Although the Multinational Corporations (MNCs) has no power over the host government, if may have considerable power under that government. By being able to influence certain factors, the MNC has the opportunity to help or harm national economics; in this sense, it may be said to have power against host governments. Critics of the MNC perceive these powers as potential perils to host societies. The strategic aspects of a host country’s national policy that are subject to the influence of the MNC include: 1. Planning and Direction of Industrial Growth Host nations have viewed with concern the tendencies of many MNCs to centralize strategic decisions in their headquarters. For the host governments this signifies loss of control over industrial strategy to the foreign-based MNC. The MNCs allegiances are geocentric; their overall objectives are growth and profits globally rather than in the host economy. These objectives require efficiency in the functional Continue reading
International Business Policies
Reasons for the Increased Foreign Direct Investments
The factors that propel sustained economic development have not changed with time. They include the generation and efficient allocation of capital and labor, application of technology and the creation of skills and institutions. These fact determine how well each economy uses its endowments and adds to them. They also affect how flexibly and dynamically each country responds to changing economic conditions. However, the global context for development has changed enormous the past decades. These changes affect not only the role of Foreign Direct Investment (FDI) in host countries, but also government policies on FDI. The following three are of particular significance. 1. The Nature and Pace of Knowledge (Technological Knowledge Change) The creation and diffusion of productive knowledge have become central to growth and development. “Knowledge” includes not only technical knowledge (research and development, design, process engineering), but also knowledge of organisation, management and inter-firm and international relationships. Much of Continue reading
What is CounterTrade?
Countertrade constitutes an estimated 5 to 30 percent of total world trade. Countertrade greatly proliferated in the 1980s. Perhaps, the single most important contributing factor is Least Developed Countries (LDC’s) decreasing ability to finance their import needs through bank loans. Countertrade, one of the oldest forms of trade, is a government mandate to pay for goods and services with something other than cash. It is a practice, which requires a seller as a condition of sale, to commit contractually to reciprocate and undertake certain business initiatives that compensate and benefit the buyer. In short, a goods-for-goods deal is countertrade. Unlike monetary trade, suppliers are required to take customers products for their use or for resale. In most cases, there are multiple deals that are separate yet related, and a contract links these separable transactions. Countertrade may involve several products, and such products may move at different points in time while Continue reading
Trends in Foreign Portfolio Investments
While Foreign Portfolio Investment (FPI) has traditionally been concentrated in developed markets, new interest has been sparked by the so-called “emerging” capital markets. The emerging markets have at least three attractive qualities, two of which are their high average returns and their low correlations with developed markets. Diversification into these markets in expected to give higher expected returns and lower overall volatility. Many individual investors, as well as portfolio and pension fund managers, are reexamining their basic investment strategies. In the last decade, fund managers realized that significant performance gains could be obtained by diversifying into high-quality global equity markets. These gains are limited, however, by the fairly high cross-correlations returns in these markets. The resulting investment strategy reflects current information. In terms of portfolio theory, adding low-correlation portfolios to an optimized investment portfolio, enhances the reward-to-risk profile by shifting the mean-variance frontier to the left. The portfolio optimization problem Continue reading
Different Challenges Faced by the Multinational Companies (MNC’s)
A multinational company (MNC) is an enterprise that manages production or delivers services in more than one country. There are some challenges faced by MNC’s that transact business in international markets which can hinder its competitiveness hence its controversies and these are as follows; Market Imperfections It may seem strange that a corporation has decided to do business in a different country, where it doesn’t know the laws, local customs or business practices of such a country is likely to face some challenges that can reduce the manager’s ability to forecast business conditions. The additional costs caused by the entrance in foreign markets are of less interest for the local enterprise. Firms can also in their own market be isolated from competition by transportation costs and other tariff and non-tariff barriers which can force them to competition and will reduce their profits. The firms can maximize their joint income by Continue reading
Sustainable Development Goals (SDGs) – An Overview
The United Nations Sustainable Development Goals (SDGs) is a program that was created by the United Nations. Its aim is to achieve an all-round development globally through having the desire to achieve such factors as; hunger and poverty reduction, having many people access both clean and affordable energy, improvement and provision of proper health services, industrialization, innovation and both economic and infrastructural development and many more objectives totaling to seventeen. In other words, it offers a sincerely comprehensive apparition of the future. These sustainable development goals were created and adopted in 2015 September, after the period for which the achievements of Millennium Development Goals (MDGs) were terminated in 2015. However, some of the objectives were substantially met. Nevertheless, some remain unfinished business, to enable the overall global sustainability and prosperity for all by the year 2030. The achievement of these development goals will involve many stakeholders, including the public sector, Continue reading