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Word Count: 776
aOutline the reasons why companies chose to become multinational in scope Illustrate your answers with examples There is an increasing drive for global profits The transnationalization of a firms operations may be motivated by either raising the revenue of selling its products or reducing cost of producing its goods or services The process is a totally logical extension of the firms normal mode of expansion from local to regional to national and then to global scales of operation Two key features of todays world are first competition is increasingly global in its extent and second such competition is extremely volatile This creates an environment of hypercompetition - an environment in which advantages are rapidly created and eroded Firms are no longer competing largely with national rivals but with firms from across the world Motivations for going multinational 3 broad categories why companies become multinational in scope asset-oriented production ocommodities eg oil reserves gold cocoa coffee beans tobacco olabour variations in knowledge and skills in wage costs in labour productivity 61607Percentage Labour Cost Total Cost clothing and footwear - 33 automotive - 10-15 chemicals - 8 TV - 5 61607Labour Productivity as percentage of US 2001 GDP per hour worked Brazil - 25 Poland - 33 UK - 85 Norway - 117 market-oriented production omarket size consumers willingness to buy productsservices and their ability to buy disposable income ostructure of demand eg greater demand for cigarettes in LEDCs strategic advantages oaccess and combine knowledge oexploit geographical differences in production factors eg raw materials labour finance state policies taxation subsidies trade barriers oshift production and resources between territories on a global scale oto minimise risk eg Nestl slow in MEDCs but offset in other regions bSummarise Dunnings eclectic paradigm How useful is it as a theory of why
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