Advantages Of Proximity Concentration Tradeoff

The OLI theory refers to ownership, location, and internationalization (Dunning, 2000). It is a basic theory proposed by John Dunning in an attempt to explain the incentives behind the MNEs going overseas (Dunning, 1993), organizational forms of MNEs, the MNE’s location choices, and the decision choice that lay between FDI and its alternatives like international licensing, trade and outsourcing (Javorick, 2004). The Ownership advantage is how a firm’s tangible and intangible assets are used in overcoming extra costs of doing business in the global market and explain why a home-grown country firm as opposed to a foreign firm manufactures in a foreign country. Location advantage offers explanation to why a home-based MNE may choose to manufacture in a foreign country instead of home country (Helpman et al., 2004). Lastly, internationalization advantage is attributed to why a home-based MNE may choose FDI instead of licensing to gain production in a foreign country (Athreye and Chen, 2009).

d. Rise of Internet-based global telecommunications networks has allowed some service enterprises to relocate some of their value-creation activities to different nations.

The IT Service industry has expanded rapidly. Many companies worldwide have made the decision to outsource this industry to offshore companies. Worldwide demand has increased growth to 40 to 50 percent on an annual compounded rate basis. Many developing nations like Latin America and Asia have made an attempt to obtain some of the IT offshoring business from countries like the United States because it is seen as not only a source for

Constraints on Multinationals Multinationals generally start off with clear advantages in two areas: They have

In terms of amounts, German FDI activities are concentrated in the services sector (71%), mainly in the financial intermediation sector (37%). Both trade and the transportation and communication sector likewise played a key role. Manufacturing led by the chemicals industry and the car sector, accounts for around 25%.

Multinational Corporations”. The analysis will evaluate factors motivating firms to move off-shore and the associated impact on the U.S. work force. The three measures that will be discussed are 1) value added (i.e. the measure of capital and labor gain at a given production stage), 2) capital expenditures (i.e. land, buildings and equipment), and 3) employment (i.e. number of jobs lost/created). The paper will conclude with a discussion of outcomes between 1977 – 2003 using data supplied by the Bureau of Economic Analysis.

Global manufacturing turns out to be more prevalent as opposed within global marketplaces is extremely elevated and persists to expand; manufacturing is a significant component in value-chain stratagem. Global manufacturing is utilized to possess a vanguard over your contenders, since other states may hold a profusion of exclusive resources, for instance, inexpensive labor, or assistance in supplementary approaches for example eliminating trade obstructions (Porter, 1985).

The article “Making the Most of Foreign Factories”, written by Kasra Ferdows discusses how companies can and should obtain the full potential of their factories abroad. She begins by stating that there are two approaches to manufacturing and a factory’s importance to the company is based on the approach the manager of the factory takes. She also exclaims how she thinks the gap between companies that treat their foreign factories as a source of competitive advantage and those that do not is widening.

Direct jobs: size of the foreign owned industry and the intensity of its production process.

As the world becomes increasing dependent on information technology (IT) products and services, the global IT services outsourcing industry has increased exponentially. Efforts to reduce costs and focus more on their core competencies have corporations outsourcing and offshoring many of their IT services. Offshoring of IT services have been growing at 40 to 50 percent a year. Brazil, like India, has stepped up to the challenge and has begun a campaign to build a strong international competitive position in the IT offshoring

Countries are enabled by free international trade to specialise or to focus in the production of the goods in which they have a comparative advantage. Specialisation countries can take the benefit of efficiencies generated from increased output and economies of trade. The size of the firm’s market are increased by the international trade which results in lower average costs and increasing in productivity, as it ultimately leads to increase in production.

FDI allows the home country to invest into the host country to produce, advertise, and distribute products, in order to upsurge their market share and provides a long-term investment and enhancement. (Moosa, 2002)

transactional costs. This can be achieved through vertical integration where the firms relocate their own suppliers and customers to a foreign market in the attempt to minimize costs such as additional transportation costs, tariffs and exchange rate fluctuation. It is understood that when market risk and uncertainty is high, then transaction costs are high, and internalisation of operations (undertaking of FDI) is preferred (Assunção, Forte & Teixeira, 2011,p.5). Government policies on subsidies, tariffs, tax holidays and incentives, exchange restrictions and foreign investment restraints may influence FDI. A host country may attempt to protect their domestic industries via the implementation of higher import tariffs. The higher the import duties, the higher the cost of importing, reducing profit margin and in turn discourage firms from importing goods. This component explains why MNEs prefer to undertake FDI rather than alternatives such as exporting or licensing to gain entry into the market. (Denisia, 2010, p. 108).

Although international trade increase the demand for labour, however, labour in developed countries loss manufacturing jobs because firms are relocates their production to gain

FDI in Services In 2000, share of FDI in services to total FDI inflows in India was just 1.8% and afterwards it grew steadily to reach a record all-time high of 34.7% during 2006 but declined afterwards. Of the cumulative FDI in services during 2000-2010, financial services accounted for bulk of the inflows (41.7%) followed by banking services (9.6%), and both non-financial services and R&D sharing 9.5% each (Table 1). Share of financial services,