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INTRODUCTION The aim of this essay is to look at the key factors that can influence multinational companies MNCs strategic decisions about the design and location of their internal activities as well as to discuss the impact of such activities on those decisions The essay starts with background discussion about the value chain activities and then the next section focuses on each internal activity and discusses the key factors surrounding the design and location of that activity The essay furnishes the discussion with interesting cases from MNCs BACKGROUND DISCUSSION Porter 1985 defines value chain as a series of value-generating activities form the entire business system of an organisation Porter introduced a generic value chain model that comprises a sequence of activities found to be common to a wide range of firms According to Hill 2002 such activities are either primary production and marketing or support activities firm infrastructure human resource management research and development and materials management According to Kotabe 1998 the competitive advantage of a firm influences the decisions as to what activities and technologies it should concentrate investment and managerial resources The comparative advantages of various countries affect the companys decision on where to source and market based on the lower cost of labour and other location factors Hill 2002 defines location economics as the economics that arise from performing a value creation activity in the operational location for that activity wherever in the world that might be p 383 There are two impacts from location of a value chain activity in the optimal location for that activity First it can lower the cost s of value creation and help the firm to achieve a low-cost position Second it can enable a firm to differentiate its product offering from those of competitors Therefore a firm deploying such strategy would have a competitive advantage vis-agrave-vis a firm that bases all its value creation activities at a single location p 383 However when making location
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