Midterm Question #1

MNC's are complex organizations however, they dominate the worldwide market. Knowing the background and nature of MNC's, answer the following:


1. Identify the benefits and disadvantages of MNC's.

Benefits to Nations

Benefits of Multinational Investment :

To Host Nations :

• Access to Foreign Capital
• Development of Resources
• Technology and Productivity Improvement
• Management and Marketing Skills

To Host Governments :

• Revenue and Taxation
• Diplomatic and Economic Alliances

Benefits to Individuals

Multinational Benefits to Individuals :

• Employment and Jobs
• Skills and Education
• Entreprenurial Opportunities
• Consumer Products and Services
• Modern Commercial Institutions

Disadvantages of MNC's
A.On the home country:

1.Loss of jobs.
2.Loss of tax revenue.
3.Flexibility of operation is reduced in a foreign political system and thus causes instability.
4.Competitive advantage of multinationals over domestic firms.

B.On the host country:

1.Remittance of dividends and profits that can result in a net outflow of capital
2.MNCs engage in anticompetitive activities such as formation of cartels and dumping..
3.MNCs offer higher wages to its employees in the host countries,which is much more than any other domestic firm.
4.Obsolete technology may be used in the host country.

wiki.answers.com/Q/What_are_disadvantages_of_multinational_corporations - 49k -

2. Identify one MNC company and describe its operation.

Business Monitor Online’s Company Intelligence Service features 149,000 fully researched senior executives at 55,000 leading multinational company sites located across Asia, Latin America, Europe, Africa and the Middle East. The Company Intelligence Service includes multinational company profiles and site networks; competitive intelligence covering sales volume, employee size, market share, ownership structure, foreign direct investment and project activity, and analysis of latest company developments. The service can be customised according to your geographic or sectoral requirements, and can be taken in conjunction with your choice of the Industry Services (see industry links to the left).

The Company Intelligence Service is used by business development teams, and by corporate analysts and strategists for benchmarking and competitive analysis. The end-user relies on data accuracy, which is why company profiles are systematically researched each year at source, by a combination of web, email and telephone validation. In addition, company updates and new company profiles and executive appointments are added to the database daily through continuous desk research.

http://www.businessmonitor.com/bmo/companydata/?gclid=CNOKz7btl5oCFRUupAodgFMG9w

3. Describe how the parent control/coordinates with its subsidiaries in other countries or region.

Answer:

FedEx Corporation

Today's FedEx is led by FedEx Corporation, which provides strategic direction and consolidated financial reporting for the operating companies that compete collectively under the FedEx name worldwide: FedEx Express, FedEx Ground, FedEx Freight, FedEx Office, FedEx Custom Critical, FedEx Trade Networks and FedEx Services.

Originally called FDX Corp., FedEx Corp. was formed in January 1998 with the acquisition of Caliber System Inc. Through this and future purchases, FedEx sought to build on the strength of its famous express delivery service and create a more diversified company that included a portfolio of different but related businesses. Caliber subsidiaries included RPS, a small-package ground service; Roberts Express, an expedited, exclusive-use shipping provider; Viking Freight, a regional, less-than-truckload (LTL) freight carrier serving the Western U.S.; Caribbean Transportation Services, a provider of airfreight forwarding between the U.S., Puerto Rico, the Dominican Republic and the Caribbean Islands; and Caliber Logistics and Caliber Technology, providers of integrated logistics and technology solutions. These companies, along with worldwide express shipping


4. How is IT maximized or used by this MNC?

Answer:

The growth of the multinational corporation (MNC) is one of the most revolutionary and controversial phenomena in the development of the world economy during this century. MNCs are business firms that own or control production in more than one country. In practice, the largest MNCs orchestrate an ensemble of investments scattered across dozens of countries. Tied together by a vast communications web, these firms match various corporate functions, such as research and development, production, and marketing, with locales around the globe that feature the right mix of necessary ingredients, whether these be the skills and wage rates of local labor, the tax and regulatory policies of governments, the availability of needed infrastructure, or the supply of natural resources. The sheer size of many MNCs, combined with their economic efficiency and international mobility, not only provides such firms with a key place in the world economy, but also endows them with considerable political power and influence.

In recent decades, MNCs have expanded in numbers, size, and economic clout. Between 1980 and 1997, global foreign direct investment grew at an annual rate of 13%, compared with 7% per year for exports. In 1999, total FDI outflows from developed countries reached $595 billion. The number of firms worldwide that engage in FDI has more than tripled over the past three decades. By 1997, 54,000 parent MNCs controlled 449,000 foreign affiliates around the world representing an overall investment valued at $3.4 trillion. The worldís two hundred largest corporations now account for more than 25 percent of all global economic activity. U.S. MNCs earn twice as much in revenue from manufacturing operations abroad as from exports. Indeed, one third of all world trade takes place on an intrafirm basisóamong different units of the same global company. The yearly sales of the largest MNCs dwarf the annual GNPs of a vast majority of Third World countries and the annual sales of the world's largest MNCs exceed the combined national incomes of 182 countries. Among the 200 largest MNCs, 62 are based in Japan, 53 in the United States and 23 in Germany. Only two of the top 200 are headquartered in the developing world.

5. What were the weaknesses/problems encountered by this MNC from its environment and global setup?

Answer:

A corporation that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management. Very large multinationals have budgets that exceed those of many small countries.

Sometimes referred to as a "transnational corporation".

Investopedia Says:
Nearly all major multinationals are either American, Japanese or Western European, such as Nike, Coca-Cola, Wal-Mart, AOL, Toshiba, Honda and BMW. Advocates of multinationals say they create jobs and wealth and improve technology in countries that are in need of such development. On the other hand, critics say multinationals can have undue political influence over governments, can exploit developing nations as well as create job losses in their own home countries.

Reference: fedex.designcdt.com/.../company_information/fedex_history

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Fullname: Melbert Estorpe