GBH 6
17 flashcards · Other · by Daniel F.
Foreign investment after WWII
Peripheral economies - market access in rapidly developing economies spain, scandinavia less developed nations - seeking natural resources mining, oil latin america, africa favourable conditions no war superior organization skills and technology increasing demand in developing nations service sector utilities and transport
catching up after ww2 for EU and japan American hegemony was undisputed until the 1970s
stability and globalization provided a fertile ground Europe fast in some countries whose firms would soon challenge U.S. Companies direct and indirect support of governments 1970s, Germany and France started investing abroad Japan car and electronic competitive
US and EU internationlize
US companies doing FDI RND in home country M form helps EU despite smaller domestic marker, companies go international
Internationalization of Asia
new players korea, japan superior organizational capabilities support of other companies State's involvement Expantion to asia and US Accessed international markets for technological frontier knowledge
1970 US dominance crumbles
1971 - dollar not gold backed trade deficit devaluation technological catch up to eu and japan
Causes of going multinational
Superior technological, organizational, financial, marketing skills developed at home Product life cycle: first companies saturate their home market and then exploit demand abroad Mixed choice of advantages Ownership advantages (e.g. intangible assets, marketing...) Location advantages (e.g. local institutions, infrastructures...) Internalization advantages (e.g. cost advantage from vertical/ horizontal integration due to reduced transaction costs...)
New technologies First phase (1960s-1980s)
decline is transport and comms costs broader access to markets better control of subsidiaries by the book, firms are larger
changes in busines second phase (1980s-)
trend though 1990 affecting core industries of IR2 reduced their vertical integration decentralization reduced size of production specialization IBM inflexible, focus on servers instead of PCs disintegration helps be more flexible ABB decentralized into a network of 1,300 companies with 200 people per company on average Full profit-centre status (i.e. treated as a separate business) Own balance sheets Capacity to retain a third of their profits Own treasury management
forces behind decentralizaion
transaction costs are lower intellectual property is safe interplay of new technologies Improvements in transport and communication encourage outsourcing Save on variable and fixed costs Access to specialized suppliers of components or services Better to pay for only what you use and not develop in house modular products Components assembled through standardized interfaces (e.g. cars, computers) business network and learning communities through standards vanishing hand invisible hand: free mark…
income growth rate 89-08
multinational firm vs international firm
multi FDI only in a limited countries heterogeneous product focus on local preferences international no FDI make product at home and export
global vs transnational firm
global strong HQ on one country, fdi and fpi homogenize products as much as the market will allow in order to keep costs low (economies of scale) weak subsidiaries close to mother company trans Large network of independent strong subsidiaries (loose control by mother company) FDI in dozens of countries strong pressures cost reduction and local responsiveness Global HQ, distributed decision making dedicated RND for different national markets
America prospers again in the 1990
Vitality economic system to create jobs high productivity - tech advancements high-tech leadership Constraints of the 1970s lifted by the 1990s - global trade cheap money new jobs and startups backing with uncertain future venture capital Potential for traditionally static sectors transformative potential Digital disruption - retail sales and global commercial transactions computer industry - 11x the investment comms networks - 21x the investment
Dot-Com Bubble
Speculative investing: Buying internet-related stocks irrespective of company performance. Herding mentality: Shared excitement and expectations pushed stock values upwards until skepticism triggered panic selling. Poor corporate governance: Focus on marketing and users over profits; unsustainable operations. Loose monetary policy: Plenty of easy credit encouraged risky investments in digital-age companies.
Global brands
Firms are competing more and more in a global market few brands are internationally successful under single ownership Brand extension creation of a product that meets the requirements of the new market might be useful. develop a comprehensive range of products to be sold through to reduce fixed costs
China after WW2
Encouragement of private enterprise Institutional stability without nationalization. Concerns lie in limited natural resources and discrepancies between the non-democratic government and economics. WTO Joined WTO in Dec 2001 seeking trading partners, better rates, and enhanced presence in a globalizing world. Ranks as top goods exporter since 2009, ahead of EU. Alibaba Privately held multinational e-commerce giant established in 1999 by Jack Ma and others. Initially started as a B2B platform, k…
India after WW2
Improved political climate and English-speaking workforce boost business services. Emphasizes service provision unlike China. High level of entrepreneurial activity.