International Investment & MNCs

International Investment & MNCs

International Investment

Emerging Economies/ Emerging Markets--formerly referred to as Newly Industrialized Countries (NICs)

Multinational corporation

· A business that has subsidiaries outside of its own country-not just about trading abroad

· Has ownership of plants, resource extraction, processing operations, and/or services

· Package of capital, technology, managerial skills, marketing skills

· MNCs are measured in Gross Corporate Product (GCP)

· MNCs are measured in GCP-gross corporate product (total revenue a company makes in a year)

2010-Wal-Mart was 1st with $408.2 M in revenues (source: http://money.cnn.com/magazines/fortune/global500/2010/full_list/)
Exxon-Mobil was 3rd, but their profits = ~ $5 M more than Wal-Mart's
For the last 5 years, W-M, E-M, and Royal Dutch Shell have been the top 3 companies
Ranked with countries= around the 24th largest economy, ranking between Norway & Austria

· MNCs overwhelmingly based in GN: Fortune 500 MNCs

-95% are owned by GN

43% are American or Japanese

-all but 5% held by EDCs

-few GS investors in or holders of MNCs

MNC history:

-Post WWII-Cold War era--LDCs felt threatened by MNCs

-Post-Cold War era, need development, see MNCs as opportunity

LDCs-export processing zones (EPZs), aka Free Trade Zone (FTZ)
-maquilas in Latin America, for example
-over 3000 in over 120 developing countries
China-special economic zones (SEZs)
-started with 4 zones, now has more than 10 zones
-model for others--particularly India
Incentives

-In post CW era, MNCs have helped to internationalize the process of production

Outsourcing- going outside the country to use a foreign labor source to complete some portion of a company's work
Offshoring- hiring a foreign company (or foreign subsidiary) to complete work
New international division of labor- work is completed by an MNC's production network
Intra-firm trading