Multinational Enterprise - Assignment Example

MULTINATIONAL ENTERPRISE by Student’s name Code+ course name Professor’s name University name City, State Date PART A The worldwide FDI flows increased by 9% in 2013. In 2012, the FDI flows was $1.33 trillion, but increased to $1.45 trillion. The increase was amid the various volatility in the global investments that was as a result of the shift in the market prospects in the direction of a previous tapering in the quantitative easing within USA. There was an increase in FDI inflows in main economic groupings i.e. developed, developing, and transition economies. However, the total FDI flows from the developed economies was still low, however, there is expectation that that it will be rising over the following three years to 52%. The Global inward FDI stock increased by 9%, thus attaining $25.5 trillion, which was a reflection in the increase in the FDI inflows and a robust activities in the stock markets in various parts of the planet (UNCTAD 2014). Fig. 1. FDI inflows, worldwide and by groups of economies, from 1995 to 2013 and forecasts, 2014–2016 (Billions of dollars) The developing Asia is still the globe’s largest beneficial area of FDI flows. The FDI inflows in the SEAN (Association of Southeast Asian Nations) increased to $125 billion-that is 7% more than in 2012. The increased level of FDI flows in the Eastern Asia was significantly enhanced by increasing inflows to China- that became the recipient of the next biggest flows globally. After continuously being just about to be stable during the year 2012, at historical high levels, the FDI flows to the Latin America as well as the Caribbean increased by 14% to almost $292 billion in 2013. Exclusive of the offshore financial points, there was an increment by 6% to $182 billion (UNCTAD 2014). The FDI inflows to Africa increased by 4% to $57 billion. The Southern African nations, particularly South Africa, exhibited huge inflows. The insistent political and social pressures were still subduing flows to the North African countries, but Sudan and Morocco showed a compact FDI growth. The lower level of FDI in Nigeria is a reflection of the withdrawal of the overseas transnational corporations (TNCs) from Nigeria’s oil sector. Within the developed nations, the inflows to European countries rose by 3% in comparison with 2012. Within the European Union, Germany, Spain and Italy significantly recovered in their FDI inflows in 2013. In the country of Spain, the lower labor costs was a major attraction of the interests in the manufacturing TNCs. The major decrease in inflows were evidenced within France, Hungary, Switzerland and England (UNCTAD 2014). The FDI flows to North American countries increased by 23%. The increment was as a result of the acquisition by investors from Asia who helped in the sustenance of the inflows to these countries. The biggest deals comprised of the take-over of Nexen ( an upstream oil and gas company in Canada) by CNOOC (China) at $19 billion; the purchase of Sprint Nextel, the third biggest wireless network service provider in the USA, by the Japanese telecommunications company, Softbank, for $21.6 billion, the biggest business ever by a Japanese firm; and the $4.8 billion gaining of the pork manufacturer Smithfield, by the Shuanghui, the biggest Chinese takeover of a US firm to date. The FDI flows to US increased by 17%, as an indication of economic recovery within US over 2012 (UNCTAD 2014). Fig. 2. FDI inflows: top 20 host economies, 2012 and 2013 (Billions of dollars) The decreasing tendency of the FDI was evidenced in 2012 both in the FDI Greenfield projects and in the cross-border M&As overturned in the year 2013, which was a confirmation that the over-all investment view point improved (as evidenced in fig. 3). The values of the announced Greenfield projects grew by 9% – remaining, on the other hand, significantly below the historic data – while the values of cross-border M&As had an increase of 5% (UNCTAD 2014). In 2013, the FDI Greenfield projects as well as the cross-border M&As exhibited a distinguished patterns amongst the groups of economies. The developing and transition economies substantially performed considerably better that the developed economies, with an upsurge of 17% in the value of the broadcasted greenfield projects (from $389 billion to $457 billion), as well as a tapering increase by 73% for the cross-border M&As (from $63 billion to $109 billion). On the other hand, in the developed countries both the Greenfield investment projects and the Crossborder M&As decreased (by 4% and 11%, respectively). Consequently, the developing and transition countries were the major cause of the overall high shares of the total value of the Greenfield investment as well as the M&A projects (68% and 31% respectively) (UNCTAD 2014). Fig. 3. Historical trends of FDI projects, 2004–2013 (Billions of dollars) PART B The Internalization Theory The post war extension in Western economies saw centralization of creation and increment in firms' size. Correspondingly with – as an outcome of – these advancements, organizations adjusted their authoritative frameworks to adapt to new capacities, new items or new topographies in the more mind boggling resultant structures. The internalization theory of the TNC focuses on these changes within the