Scope of Operations by Multinational Companies
Scope of Operations by Multinational Companies
- It is the giant multinational corporate firms (MNCs) which spend a lot on the development of new technologies that can greatly benefit the developing countries by transferring the new technology developed by them. Therefore, MNCs can play an important role in the technological up-gradation of the Indian economy
- In recent years, there has been an emerging stream of studies that challenge the idea of the importance of globalization for companies. One study even calls the common assumptions of globalization a “myth” (Rugman, A.,). Needless to say, this particular perspective has generated a lot of interest and debate. But another aspects is that An MNC’s global (i.e., non-regional) operations have higher profit margins than regional operations. There are three distinct types of MNCs exist, namely: regional, global, and home-based. As argued by the proponents of regionalization, roughly 49% of the MNCs had a regional scope in international operations. Implications for theory and practice are presented.
- Recent advances in international business research suggest that most multinational enterprises (MNEs) tend to be regional rather than global in their scope, as they extract most of their sales from their home regions, i.e., have a high home-region focus (HRF). This growing literature supports a Transaction Cost Economics (TCE) perspective on regionalization, since the typically lower transaction costs within the home region allow MNEs to still benefit from foreign market penetration but without the higher costs associated with a global expansion into less familiar and more geographically distant markets.
- The global strategy literature suggests that a low HRF provides firms with flexibility to build and reconfigure international capabilities, while also exposing the firm to vast knowledge pools from a variety of global markets that can increase learning opportunities for the firm, and thus its competitive advantage. Additionally, a global strategy can improve a firm’s efficiency and reduce risk by spreading investments over different countries, allowing the firm to take advantage of fluctuations in international markets.
- Presently numerous multinational enterprises (MNE) run their international marketing activities on a regional basis by grouping together neighbouring countries with relatively homogenous historical, cultural linguistic and economic conditions. Guiding slogans are thereby contrasted with a regional marketing concept based on a global perspective. The advantages of a regional marketing strategy on an internal level, such as cost minimization, efficient communication, achievement of a critical mass, respectively on an external level such as use of existing economic connections or bypassing of trade barriers are emphasized.
- The adoption of a regional strategy has an impact on performance. Empirical results have been mixed. Lee and Marvel found a moderating effect of regional orientation on international SME performance when they used low cost or differentiation strategies whereas Elango did not find any significant link between regional orientation and performance.
- Regionalization being the primary force of internationalization among MNEs, thus renewing debate in the academic literature. So, professionals extended the idea that MNEs existed in both regional and global formats, finding that the latter commanded higher profit margins and suggesting that global orientation perhaps yielded better performance for MNEs
- The benefits of even limited free trade is positive for economic growth and consumer spending, and thus makes the countries within an RTB. ever more attractive markets for MNEs products and services. Thus, it is no surprise that we find considerable support in the literature for the proposition that formation of a regional trading bloc (RTB) significantly increases the foreign direct investment into the RTB as a whole from non-bloc MNEs. Whether such incursions by MNEs are, in fact, a move towards globalization or regionalization appears to be best explained through an examination of context.
- In high altitude resorts, the interest of geographical proximity seems to be minimized. The transfer of certain types of knowledge, skills, and resources does not necessarily require geographic proximity. Referring to the theory of social networks, this result is related to the idea that strong ties (made possible by geographical proximity) may limit the emergence of new ideas, while weak ties (with less geographic proximity) can multiply the sources of information and foster innovation. As such, it has showed that the embedding of social relations has a positive effect on innovation up to a certain stage and then acts as a barrier to innovation.
- The another network dimension is geographical proximity, which describes the spatial or physical distance between members. We retain this feature because many studies (show the importance of geographical proximity in the smooth operation of innovation networks. For example, Broekel, Brenner, and Buerger empirically show that the intensity of interactions among regional actors and between regional and extra-regional actors needs to be balanced to yield positive effects on regions’ innovation performance.
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