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Globalisation and Multinational Business. DTK, After Todaro 2011. To increase the availability and widen the distribution of basic life-sustaining goods . Sustenance: The ability to meet basic needs. Three Core Values Of Development. Three objectives of D evelopment.
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Globalisation and Multinational Business
To increase the availability and widen the distribution of basic life-sustaining goods Sustenance: The ability to meet basic needs Three Core Values Of Development Three objectives ofDevelopment DimensionsofDevelopment Self-Esteem: To be a person To raise levels of living; e.g. Food, shelter, health, protection To expand the range of economic and social choices Freedom from servitude: To be able to choose DTK, After Todaro 2011
Bearable Social Environmental Sustain- ability Equitable Viable Economic
Create Value Profit Eliminate Waste Recognized Interdependence Sustainable Energy Flows Share Knowledge People Planet Humans Nature Co-exist Quality Of Life Accept Responsibility Model Nature
Nature & Environmentalism Ecology Ecology/ Equity Ecology/ Economy Sustainable Equity/ Ecology Economy/ Ecology Economy Equity Society And Socialism Business & Capitalism Economy/ Equity Equity/ Economy
Development • 2. Development is a comprehensive: • economic; 2. social -cultural and • 3. political process • aims at constant improvement of wellbeing of entire population and individuals on basis of active, free and meaningful participation in development • and fair distribution of benefits resulting there of . • (AUSAID, NGO information package, Canberra) Development process by which: political; 2. social and 3. economic structures of a country are improved for purpose of ensuring wellbeing of its populace. (Fisher, 1995) 4. Any adequate definition of development includes 6 dimensions: An economic component A social ingredient A political dimension, A cultural dimension, Ecological soundness, The full-life paradigm. Development : Definitions & Measurements • 3.Human development is: • - process of enlarging people’s choices • choices that are created by expanding human capabilities and functions, • i.e. what people do and can do in their lives.
6 DIMENSIONS OF DEVELOPMENT • (2) A social ingredient measured in wellbeing in: (a) health, (b) education, (c) Housing & (d) employment • (3) A political dimension: embracing values such as: • (a) Human rights, (b) Politicalfreedom, (c) legal enfranchisementof persons, (d) Some form ofdemocracy An economic component dealing with the creation of wealth and improved conditions of material life – equitably distributed 6 DIMENSIONS OF DEVELOPMENT • (4) A cultural element: • In recognitionoffactthatculturesconferidentity and self-worth to people • (6) The full-life paradigm: • Refers to meaningssystems,symbols and beliefsconcerning ultimate meaningoflife and history • (5) Ecological soundness:
The Economic System Source: Witherick et al., 1995
Summary Of The Impact Of TNCs On Host Economies Source: Witherick et al., 1995
Globalisation Global Interactions/ Globalization Global Interactions/Globalization could involve all these things!
Seven Key Issues concerning the role and impact of TNCs Source: Witherick et al., 1995
The Process of cumulative causation Source: Witherick et al., 1995
Backwash or Spread Source: Witherick et al., 1995
Friedmann’s model of Spatial Development Source: Witherick et al., 1995
Globalisation: Setting the Scene • Current issues in the global economy • Defining globalisation • global economic interdependence • implications for business • What is driving globalisation? • market drivers • cost drivers • government drivers • competitive drivers
Globalisation: Setting the Scene • Current issues in the global economy • Defining globalisation • global economic interdependence • implications for business • What is driving globalisation? • market drivers • cost drivers • government drivers • competitive drivers • Globalisation: the good and the bad
Multinational Corporations • Statistics on growth and size of MNCs • the comparative size of MNCs and countries' GDP
Comparison of the 10 largest multinational corporations (by gross revenue) and selected countries (by GDP): 2002
Multinational Corporations • Statistics on growth and size of MNCs • the comparative size of MNCs and countries' GDP • foreign direct investment (FDI) inflows
FDI inflows FDI as % of gross fixed capital formation
FDI inflows FDI as % of gross fixed capital formation
FDI inflows FDI as % of gross fixed capital formation
Multinational Corporations • Diversity among MNCs • size • the nature of the business • overseas business relative to total business • production locations • ownership patterns • organisational structure
Why do Businesses go Multinational? • Categories of multinational organisation • horizontally integrated • vertically integrated • conglomerate • Advantages to firms • reductions in costs • international differences in factor prices • international differences in factor productivity • low-cost access to local markets • spreading overheads
Why do Businesses go Multinational? • Advantages to firms (cont.) • government support in host countries • lower taxes • subsidies • provision of infrastructure • increased demand • spreading risks • can exploit advantages over local firms • ownership of superior technology • entrepreneurial and managerial skills • R&D capacity • access to local technology
Why do Businesses go Multinational? • The product life cycle and the MNC • the launch phase • the growth phase • maturity • late maturity and decline • Problems facing multinationals • language barriers • selling and marketing • relations with host governments • relationships between subsidiaries
MNC Investment and the Host State • Advantages of MNC investment • employment • balance of payments • technology transfer • tax revenues • Disadvantages • uncertainty • power and control by the MNC over the host • transfer pricing • the environment
MNCs and Developing Countries • The scale of MNC investment in developing countries • Advantages to host country • the saving gap • the importance of development finance • the contribution of saving to growth • the foreign exchange gap • public finance gap • skills and technology gaps
MNCs and Developing Countries • Disadvantages to host country • MNCs may drive local firms out of business • limited demand for local components • repatriation of profits • transfer pricing and effects on tax revenues • competition between developing countries to attract MNCs • distorting the whole pattern of development • increasing gap between rich and poor • introducing consumerist values • What can developing countries do?