Unformatted text preview: ne Beecham can identify itself as an inside player in
both Europe and the United States. Similarly, when Germany’s
BASF launched biotechnology research at home, it confronted
legal and political challenges from the environmentally conscious
Green movement. In response, BASF (Baden Aniline and Soda Factory) shifted
its cancer and immune system research to two laboratories in
This location is attractive not only because of its large number of
engineers and scientists but also because the Boston area has
resolved controversies involving safety, animal rights, and the
environment. 11 Why do MNCs go global?
NCs To diversify-By establishing worldwide production facilities
and markets, firms can cushion the impact of adverse
economic trends in any single country.
For example, General Motors softened the blow of poor
sales in the United States during the 1990–1991 recession
with strong sales by its European subsidiaries.
In general, geographic diversification works because the
economic ups and downs of different countries are not
Therefore, companies investing overseas benefit from
diversification in the same way that individuals benefit from
investing in a broad portfolio of stocks.
12 MNCs in Changed Context The disintegration of the former Soviet Union and the
movement toward market economies in the newly formed
countries have created a vast new market for international
The reunification of Germany, coupled with the collapse of
communism in Eastern Europe, has created significant new
opportunities for foreign investment.
The European Community and the European Free Trade
Association have created a “borderless” region where
people, capital, goods, and services move freely among the
28 nations without the burden of tariffs.
This consolidation has led to the creation of a single
Eurocurrency” called the “Euro.”
Eurocurrency” MNCs in Changed Context The Nort...
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