Stopford - multinational corporations

Global Strategic Management   Angelina Nasonenko

MULTINATIONAL CORPORATIONS by Stopford

• Assumption: MNCs completely free to move across boundaries
• Partially true, some MNCs are “locked” in the specific place due to related assets or specialized infrastructure – e.g. Silicon Valley
• MNCs may be dependent upon the skills of specialized teams of local workers – e.g. Volkswagen in Brazilian innovation center

• Assumption: MNCs are creatures of their home countries
• Not always do MNCs put national interests above all else – e.g. Japanese MNCs protecting lower-cost international assets at the expense of local ones
• MNCs place higher priority on the innovation process - regardless of where that process is centered – e.g. Tokyo is home to IBM’s personal computers
• MNCs are becoming stateless – e.g. promotion of foreign nationals to top management

• Assumption: All MNCs are large corporations
• No, most of the firms that operate internationally employ fewer than 250 people
• Not necessarily “the bigger the better” – e.g. problems of big banks’ mergers, small upstarts in the oil industry challenge big traditional players, flexible organizational structures can better respond to diverse consumers’ needs

• Assumption: MNC markets are impenetrable to rival companies
• No, MNCs that possess organizational hierarchies suited to the creation and deployment of human resources and intangible assets - such as patents or brands - can enter the traditional long-built industry and succeed on it in just a few years and take business from larger incumbents – e.g. Microsoft, Cisco
• Some giants lack ability to quickly develop strategies and learn new skills in order to create the necessary flexibility in the supply chain – while many smaller companies excel in that

• Assumption: Only some industries are going global
• No, no sector in any country can be confident that it will never be confronted by foreign competitors and in order to survive even local businesses must adopt global standards

• Assumption: MNCs are bigger than their assets
• True, the annual flow of global FDI: $400 billion, but with inclusion of the capital mobilized by local borrowings and the equity shares of partners, the “real” figure of foreign corporation’s “presence” in a home country is $1.4 trillion per year
• Explosion of strategic alliances among firms is transforming the competitive landscape - competition is no longer defined solely by the ownership of assets; it is also a matter of who is in league with whom
• the real power of the MNCs lies in their ability to exert control far beyond their legal “boundaries”

• Assumption: MNCs are inherently exploitative
• Yes and no, exploitation of local resources by MNCs remains a problem, but smaller, local firms often can be much more exploitative than foreigners and MNCs typically pay at or above the going wage and provide superior training

• Assumption: Investments by MNCs are good, investments by international money managers are bad
• Not necessarily, FDI by MNCs has a long-term effect and is not always mobile, foreign portfolio investment (FPI) is mostly volatile money that can go away overnight
• FDI might be more stable than FPI, but there have been periods of volatility – e.g. companies running away from Malaysia in the 1970s
• While the principal objective of FPI is to maximize the return to the investor, FDI has a more complex set of motivations: resource seeking - gaining access either to natural resources or man-made resources, market seeking - in an expanding local market, efficiency seeking - a series of investments linked across borders can lower total system costs below what could be achieved in one territory alone

• Assumption: MNCs are creations of wealthy countries
• Not anymore, many of the newcomers are based in developing countries - e.g. Taiwan´s Acer

• Assumption: MNCs are beyond government control
• Absolutely not, once MNCs enter a country, they are locked in by the commitments that they have made to develop local operations and provide job training and both sides have a strong incentive to work on building partnerships that create wealth in the first place