Lecture Highlights - Roles of MNC

The global ones are mainly

high tech companies

Many are financial

Key Role is providing FDI, usually via:
institutions or owned
• M&A
by powerful people
• Equity holding
• Financial Restructuring

+ impacts on locations,
regionally or globally

Code of Conduct Principles on how

they comply to good governance
principles relating to

Human Rights
Labour Equality
Environment Sustainability
Anti Corruption
 Why MNCs invest in FDI?
Country Attractiveness

Marketing Trade
Factors Barriers

Profit
Attractions

Cost Investment
Factors Supporting
 Host Country Cost-Benefits
Host Country Costs Host Country Benefits

• Industrial dominance • Improves Gross Domestic

Product via repatriation of
• Exploitation of raw materials and profits, royalties & fees
cheap labour
• Increases export opportunities
• Bribery and corruption
• Political advantages
• Interference in political matters
• Job losses
• Technological dependence
• Net effect on imports & exports
• Disturbance of economic plans • Creating competitors
• Cultural change

• Interference by home
government through MNC

• Degree of government control

may be less than intended
 Allegations against MNCs
1. Control of technology transfer prices
Inappropriate technology introduction to host
country
POOR
Corporate
2. Skip the country when regulation sets in
Social
3. MNC control systems exert neo-colonist Responsibility
relationship with host country

4. Expose country sensitive information in global

intelligence networks

5. Produce products that do not create or Code of Conduct Principles on how

they comply to good governance
contribute social value to host country
principles relating to

6. Undermining national labour interests

Human Rights
Labour Equality
7. Avoid paying taxes
Environment Sustainability
Anti Corruption
8. Give best jobs to own boys, especially in HQ
circles
 Lecture Highlights - Trade Theories

1. 16th Century Mercantilism theory

2. Absolute Advantage (Adam Smith)
3. Comparative Advantage (David Richardo)

19th Century onwards

4. Factor Proportions Theory (Heckscher & Ohlin)
5. Country Similarity Theory (Steffan Linder)
6. Global Horizons Theory
7. Product Life Cycle (Vernon)
8. New Trade Theory
9. Ownership Advantage Theory (S.Hymer)
10. Internationalisation Approach (Buckley and Casson)
11. Global Strategic Rivalry theory
12. Porter’s National Competitive Advantage (diamond) theory
13. Internalisation Theory
14. Eclectic Theory (John Dunning)
Individual /Pair Presentation
 The Rise of Bangladesh’s Textile Trade Case Study
Bangladesh's textile industry – 1.51 m
https://www.youtube.com/watch?v=CxKlnkp9SvQ

Ethnical Textiles – 3.31m

https://www.youtube.com/watch?v=A3xrXC9wcZg
https://www.youtube.com/watch?v=hcYYLmcxavA

Source: The Hindu, Dec 20, 2012 Martin Jacques - When China Rules the World – 10.04 m
https://www.youtube.com/watch?v=Og8zBhDDkEQ

1. Why was the shift to a free trade regime in the textile industry good for
Bangladesh?

2. Who benefits when retailers in the US source textiles from low-wage

countries suh as Bangladesh?

3. What international trade theory or theories best explain the rise of

Bangladesh as a textile exporting powerhouse?

4. How secure is Bangladesh ‘s textile industry from foreign competition?

What factors could ultimately lead to a decline?
 The Benefits
During Lecture, we saw the POSITIVES:

1. Capital Formation
2. Technology Transfer
3. Regional & Sectoral Development
4. Internal Competition &
Entrepreneurship
5. Favourable Effect on Balance of
Payments
6. Increased Employment

Bangladesh's textile industry – 1.51 m

https://www.youtube.com/watch?v=CxKlnkp9SvQ

At What
Costs?

At Whose
Costs?
Bangladesh has the advantage of not being China

The argument focus is Cost Advantage

Bangladesh China
China
Low cost factors Is the largest world’s exporter
 sunk FDI

But still MNC have concerns of

increasing cost factors

Martin Jacques - When China Rules the World – 10.04 m

https://www.youtube.com/watch?v=Og8zBhDDkEQ

The long version – 1.34 hrs

https://www.youtube.com/watch?v=3G1EyvRZmOs
 The Costs
During Lecture, we saw the NEGATIVES:
1. Industrial dominance 10. Technology transfer may be too
2. Exploitation of raw materials + cheap expensive or inappropriate (eg old)

labour 11. Can move out when country regulates

3. Bribery and corruption
12. Products are for overseas markets and
4. Interference in political matters may not benefit local social needs or
5. Technological dependence value

6. Disturbance of economic plans 13. MNC’s home country’s labour

7. Cultural change /employment interests are undermined

8. Interference by home government 14. Avoid taxes

through MNC
15. Best jobs given to MNC’s privileged
9. Degree of government control may people
be less than intended
Ethnical Textiles – 3.31m
https://www.youtube.com/watch?v=A3xrXC9wcZg
https://www.youtube.com/watch?v=hcYYLmcxavA