Lecture-9-MNC+Management

10 why do mncs go global ncs now smithkline beecham

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Unformatted text preview: ne Beecham can identify itself as an inside player in Now 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 In its cancer and immune system research to two laboratories in Boston suburbs. This location is attractive not only because of its large number of This engineers and scientists but also because the Boston area has resolved controversies involving safety, animal rights, and the environment. environment. 11 Why do MNCs go global? NCs To diversify-By establishing worldwide production facilities To and markets, firms can cushion the impact of adverse economic trends in any single country. For example, General Motors softened the blow of poor For sales in the United States during the 1990–1991 recession with strong sales by its European subsidiaries. In general, geographic diversification works because the In economic ups and downs of different countries are not perfectly correlated. Therefore, companies investing overseas benefit from Therefore, diversification in the same way that individuals benefit from investing in a broad portfolio of stocks. investing 12 MNCs in Changed Context The disintegration of the former Soviet Union and the The movement toward market economies in the newly formed countries have created a vast new market for international commerce. commerce. The reunification of Germany, coupled with the collapse of The communism in Eastern Europe, has created significant new opportunities for foreign investment. opportunities The European Community and the European Free Trade The 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 This Eurocurrency” called the “Euro.” 13 Eurocurrency” MNCs in Changed Context The Nort...
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