MGMT221 Final Exam

Multinational Enterprise

A firm operating in two or more countries via FDI

Why do firms become MNEs (FSA)

FSA Exploitation (Build on what firm already does good) and FSA Augmentation (going to acquire new advantages)

5 FSA Exploitation reasons

Market seeking, efficiency seeking, natural resource seeking, escape, trade-supportive

3 FSA Augmentation reasons

Cheap labour, raw materials, R&D

How firms internationalise - original

Patent→ Export agent → Own sales rep → Assembly in country → Wholly-owned subsidiary (FDI)

How firms internationalise - updated

Business networking

“Liability of outsidership”

Johanson & Vahlne

2 types of entry modes

Non-equity (low commitment and control) and equity (high commitment and control)

Equity aka

FDI

Four examples of non-equity entry modes

Direct export, indirect export (export agent), licensing, franchising

The three equity/FDI entry modes

International Joint Venture (shared ownership), Wholly-owned subsidiary, Wholly-owned subsidiary

Wholly-owned subsidiary - Greenfield

Built from scratch

Wholly-owned subsidiary - Acquisition

Buy existing firm

First pro of 3 of MNEs

Fortune Global 500 (2025) $42 trillion in revenue and $2.98 trillion in profit and 70 million employees across 33 countries

Second pro of 3 of MNEs

Delivers products and services underpinning modern life e.g. smartphones, cars, food, energy

Third pro of 3 of MNEs

Transfers technology and creates jobs that connect supply chains across borders

9 cons of MNEs

Ethics, Heath & environmental damage, Undue political power, Corporate social irresponsibility, Excessive profits, Tax avoidance, Slave labour, Crowding out local firms, North-South divide

Zhao et al.

180 MNCs in China, balance between economic adaptation and social adaptation to prevent public crises

Dunning

Firms go abroad when they have Ownership advantage, Location advantage, Internalisation advantage