economic set up. Buckley and Casson focus on a specific sort of business defect: exchange defects as in Coase's investigation. At the point when markets present value-based blemishes there is a motivating force to internalize. Why do companies internalize? What are the points of confinement to internalization? There are advantages of internalization and there are additionally costs; the harmony between the two will focus the utmost to internalization. The advantages of internalization stem from value-based business sector flaws and identifies with some circumstances (Casson 2014, Buckley 2014). First, whenever there is long time lagging between the launch and culmination of the production processes and, in the meantime, prospected markets are non-existent or inadmissible. Second, whenever the productive misuse of business sector control over a transitional item obliges unfair estimating of a kind hard difficult to execute in an outer business, however conceivable to actualize internally. Third, whenever flaws would prompt two-sided convergence of business sector force and in this manner to an insecure circumstance under external market. Fourth, whenever there is imbalance in the position of the buyers and venders in regards to information on the quality, nature and nature of the item; the resultant buyer instability may enhance forward integration. Lastly, whenever there are defects gotten from the government mediation in global markets, for example, the presence of ad valorem tariffs, limitations on capital developments, and errors in rates of taxation (Letto-Gillies 2005). The two main essential parts of internalization related to TNCs are the markets for the intermediary goods and marketplaces for information. Prior to the Second World War, the main aspect that resulted to the occurrence of the multinational enterprises (MNEs) was the need for the primary goods, resulting to the vertical integration throughout the frontiers and the internalization of the middle markets. Since the World War two, the main aspect has been the increase in demand for the knowledge-based goods together with the problems of organizing effective external marketplaces for the intangibles in addition to knowledge. The TNC is an implication of internalization allover countrywide boundaries. Rugman (2002) writes on this matter: ‘‘there is a special reason for believing that internalization of the knowledge market will generate a high degree of multinationality among firms. Because knowledge is a public good which is easily transmitted across national boundaries, its exploitation is logically an international operation.’’ Therefore, the assumptions are that the defective marketplaces bring about encouragements to internalize; the marketplaces for knowledge are significantly imperfect, thus there are strong advantages in their internalization. The internalization theory of the TNC remains effective and in common use. On the other hand, various points of concern have been put across regarding the theory. There arose a query on whether the internalization theory is tautological-as the authors themselves recognize. Casson asserts: ‘‘Internalization is in fact a general theory of why firms exist, and without additional assumptions it is almost tautological.’’ Buckley is similarly expressing misgivings and he states: ‘‘At its most general, the concept of internalisation is tautological; firms internalise imperfect markets until the cost of further internalism outweighs the benefits.’’ In regard to the relevance with the economic grounds, to which this theory is meant to be applicable, various points are worth noting. When the internalization theory was conceived, firms had grown for long through the internal expansion resulting to the concentration and large companies within many industries. But, for the last 40 years, there has been a significant increase in the outsourcing and commonly, in the activities of companies becoming contracted out and purchased on the market. Still, this is the time when internalization theory was more efficient in the global business fraternity. The two macro patterns – years of internalization then several years of externalization – might not, sufficiently explained using the same internalization theory. However, internalization theory has the ability of explaining the choice between internalization and externalization at the level of companies (Cowling 2005). Additionally, the theory of internalization attempts to give an explanation the reasons and under which companies opt for the FDI as opposed to licensing path to growth, therefore, they opt for internalization in the market-based matters. Conversely, even agreeing with the perception that the theory of internalization is to be favored since it cuts transactional expenses faces some challenge. It is not clear on the reason as to why companies should opt for the FDI instead of the exporting path (Letto-Gillies 2005). Transnational monopoly capitalism  This theory is stating that capitalism goes through stages of evolution and transformation whenever a number of its main institutions change considerably with time. The theory is also stating that historic changes towards bigger concentration of industry needs to be integrated into the structure of the economic theory. It is not satisfactory to simply have an