国际经济学英文版章节课件Chap009

1、9,International Factor Movements and Multinational Enterprises,Introduction,Role of international capital flows (investment) Multinational enterprises and international reallocation of capital Analysis of international mobility of labor,Multinational Enterprise (MNE),Identifiable features of these b

2、usinesses: Operation in many host countries Cutting across national borders Direction from a company planning center, distant from host country Glimpse of some of the worlds largest corporations (Table 9.1),Back,MNE: Diversified Operations,Vertical integration Backward integration Forward integratio

3、n Horizontal integration Conglomerate integration Diversification into nonrelated markets,MNE: Investments,Rely on foreign direct investment (FDI): Parent company obtaining sufficient common stock in foreign company Parent company acquires or constructs new plants and equipment overseas Parent compa

4、ny shifts funds abroad to finance an expansion of its foreign subsidiary Earnings of the parent companys foreign subsidiary are reinvested in plant expansion Position of the U.S. with respect to foreign direct investment in 2002 (Table 9.2),Back,Motives for FDI,Firms remain competitive and supports

5、employment at home Economic growth and job creation Stimulates exports of machinery and capital goods Anticipation of future profits Other factors: Market-demand conditions Trade restrictions Investment regulations Labor costs Transportation costs,Demand Factors,Quest for profits through new markets

6、 and sources of demand Tap foreign markets that cannot be maintained adequately by export products Parent companys productive capacity meets domestic demands Market competition Prevent foreign competition by acquiring foreign businesses,Cost Factors,Increasing profit levels through production costs

7、reduction Forms of cost-reducing FDIs: Procuring essential raw materials Reducing labor costs Location affecting transportation costs Government policies providing benefit: Subsidies (preferential tax treatment or free factory buildings),Supplying Products to Foreign Buyers: A-Bs Strategy,Whether to

8、 produce domestically or abroad Example: Anheuser-Busch (A-B), U.S. aims to sell Budweiser beer in Canada Three ways: Direct exporting: Build brewery in Wisconsin to produce and sell to U.S. and Canadian consumers Foreign direct investments: Build brewery in Canada to produce and sell to Canadian co

9、nsumers Licensing: License rights to a Canadian brewery to produce and market Bud in Canada,Direct Exporting Versus FDI /Licensing: A-Bs Strategy,Method A-B chooses dependent on: Economies of scale Transportation and distribution costs International trade barriers Choice between direct exporting and

10、 FDI/ licensing (Figure 9.1),Back,Foreign Direct Investment Versus Licensing,If the firm chooses foreign production, two options are: Establish a foreign production subsidiary License technology to a foreign firm to produce its goods Hypothetical cost conditions confronting A-B (Figure 9.2),Back,Cou

11、ntry Risk Analysis,Assessing the cost and benefits of doing business abroad entails analyses of risks Political risk Financial risk Economic risk Multinational firms and banks obtain help from organizations which analyze risk Risk analysis (Table 9.3),Back,International Trade Theoryand Multinational

12、 Enterprise,Analysis is same, except the approach: Conventional trade model: Based on movement of merchandise among nations Multinational-enterprise analysis: Stresses international movement of factor inputs Differences: Conventional model: Goods exchanged between independent organizations on intern

13、ational markets at competitively determined prices MNEs: Vertically integrated companies; subsidiaries manufacture intermediate goods as well as finished goods,Japanese Transplants in the U.S. Automobile Industry,Japanese Auto Plants in the U.S. (Table 9.4) Provided opportunities to: Silence critics

14、 insistence on local production of autos sold in the U.S. Avoid export restraints imposed by Japan and potential U.S. import barriers Gain access to an expanding market at a time when the Japanese market was nearing saturation Provide a hedge against fluctuations in the yen-dollar exchange rate,Back

15、,Japanese Transplants in the U.S. Automobile Industry,Despite skeptics view, benefits included: Boost in the economies of regions of location Transfer of Japanese quality control, just-in-time delivery, and other production techniques Shortfalls: Extensive use of imported parts by Japanese transplan

16、ts contributing to a U.S. automotive trade deficit with Japan Fewer jobs for U.S. autoworkers Labor productivity figures (Table 9.5),Continued,Back,International Joint Ventures,Business organization established by two or more companies that combines skills and assets Examples of recent joint venture

17、s between U.S. and foreign companies (Table 9.6) Formation types of international joint ventures: Two businesses conducting business in a third country Local private interests Participation by local government,Back,International Joint Ventures,Reasons justifying creation of ventures: Costs too large

18、 to be absorbed by a single company Governmental restrictions on foreign ownership of local businesses Viewed as a means of forestalling protectionism against imports Disadvantages to forming venture: Divided control; problems of two masters Success or failure dependent on companies working together

19、, managing differences,Welfare Effects,Welfare gains: Adds to preexisting productive capacity Fosters additional competition Provides ability to enter new markets neither parent companies could have entered individually Yields cost reductions unavailable if parent companies performed the same functi

20、on separately Welfare losses: May give rise to increased market power; greater ability to influence market output and price Illustration of the welfare effects (Figure 9.3),Back,Multinational Enterprises as a Source of Conflict,Advocates point out several benefits of multinational enterprises Howeve

21、r, critics contend that MNEs often: Create trade restraints Create conflict with national economic and political objectives Have adverse effects on a nations balance of payments,Employment,Effects for the host country MNEs highlight benefits to the labor force MNEs effect on jobs varies: Investments

22、 used to purchase existent local businesses Hiring of foreign managers and other top executives Effects for the source country Issues of runaway jobs and cheap foreign labor Ultimate impact dependent in part on time scale,Technology Transfer,Enhances personal contacts between subsidiaries and local

23、firms Facilitated through demonstration effect Firm showcases its operation and products Technology diffusion aided by competition effect: Focused in innovation and quality improves Maybe detrimental to economic base of donor nations,Technology Transfer: GEs Trade-Off,GEs earlier strategy to compete

24、 in Chinese market: Best equipment at the lowest price By 2000s: GE had to agree to share sophisticated technology Competitors obligated to form joint ventures with state-owned companies Size of Chinas market attractive despite technology sharing clause Trade-off: Short-term sales in China for long-

25、term competition from Chinese manufacturers,National Sovereignty,Fear that presence of MNEs results in a loss of its national sovereignty Political influence of MNEs questioned National economies interdependent and mobiles factors of production Possible loss of national sovereignty a necessary cost,

26、Balance of Payments,Account of the value of goods and services, capital movements, and other items flowing into or out of a country MNEs gain by strengthening payment position Subsidiaries tend to purchase additional capital equipment and other material from U.S. Return inflow of income generated: E

27、arnings of overseas affiliates Interest and dividends Fees and royalties,Taxation,Concessions for MNEs under U.S. taxation policies: Foreign tax credits For MNE headquartered in U.S., amount equal to the income taxes payed to foreign governments Tax deferrals Parent organization has option of deferr

28、ing U.S. taxes paid on the income of its foreign subsidiary Income should be retained overseas,Transfer Pricing,Choice of the transfer prices affects division of the total profit among parts of the company Influences its overall tax burden Foreign and U.S. governments interested in the part that tra

29、nsfer prices play in the realization of corporate profits According to the IRS regulations, enterprises dealing with their own subsidiaries are required to set prices similar to ones meant for unrelated customers,International Labor Mobility: Migration,Volume of immigration to the U.S. (Table 9.7) Benefits from labor movements; often restricted by government controls United States, limits immigration; Immigration Act of 1924 Restricts overall flow of immigrants Implemented a quota that limited number of immigrants from each foreign country,Back,Eff