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Lecture Highlights - Roles of MNC

Lecture Highlights - Roles of MNC. The global ones are mainly high tech companies. Many are financial institutions or owned by powerful people. Key Role is providing FDI, usually via: M & A Equity holding Financial Restructuring. + impacts on locations, regionally or globally.

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Lecture Highlights - Roles of MNC

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  1. Lecture Highlights - Roles of MNC The global ones are mainly high tech companies Many are financial institutions or owned by powerful people • Key Role is providing FDI, usually via: • M & A • Equity holding • Financial Restructuring + impacts on locations, regionally or globally Code of Conduct Principles on how they comply to good governance principles relating to Human Rights Labour Equality Environment Sustainability Anti Corruption

  2. Why MNCs invest in FDI? Country Attractiveness Marketing Factors Trade Barriers Profit Attractions Cost Factors Investment Supporting

  3. Host Country Cost-Benefits • Host Country Costs • Industrial dominance • Exploitation of raw materials and cheap labour • Bribery and corruption • Interference in political matters • Technological dependence • Disturbance of economic plans • Cultural change • Interference by home government through MNC • Degree of government control may be less than intended • Host Country Benefits • Improves Gross Domestic Product via repatriation of profits, royalties & fees • Increases export opportunities • Political advantages • Job losses • Net effect on imports & exports • Creating competitors

  4. Allegations against MNCs Control of technology transfer pricesInappropriate technology introduction to host country Skip the country when regulation sets in MNC control systems exert neo-colonist relationship with host country Expose country sensitive information in global intelligence networks Produce products that do not create or contribute social value to host country Undermining national labour interests Avoid paying taxes Give best jobs to own boys, especially in HQ circles POORCorporate Social Responsibility Code of Conduct Principles on how they comply to good governance principles relating to Human Rights Labour Equality Environment Sustainability Anti Corruption

  5. Lecture Highlights - Trade Theories • 16th Century Mercantilism theory • Absolute Advantage (Adam Smith) • Comparative Advantage (David Richardo) • 19th Century onwards • Factor Proportions Theory (Heckscher & Ohlin) • Country Similarity Theory (Steffan Linder) • Global Horizons Theory • Product Life Cycle (Vernon) • New Trade Theory • Ownership Advantage Theory (S.Hymer) • Internationalisation Approach (Buckley and Casson) • Global Strategic Rivalry theory • Porter’s National Competitive Advantage (diamond) theory • Internalisation Theory • Eclectic Theory (John Dunning)

  6. Individual /Pair Presentation Student Presents

  7. The Rise of Bangladesh’s Textile Trade Case Study Bangladesh's textile industry – 1.51 m https://www.youtube.com/watch?v=CxKlnkp9SvQ Ethnical Textiles – 3.31m https://www.youtube.com/watch?v=A3xrXC9wcZg https://www.youtube.com/watch?v=hcYYLmcxavA Martin Jacques - When China Rules the World – 10.04 m https://www.youtube.com/watch?v=Og8zBhDDkEQ Source: The Hindu, Dec 20, 2012 Why was the shift to a free trade regime in the textile industry good for Bangladesh? Who benefits when retailers in the US source textiles from low-wage countries suh as Bangladesh? What international trade theory or theories best explain the rise of Bangladesh as a textile exporting powerhouse? How secure is Bangladesh ‘s textile industry from foreign competition? What factors could ultimately lead to a decline?

  8. The Benefits • During Lecture, we saw the POSITIVES: • Capital Formation • Technology Transfer • Regional & Sectoral Development • Internal Competition & Entrepreneurship • Favourable Effect on Balance of Payments • Increased Employment Bangladesh's textile industry – 1.51 m https://www.youtube.com/watch?v=CxKlnkp9SvQ At What Costs? At Whose Costs?

  9. Bangladesh has the advantage of not being China The argument focus is Cost Advantage China Martin Jacques - When China Rules the World – 10.04 m https://www.youtube.com/watch?v=Og8zBhDDkEQ The long version – 1.34 hrs https://www.youtube.com/watch?v=3G1EyvRZmOs

  10. The Costs • During Lecture, we saw the NEGATIVES: • Industrial dominance • Exploitation of raw materials + cheap labour • Bribery and corruption • Interference in political matters • Technological dependence • Disturbance of economic plans • Cultural change • Interference by home government through MNC • Degree of government control maybe less than intended Technology transfer may be too expensive or inappropriate (eg old) Can move out when country regulates Products are for overseas markets and may not benefit local social needs or value MNC’s home country’s labour /employment interests are undermined Avoid taxes Best jobs given to MNC’s privileged people Ethnical Textiles – 3.31m https://www.youtube.com/watch?v=A3xrXC9wcZg https://www.youtube.com/watch?v=hcYYLmcxavA

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