundness, The full-life paradigm. Development : Definitions & Measurements • 3.Human development is: • - process of enlarging people’s choices • choices that are created by expanding human capabilities and functions, • i.e. what people do and can do in their lives.

  8. 6 DIMENSIONS OF DEVELOPMENT • (2) A social ingredient measured in wellbeing in: (a) health, (b) education, (c) Housing & (d) employment • (3) A political dimension: embracing values such as: • (a) Human rights, (b) Politicalfreedom, (c) legal enfranchisementof persons, (d) Some form ofdemocracy An economic component dealing with the creation of wealth and improved conditions of material life – equitably distributed 6 DIMENSIONS OF DEVELOPMENT • (4) A cultural element: • In recognitionoffactthatculturesconferidentity and self-worth to people • (6) The full-life paradigm: • Refers to meaningssystems,symbols and beliefsconcerning ultimate meaningoflife and history • (5) Ecological soundness:

  9. The Economic System Source: Witherick et al., 1995

  10. Summary Of The Impact Of TNCs On Host Economies Source: Witherick et al., 1995

  11. Globalisation Global Interactions/ Globalization Global Interactions/Globalization could involve all these things!

  12. Seven Key Issues concerning the role and impact of TNCs Source: Witherick et al., 1995

  13. The Process of cumulative causation Source: Witherick et al., 1995

  14. Backwash or Spread Source: Witherick et al., 1995

  15. Friedmann’s model of Spatial Development Source: Witherick et al., 1995

  16. Globalisation: Setting the Scene • Current issues in the global economy • Defining globalisation • global economic interdependence • implications for business • What is driving globalisation? • market drivers • cost drivers • government drivers • competitive drivers

  17. The drivers of globalisation

  18. The drivers of globalisation

  19. The drivers of globalisation

  20. The drivers of globalisation

  21. The drivers of globalisation

  22. The drivers of globalisation

  23. Globalisation: Setting the Scene • Current issues in the global economy • Defining globalisation • global economic interdependence • implications for business • What is driving globalisation? • market drivers • cost drivers • government drivers • competitive drivers • Globalisation: the good and the bad

  24. Multinational Corporations • Statistics on growth and size of MNCs • the comparative size of MNCs and countries' GDP

  25. Comparison of the 10 largest multinational corporations (by gross revenue) and selected countries (by GDP): 2002

  26. Multinational Corporations • Statistics on growth and size of MNCs • the comparative size of MNCs and countries' GDP • foreign direct investment (FDI) inflows

  27. FDI inflows ($ millions)

  28. FDI inflows ($ millions)

  29. FDI inflows ($ millions)

  30. FDI inflows ($ millions)

  31. FDI inflows FDI as % of gross fixed capital formation

  32. FDI inflows FDI as % of gross fixed capital formation

  33. FDI inflows FDI as % of gross fixed capital formation

  34. Multinational Corporations • Diversity among MNCs • size • the nature of the business • overseas business relative to total business • production locations • ownership patterns • organisational structure

  35. Why do Businesses go Multinational? • Categories of multinational organisation • horizontally integrated • vertically integrated • conglomerate • Advantages to firms • reductions in costs • international differences in factor prices • international differences in factor productivity • low-cost access to local markets • spreading overheads

  36. Why do Businesses go Multinational? • Advantages to firms (cont.) • government support in host countries • lower taxes • subsidies • provision of infrastructure • increased demand • spreading risks • can exploit advantages over local firms • ownership of superior technology • entrepreneurial and managerial skills • R&D capacity • access to local technology

  37. Why do Businesses go Multinational? • The product life cycle and the MNC • the launch phase • the growth phase • maturity • late maturity and decline • Problems facing multinationals • language barriers • selling and marketing • relations with host governments • relationships between subsidiaries

  38. MNC Investment and the Host State • Advantages of MNC investment • employment • balance of payments • technology transfer • tax revenues • Disadvantages • uncertainty • power and control by the MNC over the host • transfer pricing • the environment

  39. MNCs and Developing Countries • The scale of MNC investment in developing countries • Advantages to host country • the saving gap • the importance of development finance • the contribution of saving to growth • the foreign exchange gap • public finance gap • skills and technology gaps

  40. MNCs and Developing Countries • Disadvantages to host country • MNCs may drive local firms out of business • limited demand for local components • repatriation of profits • transfer pricing and effects on tax revenues • competition between developing countries to attract MNCs • distorting the whole pattern of development • increasing gap between rich and poor • introducing consumerist values • What can developing countries do?

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