assumption of the high strengths of competition, as the magnitude of monopoly is fundamental to the performance of capitalism in various aspects. There is much of concern regarding the theory on the magnitude of concentration of the industry; they type of forces controlling the big companies; if a trend is evident for the stagnation as a result of operational demand failure; and is a significant quantity of waste is required for capitalism to intermittently minimize the demand difficulties. Up to late 1800s moderately great degree of competition was evident in capitalism. The levels of competition underwent changes, on the other hand, over the commercial cycles and the long waves of expansion. Following the incorporation of joint stock companies within the developed nations, corporates experienced growth in sizes within the course of the mid- to late 1800s. In the course of the late 1870s to1890s overproduction resulted to a periodical big downturns and depressions. Responding to this, as the twentieth century turned, a main merger undertaking facilitated more concentration, together with selling costs, for example, advertising, despite the fact imperialism and globalization increased the markets. Therefore, this resulted to a significant increase in profits and accumulation till World War I. In 1930s a substantial degree oligopolistic and monopolistic competition turned out to be institutionalized in the main capitalist countries. Using the postwar upsurge of the 1950s till the early 1970s, the dominating oligopolistic segment controlled the main industrial sector, on the other hand, the fragile competitive segment was surviving through contracts and agreements with the prevailing segment. By then, monopoly capitalism was perceived on the basis of the big firms, big unions, and big governments (Cowling 2005, Hoenen and Hansen 2009). Whenever the forceful heights of trade are under oligopolistic control, the profit mark-ups have the possibility of increasing with time. Those receiving earnings from profit afford a significant tendency of saving, resulting to lower summative demands, except when the investment increases, which is not likely since investment is dependent on consumption. With productivity being bigger than demand, capacity output utilization decreases, resulting to the possibility of inadequate demand (Hoenen and Hansen 2009). The tendency to stagnation is creating atypical solutions, for instance, wasteful advertisements and other sales cost; destructive military expenditure; and international company dominance of the culture. On the basis of monopolistic capitalism, billions of dollars become a waste on a notable consumption and fashion of reinforcing social discrepancy. Increasing administrative bonuses increased class divisions and expanded inequality. Monopolistic capital enterprises enhance the deterioration of work by means of skill fragmentation to smaller units of minor abilities. Employees are a smaller amount of main craftspeople and more ordinary support to the technical gear. Credit creation might significantly accelerate consumption to decrease total demand issues. However, lack of more real wages, this might result to more debts and intensifying speculative bubbles that result to intermittent huge downturns, for example the recession that happened between 2001 and 2003 in US. The concern of realization of the surplus progresses as the needs of businesses and privilege offset the possibility of egalitarian reforms. In the Transnational Monopoly Capitalism, various concerns regarding the transnationals spreading stagnation trends to the worldwide economy are evident. Demand problems worsen whenever the power of labor declines and governments keep on reducing the productive social investments. As the significant globalization apparently increases competition, it might raise the power of big firms by use of lesser costs and bigger markets. There is emphasis on the distributional conflicts between executives and the shareholders, and the manner in which managerial salaries form a part of the economic surplus (instead of becoming a necessary cost) (Cowling 2005). PART C Though transnational companies hire only a small percentage of the globe’s labor force, they are specifically vital employers in various sectors and countries. For instance, transnational companies account for 20 percent of all the paid employment in the non-agricultural sector and are significantly essential within the manufacturing industries where technology is vital (Gillies 2005). As a matter of fact, in both the industrialized and developing economies, transnational corporations, such as Nissan, significantly offer high salaries, safe working conditions and enhanced benefit packages compared to the locals companies. There are various reasons as to why Nissan, amongst other TNCs, offer better salary packages often provide higher wages. The first one is that the company tries to embark on higher-skill zones within developed economies. Secondly, within the developing economies, there exist substantial discrepancies between the TNCs and the local companies in relation to technological application, economies of scale and management approach; and lastly, TNCs aim at deflecting nationalist sentiments against the extraneous economic bodies (Casson 2014). Though TNCs usually