Essay about Rim Environmental Factors

1403 Words Apr 11th, 2013 6 Pages
1. Globalization meaning components
Globalization is that the shift toward a more integrated and interdependent world economy such as markets and production. Merging of historically distinct and separate national markets into one huge global marketplace is standardized by global products such as Coca-Cola, Sony PlayStation and so on. Companies hope to lower their overall cost structure and/or improve the quality or functionality of their product offering- increasing their competitiveness. Therefore, they seek for source of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production. Macro factors such as declining in trade barriers and technological changing
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MNEs have to face to currency fluctuation and exchange risks, due to the global transactions. Due to the difference from its own home countries’ economic environment, MNEs need to manage complex demands across barriers of distance, time, language and culture. Largest MNEs are as large as (and perhaps more influential than) mid-sized countries. For example, Exxon Mobil’s value-added is approximately the same as Chili’s added-value in 2003 ($72 billion) Moreover, some industries are completely dominated by MNEs such as automobiles and manufacturing and selling of computers.

3. Motivations to internationalise operations
MNEs motivations to internationalise can be roughly divided into two motivations, traditional motivations and emerging motivations. 1. Traditional motivations
Among the earliest motivations that drove companies to invest abroad was the need to secure key supplies. For example, aluminium producers needed to ensure their supply of bauxite, tire companies went abroad to develop rubber plantations and so on to secure supplies and exploit factor cost differences. Another strong trigger for internationalization could be described as market seeking behaviour. This motivation was particularly strong for companies that had intrinsic advantage, typically related to their technology or brand recognition that gave them a competitive advantage in offshore markets. They eventually realised that additional sales enabled them to exploit

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