1、Unit 11Text:Multinational Corporations（跨国公司）1.Key words2.Evolution of multinational corporation3.Definition of multinational corporation4.Impact of multinational corporation5.Major determinants of foreign direct investment6.Questionsmultinational entityextractive industrymultinational corporationeth
2、nocentric firmpolycentric firmregiocentric or geocentric firmforeign affiliatecorporate headquartercross-border dealcompetitive positiongovernment-erected barriercountry-of-originbuilt-in positive stereotypeacquiring or establishing firmsintermediary goodsjust-in-time logistics systeminvestment clim
3、ateenvironmental constraintpolitical riskpolitical upheavallocal-content requirementexpatriate employmentMultinational entities have played a role in international trade for more than 300 years.The beginnings of these operations can be traced to the British and Dutch trading companies and,after thei
4、r decline,to European overseas investments,mainly in the extractive industries.The phenomenon as it is known today is the result of the lead taken by U.S.-based companies in the post-World War period and later followed by Western European and Japanese entities.Different terms abound for the multinat
5、ional corporation.They include global,world,transnational,international,supernational,and supranational corporation.The term multinational enterprise is used by some when referring to internationally involved entities that may not be using a corporate form.3.1 UN definition of MNC3.2 Quantitative cr
6、iteria for MNC3.3 Qualitative criteria for MNC3.4 Key criteria for MNCThe United Nations defines multinational corporations as“enterprises which own or control production or service facilities outside the country in which they are based.”The number of countries of operation is typically two,although
7、 the Harvard multinational enterprise project required subsidiaries in six or more nations.Another measure is the proportion of overall revenue generated from foreign operations.Although no agreement exists regarding the exact percentage to be used,25 to 30 percent is most often cited.The degree of
8、involvement in foreign markets has to be substantial enough to make a difference in decision making.Several nations should be owners of the corporation.The behavior of the firm is the determining factor.If the firm is to be categorized as a multinational corporation,its management must consider it t
9、o be multinational and must act accordingly.In terms of management philosophies,firms can be categorized as ethnocentric(home-market oriented),polycentric(orientated toward individual foreign markets),or regiocentric or geocentric(oriented toward larger areas,even the global markets).Even ethnocentr
10、ic firms would qualify as multinational corporations if production were the sole criterion.The firm controls its production facilities abroad and manages them(and its domestic operations)in an integratedfashion in pursuit of global opportunities.The impact of multinationals varies by industry sector
11、 and by country.In oil,multinational corporations still command 30 percent of production,despite strong national efforts by some countries.Similarly,the contribution of multinational corporations affiliates may account for more than one-third of the output of the marketing sector in certain countrie
12、s.The importance of the world marketplace to multinational corporations also varies.The foreign sales share of total sales for the worlds largest industrial corporations has increased steadily.The percentage will naturally vary by industry(for example,oil company ratios are well over half)and by the
13、 country of origin.5.1 Marketing factors5.2 Barriers to trade5.3 Cost factors5.4 Investment climateMarketing considerations and the corporate desire or growth are major causes of the increase in foreign direct investment.Even a sizable domestic market may present limitations to growth.Firms therefor
14、e need to seek wider market access in order to maintain and increase their sales.Foreign direct investment permits firms to circumvent barriers to trade and operate abroad as domestic firms,unaffected by duties,tariffs,or other import restrictions.In addition to government-erected barriers,barriers
15、may also be imposed by customers through their insistence on domestic goods and services,either as a result of nationalistic tendencies or as a function of cultural differences.Servicing markets at sizable geographic distances and with sizable tariff barriers has made many exporters offerings in for
16、eign markets prohibitively expensive.Many manufacturing multinationals have established plants overseas to gain cost advantages in terms of labor and raw materials.Foreign direct investment occurs not only horizontally,by firms acquiring or establishing similar firms abroad,but also vertically.Some
17、firms engage in foreign direct investment to secure their sources of supply for raw materials and other intermediary goods.This usually secures supply and may provide it at a lower cost as well.5.4.1 Definition of political risk5.4.2 Forms of political riskThe general attitude toward foreign investm
18、ent and its development over time may be indicative of the long-term prospects for investment.In many countries,foreign direct investment tends to arouse nationalistic feelings.Political risk has to be defined broadly to include not only the threat of political upheaval but also the likelihood of ar
19、bitrary or discriminatory government action that will result in financial loss.Tax increases,price controls,or measures directed specifically at foreign firms such as partial divestment of ownership,local-content requirements,remittance restrictions,export requirements,and limits on expatriate emplo
20、yment.The investment climate is also measured in terms of foreign currency risk.(1)According to the UN definition of MNC,what characteristics should a MNC have?(2)Of the quantitative and qualitative criteria that a firm has to satisfy to beconsidered a multinational corporation,which should be the major determinant?(3)Is the impact of multinationals the same to all industry sectors and countries?Give examples to prove your answer.(4)What induces a firm to make foreign direct investment?(5)Why is investment climate important to foreign direct investment?