avail better treatment of their employees compared to the local companies, their decisions are hardly beyond reproof. As a matter of fact, their labor strategies within the developing nations in regard to subcontractors and export processing regions are usually intolerable. TNC workers within the developing nations usually work for excessively long hours in risky surroundings and receive little remuneration and no recompense for their extra hours of work. The workers have significantly low unionization rates, inadequate job security and, sometimes, fewer chances for trainings or growth (Gillies 2005, Cowling and Tomlinson 2005). Transnational corporations, such as Nissan, have indirect impact on social development based on their dissemination of their technology to their host nations. The technology that is transmitted has the likelihood of assuming various forms such as hardware, for example, machinery and various types of equipment; software for example blueprints; processing and production designs; and trainings on supervision, marketing and quality control techniques. In addition, this technology is transferred using various techniques such as joint ventures, overseas direct investments, licensing agreement, turnkey sites, technical aid, subcontracting engagements as well as non-equity investments. The Nissan Motor Company, Ltd., which is an international maker of automobiles experienced a monumental improvement in 2000. The good results that resulted to its U-turn was associated with its association with Renault as well as its new CEO Carlos Ghosn. The CEO made particular changes within the company which have been perceived to have brought the organization back into making substantial profits. On the other hand, the CEO faced various cultural concerns that required a tactful way of being tackled so as to make sure that there was an effective execution of restructuring strategies. As a fragment of the Nissan Way, the organization issued particular Career Counsellors, for ladies only. The session was meant to have the women be offered additional career guidance and advancement. The Nissan Company had a talented management approach and incorporated a broad "whole workforce" technique. It entailed various activities that focused on Proficiency Management, Performance Organization, Profession Development and Progression Management. As one of the restructuring approaches, Mr. Ghosn ended up closing down various plants and this resulted to loss of jobs by any employees. Though some might criticize this as a sincere oversight by Mr. Ghosn, some believed that there was essence for the company to do so. As the arguments progressed on this matter, professionals were almost in agreement with the perception that the incident would be recalled as a horrifying scenario in the history of reorganization though, would also be a vital lesson to other companies that plan for a restructuring activity. Employee welfare 1. Training Nissan Motor Manufacturing (UK) Ltd, or NMUK, has a robust Training branch and is meant to offer a diverse on and off employment trainings. Flexible Learning Centre existing on-site has been made accessible to all employees and enables them to participate in more than 300 programs. Technical on-the-job trainings are accessible to all employees, and majority of the programs are delivered on-site by proficient training team. People-development programs (such as presentation skills) are also offered to the employees. NMUK uses considerably more per head on employee-development compared to the UK industry average. Nissan Motor Manufacturing (UK) Ltd has a Continuous Development Program (CDP) in which, employees are offered individual as well as proficiency objectives annually, and get appraisal based on the set objectives. The appraisal is reflected by the increment of the salaries of the employees. The appraisals help in identifying the various areas that require additional. 2. Job rotation As a strategy of keeping the workplace have more flexibility, NMUK has a dogma of “1 worker -> 3 jobs, 3 workers -> 1 job”. That is, an employee has to be proficient in no less than three dissimilar professions, and no less than three workers should have the capability of handling each of the jobs. This strategy makes sure that each and every task can be taken care of should there be an instance of absence. This also means that tasks can be frequently interchanged so as not to have the employees bored by a specific responsibility. Kaizen “Kaizen” is a Japanese word that means '’Continuous Improvement'’. NMUK motivates all of its employees to look for places in which developments in their working setting, irrespective of how small, could be effected. For instance, a line-worker might be required to bend down so as to pick some parts out of boxes as the vehicles go past. This can have medical and safety effects, and also waste a lot of time. Kaizen teams could then have investigations, and perhaps bring about an alternative in which the boxes are stored at optimum heights, that are easily reached by the employees. Kaizen teams are usually situated in all the departments. The Kaizen teams emphasize on the small, practicable enhancements, though big Kaizen tasks have been carry out, for example, the platform that follows the vehicles down the lines to avoid employees from