Part 1 a regional and global strategy 2

Multinational enterprise (MNE): A company headquartered in one country but having operations in other countries.

1Econ. Christian Suárez Molina, MAE

The sheer size of MNEs is an issue

Some have sales larger than many countrie`s GNI.

Some MNE executives deal directly with heads of state


THE INTERNATIONALIZATION PROCESS

Internationalization: The process by which a company enters a foreign market

Licence: A contractual arragement in which one firm (the licensor) provides access to some of its patents, trademarks, or technology to another firm in exchange for a fee or royalty

Licensor: A company that provides access to some of its patents, trademarks, or technology to another firm in exchange for a fee or royalty

Licensee: A firm given access to some of the patents, trademarks, or technology of another firma in exchange for a fee or royalty


Pressure groups push to restrict MNE`S activities at home and abroad

The effort to create favorable investment environments has led many countries to replace obstacles to FDI (foreign direct investment) with incentives for FDI


The effort to create favorable investment environments has led many countries to replace obstacles to FDI with incentives for FDI.

The growing prevalence a better understanding of the views of the views of home and host countries.


Shareholders Employees Customers Society

Management decisions made in one country have repercussions elsewhere


The effects of an MNE`s activities may be simultaneously positive for one national objective and negative for another

FDI may result in a win-win, win- lose, or lose – lose situation for both countries involved.


Companies are best at serving the interests of shareholders, whereas governments are best equipped to deal with social issues and externalities.

It is hard to determine whether MNE`s actions cause societal conditions

The philosophy, actions, and goals of each MNE are unique


One country`s surplus is another country`s deficit.

The effect of a individual FDI may be positive or negative

The formula to determine effects is simple, put the data used must be estimated and are subject to assumptions.


On the important side, the balance- of- payments effect is positive if the FDI results in a substitution for imports and negative if it results in a increase in imports.

On the export side, the BOP effect is positive if the FDI results in generating exports in the host country and negative if it produces only for the local market and stops sports.


Econ. Christian Suárez Molina, MAE 11

Initial capital flows are positive to the host country, but the flows may be negative over time as the FDI remits dividends or other capital flows back to the home country

Positive for the host country initially and negative for the home country

Positive for the home country and negative to the host country later.


Econ. Christian Suárez Molina, MAE 13

Growth and employment effects are not a zero/sum game because MNEs may use resources that were unemployed or underemployed.

Home – country labor claims that jobs are exported through FDI.

More optiamal use of production factors

The use of unemployed resources

The upgrading of resource quality


Replace local companies Take the best resources Destroy local entrepreneurship Decrease local R&D undertakings

Many actions elicit universal agreement on what is right or wrong, but other situations are less clear.


Ethical truths depend on the groups holding them

Normativism There are universal standards of behavior that all cultures should follow

Managers need to exhibit ordinary decency

Principles of honesty and fairness


Managers need to create competitive advantages through ethical behavior and avoid being perceived as irresponsible

NGO are active in prodding companies to comply with certain standards of ethical behavior

Social responsibility requires human judgment, which is subjective and ambiguous


Legal justification for ethical behavior may not be sufficient since not everything that is unethical illegal.

The law is a good basis for ethical behavior since it embodies local cultural values

As countries tackle similar ethical issues, laws will become similar


Bribery of public officials takes place to obtain government contracts or to get officials to do what they should be doing anyway

Bribes are payments or promises to pay cash or anything of value


The foreign corrupt Practices Act is U.S. legislation that makes bribery illegal. It applies to domestic or foreign operations and to company employees as well as their agents overseas

International multilateral approaches to combating bribery include the OECD, international Chamber of commerce, and United Nations


A zero tolerance pact against bribery was signed by companies at the 2005 world Economic Forum

An effective antibribery compliance program for companies involves setting high standards, communicating them to relevant employees, educating employees on expected behavior, and monitoring compliance.


Companies that extract natural resources, generate air or water waste, or manufacture products, such as autos, that are polluters need to be concerned with their environmental impact.

Sustainability involves meeting the needs of the present without compromising the ability of future generations to meet their own needs, while taking

Global warming results from the release of greenhouse gases that rap heat in the atmosphere rather than allowing it to escape


The kyoto Protocol was signed in 1997 to require countries to cut their greenhouse gas emissions to 5.2 percent below 1990 levels between 2008 and 2012. Some countries have adopted stricter requirements, and others, such as the U.S. , China , and India, are not part of the compliance


U.S. based MNEs must comply with the kyoto Protocol in compliance countries where they may have operations.

System pricing for pharmaceuticals means that companies charge a market price for products sold in industrial


Legal generic products allow countries to purchase drugs at lower costs and comply with drug patents, whereas illegal generic products are fakes that may or may not be of high quality .

Countries with health crises, such as African countries suffering from AIDS, are allowed by TRIPS to manufacture or import generic drugs

India is a major manufacturer of generic drugs and is now moving to R&D of new drugs.


Governments and private foundations are attempting to solve the problem of developing country access to drugs and vaccines through an International Finance Facility for immunization and/or advance-purchase contracts

Major labor issues that MNEs get involves in trough FDI or purchasing from independent manufactures in developing countries are fair wages child labor, working conditions, working, hours, and freedom of association


An estimated 250 million children between 5 and 17 years old are working, but only about 5 percent of child labor is involved in export industries.

Some companies avoid operating in countries where child labor is employed, whereas others try to establish responsible polices in those same countries

MNEs may not be willing to hire local workers who want to work, long hours due to concerns about exploitation


Could result in legal sanctions Could result in consumer boycotts Could lower employee morale Could cost sales because of bad publicity


A major component in a company`s strategy for ethical and socially responsible behavior a code of conduct.

Codes of conduct, involve four dimensions

Set a global policy that must be complied with wherever the company operates

Communicate the code to employees, suppliers, and subcontractors.

Ensure that policies are carried out. Report results to external stakeholders


Part 1 a regional and global strategy 2

Education

christian surez molina

similar econ

fairness econ

ambiguous econ

home country positive

host country

heads ofstate econ

country haverepercussions