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Definitions of MNEs
A firm that owns and controls activities in two or more different countries (Buckley and Casson, 1976; 2009: 1564)
A coordinated system of cross-border value-creating activities, some of which are carried out within the hierarchy of the firm, and some of which are carried out through informal social ties or contractual relationships (Dunning and Lundan, 2008; Cantwell et al., 2010: 569) An enterprise that has operating subsidiaries, branches, or affiliates located in foreign countries (Eiteman et al., 2010: 2)
Definitions of MNEs
A company that has headquarters in
one country but has operations in other countries (Wall and Rees, 2004: 23) countries
Royal Dutch Shell UK/Netherlands Oil refining Exxon Mobil Walmart BP Sinopec China National Petroleum Corp USA USA UK China China Oil refining Retail Oil refining Oil refining Petroleum Power Automobile Oil refining Automobile
State Grid Corp. of China China Chevron ConocoPhillips Toyota Motor USA USA Japan
Data illustrates many MNEs have larger revenues than many countries GDPs.
Company
Global Rank
5 6 7
4 5
6 7 8 9 10
54 77
81 84 91 93 100
109,040 89,648
87,544 84,803 80,732 80,230 76,024
229 315
224 397 339 -
Company
Indian Oil Reliance Industries Bharat Petroleum
Global Rank
83 99 225
Revenues ($m)
86,016 76,119 44,582
4 5
6 7 8
267 285
314 357 401
38,885 36,950
34,575 30,746 27,739
Rankings of MNEs
Methods of Internationalisation
Export-based methods
Indirect exporting - through intermediaries
Direct exporting
Equity-based methods
Strategic alliances Joint ventures Merger & acquisitions
Market seekers Raw material seekers Production material seekers Knowledge seekers Political safety seekers Brand seekers
Dunnings View
The drivers of FDI(MNE) activity are: The Search for markets The search for resources Agglomeration economies Efficiency seeking motives
Enhancing Revenues
Global branding The advantages of size
Reducing Costs
Low-cost raw materials Low-cost labour
Employment and Health and Safety legislation in other countries may be more relaxed
Reduce a companys tax bill To take advantage of government grants
Country Risk - risk that business environment in host country will unexpectedly change- sometimes thought of as economic risk
Political Risk - risk that business environment in a host country will change due to political events Financial Risk - risk of unexpected change in the financial or economic environment of a host country Currency risks - transaction exposure; operating exposure; translation exposure
References
Buckley, P.J., & Casson, M.C. (1976) The future of the multinational enterprise, London:Macmillan Buckley, P.J., & Casson, M.C. (2009) The internationalisation theory of the multinational enterprise: A review of the progress of a research agenda after 30 years, Journal of International Business Studies, 40, 1563-1580
Butler, K.C. (2004) Multinational Finance, 3rd ed., Mason, Ohio: Thomson South-Western
Cantwell, J., Dunning, J.H., & Lundan, S.M., (2010) An evolutionary approach to understanding international business activity: The coevolution of MNEs and the institutional environment, Journal of International Business Studies, 41, 567-586 Eiteman, D.K., Stonehill, A.I., & Moffett, M.H. (2010) Multinational Business Finance, 12th ed., Boston, MA: Pearson Education, Ltd. Wall, S., & Rees, B. (2004) International Business, 2nd ed., Harlow, Essex: Pearson Education Limited