walking beside it as they proceed with their work (Bunji 1995). Employment NMUK is termed to be amongst the top most productive car plants within European countries. The company produces more 'cars per worker' compared to their competitors. The company has 4,500 employees directly employed, and around 500 employees under contract, indirect employees in United Kingdom. Globally, the company has 23,085 employees hired on non-consolidated grounds and 142,925 workers hired on consolidated grounds. Workers at the Nissan Motor Manufacturing (UK) Ltd work weekly for a cumulative of 39 hours. Though the Office employees work on the basis of a fixed 'Day shift', the manufacturing workers work by interchanging their morning and evening shifts. Their morning shifts usually start as from 7am to 3:18pm. The evening shifts usually start as from almost 4:35pm to 12:53am. The intervals f the shifts might differ based on the requirements. Whenever staff are required, they work during their overtimes, however, the schedules are harmonized by being balance throughout the year with the planned downtime (Scotsman 2009). '3-shift' structure has been implemented during the periods of high demand, being translated into “the factory is active 24 hours a day”. This strategy gets only effected when NMUK managers have the assurance that the demand is substantially sufficient. Line 1 ran 3 shift production as from August 2008 to the early January 2009 being meant to arrest the exceptional demands for the Qashqai, on the other hand, as a result of the credit crunch as well as the falling orders, the 3rd shift was postponed and individuals were frees by voluntary redundancy (Scotsman 2009). Employees at the Nissan Motor Manufacturing (UK) Ltd use various techniques in ensuring that productivity is constantly high. Three of these are: Kaizen, Just in Time and Job Rotation. In July 2011, Nissan Motor Manufacturing (UK) Ltd made an announcement that the company would be hiring an additional 200 jobs to handle the task of recording levels of production (Tyne 2011). Just in Time (JIT) Just in Time (JIT) ideology, offers encouragement of the use of the least quantities of resources (for example; space, time, materials, employees) required in adding value to the goods. The Nissan Motor Manufacturing (UK) Ltd applies this managerial approach all over the company and outside. Synchronous Suppliers convey chunks line-side only whenever they have been requested to, thus minimizing the essence of storing huge supplies of these parts at a greater expense (Tyne 2011). Reflection on the Assignment Main lessons learnt The decreasing tendency of the FDI was evidenced in 2012 both in the FDI Greenfield projects and in the cross-border M&As overturned in the year 2013, which was a confirmation that the over-all investment view point improved. In 2013, the FDI Greenfield projects as well as the cross-border M&As exhibited a distinguished patterns amongst the groups of economies. The developing and transition economies substantially performed considerably better that the developed economies, with an upsurge of 17% in the value of the broadcasted greenfield projects (from $389 billion to $457 billion), as well as a tapering increase by 73% for the cross-border M&As (from $63 billion to $109 billion). The theory of internalization attempts to give an explanation the reasons and under which companies opt for the FDI as opposed to licensing path to growth, therefore, they opt for internalization in the market-based matters. Transnational monopoly capitalism theory states that capitalism goes through stages of evolution and transformation whenever a number of its main institutions change considerably with time. The theory is also stating that historic changes towards bigger concentration of industry needs to be integrated into the structure of the economic theory. Most interesting lesson The main reasons as to why Nissan, amongst other TNCs, offer better salary packages. The first one is that the company tries to embark on higher-skill zones within developed economies. Secondly, within the developing economies, there exist substantial discrepancies between the TNCs and the local companies in relation to technological application, economies of scale and management approach; and lastly, TNCs aim at deflecting nationalist sentiments against the extraneous economic bodies. Most challenging aspect Linking the theories with the NISSAN Company was a challenge. Its effectiveness to learning module We have gotten the ability of being able to critically analyze resources while addressing the essay questions. Reference List Letto-Gillies, G 2005, Transnational Corporations and International Production: Concepts, Theories and Effects Scotsman, 2009, Nissan sheds 1,200 jobs as slump hits UK's biggest car factory, available at http://www.scotsman.com/news/nissan-sheds-1-200-jobs-as-slump-hits-uk-s-biggest-car-factory-1-753035 Tyne, W, 2011, Sunderland's Nissan creates 200 new jobs, available at http://www.bbc.com/news/uk-england-tyne-14230231 Bunji, T1995, The improvement engine: creativity & innovation through employee involvement: the Kaizen teian system. Productivity Press. p. 34.  Rugman, A 2002, International Business: Theory of the multinational enterprise, Taylor & Francis UNCTAD, 2014, World investment report 2014, Read More