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
Why MNCs invest in FDI?
Country Attractiveness
Marketing
Factors
Trade
Barriers
Profit
Attractions
Cost
Factors
Investment
Supporting
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
Allegations against MNCs
1. Control of technology transfer prices
Inappropriate technology introduction to host
country
2. Skip the country when regulation sets in
3. MNC control systems exert neo-colonist
relationship with host country
POOR
Corporate
Social
Responsibility
4. Expose country sensitive information in global
intelligence networks
5. Produce products that do not create or
contribute social value to host country
6. Undermining national labour interests
7. Avoid paying taxes
8. Give best jobs to own boys, especially in HQ
circles
Code of Conduct Principles on how
they comply to good governance
principles relating to
Human Rights
Labour Equality
Environment Sustainability
Anti Corruption
Lecture Highlights - Trade Theories
1. 16th Century Mercantilism theory
2. Absolute Advantage (Adam Smith)
3. Comparative Advantage (David Richardo)
19th Century onwards
4. Factor Proportions Theory (Heckscher & Ohlin)
5. Country Similarity Theory (Steffan Linder)
6. Global Horizons Theory
7. Product Life Cycle (Vernon)
8. New Trade Theory
9. Ownership Advantage Theory (S.Hymer)
10. Internationalisation Approach (Buckley and Casson)
11. Global Strategic Rivalry theory
12. Porter’s National Competitive Advantage (diamond) theory
13. Internalisation Theory
14. Eclectic Theory (John Dunning)
Individual /Pair Presentation
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
Source: The Hindu, Dec 20, 2012
Martin Jacques - When China Rules the World – 10.04 m
https://www.youtube.com/watch?v=Og8zBhDDkEQ
1. Why was the shift to a free trade regime in the textile industry good for
Bangladesh?
2. Who benefits when retailers in the US source textiles from low-wage
countries suh as Bangladesh?
3. What international trade theory or theories best explain the rise of
Bangladesh as a textile exporting powerhouse?
4. How secure is Bangladesh ‘s textile industry from foreign competition?
What factors could ultimately lead to a decline?
The Benefits
During Lecture, we saw the POSITIVES:
1.
2.
3.
4.
Capital Formation
Technology Transfer
Regional & Sectoral Development
Internal Competition &
Entrepreneurship
5. Favourable Effect on Balance of
Payments
6. Increased Employment
Bangladesh's textile industry – 1.51 m
https://www.youtube.com/watch?v=CxKlnkp9SvQ
At What
Costs?
At Whose
Costs?
Bangladesh has the advantage of not being China
The argument focus is Cost Advantage
Bangladesh
Low cost factors
China
China
Is the largest world’s exporter
 sunk FDI
But still MNC have concerns of
increasing cost factors
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
The Costs
During Lecture, we saw the NEGATIVES:
1. Industrial dominance
2. Exploitation of raw materials + cheap
labour
10. Technology transfer may be too
expensive or inappropriate (eg old)
11. Can move out when country regulates
3. Bribery and corruption
4. Interference in political matters
5. Technological dependence
6. Disturbance of economic plans
12. Products are for overseas markets and
may not benefit local social needs or
value
7. Cultural change
13. MNC’s home country’s labour
/employment interests are undermined
8. Interference by home government
14. Avoid taxes
through MNC
9. Degree of government control may
15. Best jobs given to MNC’s privileged
people
be less than intended
Ethnical Textiles – 3.31m
https://www.youtube.com/watch?v=A3xrXC9wcZg
https://www.youtube.com/watch?v=hcYYLmcxavA