slide1 n.
Skip this Video
Loading SlideShow in 5 Seconds..
Multi-national corporations and their impact on PowerPoint Presentation
Download Presentation
Multi-national corporations and their impact on

Multi-national corporations and their impact on

378 Views Download Presentation
Download Presentation

Multi-national corporations and their impact on

- - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

    Slide 2:What determines beneficial MNE embeddedness in CEECs? Are MNEs embedded in CEECs with high absorptive capacities (Czech Republic, Hungary) and not embedded in the others (Romania and Bulgaria), which have weak local capacity?

    Slide 3:it allows for possible inter-sectoral comparisons across countries; it is important in the process of EU integration; it is involved in global production networks; it is significant for the CEE economies (in terms of employment and contribution to industrial value added); it is a sector where the role of innovation and knowledge is clearly observed.

    Slide 4: (Switzerland) (England-Netherlands) (Belgium) In Hungary, Romania, Bulgaria and the Czech Republic WHY these companies and countries?

    Slide 5:The largest and most powerful food MNEs in Europe and in the world with global strategies and networks. The best representatives of the current and near-future level of industrial integration between Eastern and Western Europe. All the three companies are present in the four CEECs

    Slide 6:Hungary and the Czech Republic compared to Bulgaria and Romania in order to grasp the diversity of MNEs behavior that exists in the CEECs Similarities the significant place of the agro-food industry in their economies Differences in the nature of the embeddedness of MNEs within them; the first group is part of the first-wave EU enlargement, while the second is part of the second-wave enlargement.

    MNEs, domestic suppliers, and the linkages between the different actors of the National Innovation System MNEs, domestic suppliers, and the linkages between the different actors of the Hungarian Innovation System MNEs, domestic suppliers, and the linkages between the different actors of the Czech Innovation System MNEs, domestic suppliers, and the linkages between the different actors of the Bulgarian Innovation System MNEs, domestic suppliers, and the linkages between the different actors of the Romanian Innovation System Legend: Strong links of MNEs Weak links of MNEs Strong Links of Domestic companies Weak links of domestic companies FDI

    Slide 12:CEE subsidiaries Integrated in the global production and supply chain of the mother company; strong centralized management; Distribute and/or produce many standardized global brands. Use local suppliers in Hungary and the Czech republic and do not use domestic suppliers in Bulgaria and Romania; No R&D internationalization in CEE as a whole; Many governmental initiatives to embed MNEs in the CZ and HU and absence of such in BG and RO. Hungarian and Czech subsidiaries with larger product portfolios then those in Bulgaria and Romania; Larger investments in HU and CZ than in BG and RO;

    Slide 13:CZ and HU subsidiaries beneficially embedded in the local economies due to better investment climate; higher absorptive capacities of these economies; earlier entrance of the MNEs in the beginning of 90s, market leaders, heavy investments; preservation of the socialist supplier networks; geographical proximity to Western Europe; higher purchasing power of the population; governmental programs encouraging linkage creation between MNEs, local suppliers and R&D institutions.

    Slide 14:2006, The Czech Republic the best prepared Nestl Cesko closes its Orion factory as an outcome of divestment from cocoa business; Unilever closed a plant in Zbreh as part of optimization process; production relocated to the plant in Nelahozeves and other European manufacturing centers. InBev closed two breweries in Belgium, among which the famous Branik brewery 2009 Unilever, Nelahozeves Manufacturing : 17-09-2009 - Planned job reductions: 634 - Type of restructuring: Offshoring / Delocalisation - New Location: EU15 - Employment effect start: 01-01-2010 - Employment effect timeline: 30-06-2010 The company has decided to move the production to Poland, Romania and Great Britain. Laid-off workers are to be given severance pay amounting between 12 and 14 average monthly wages.

    Slide 15:2006, Hungary: Kraft Foods leading manufacturer of confectionary closed completely a plant and moved production facilities to Bratislava and Vienna; Unilever closed down its best margarine plant in Europe moved production to Czech republic, Poland and Germany; 200 workers dismissed; Unilever aimed at cutting operation costs to better serve its largest central European markets in Poland and Germany from closer locations. InBev turns into a highly centralized subsidiary with regionally approved suppliers; Nestle uses the global suppliers of the mother company.

    Slide 16:All protection measures removed; free trade regime; Tougher competition coming from the cheaper imported goods; Increased prices of water, electricity, labor force; To increase competitiveness MNEs followed their global optimization plans, which led to concentration of production and plant closures.

    Slide 17:NO focused policies aimed to embed FDI; Late massive privatisation, not clear privatization schemes, unstable political environment and constantly changing legislative framework ; Serious economic crises; Agricultural sector is highly fragmented and there are not many high quality raw material producers; Low absorptive capacity of the domestic firms; Not well developed supplier networks and MNEs source regionally; No deep linkages with the research institutions for scientic projects; Government and regional authorities very passive in regard to linkage creation.

    Slide 18:Nestle one of the largest investors in BG; uses regional suppliers there is a European supply chain of Nestle; produces global and local brands, all missing products from the global portfolio are imported, high import duties on Nescafe and cocoa; centralized decision-making; Unilever the Bulgarian subsidiary completely dependent on the Romanian one; late entrance in the country in 1999, long process to find appropriate factory, very small product portfolio, mainly imported goods; InBev 60% foreign suppliers;integrated in the global production network; concentration of production facilities, closure of two plants; large investments All the three companies have weak linkages with research institutes, financial institutions, local actors.

    Slide 19:Unilever large product portfolio, no partnership with local institutions; inability to source locally no high quality local suppliers; very low purchasing power of the population, limited number premium brands; heavy investments in modernization of the plant; headquarters of South and Central Europe; InBev very high import duties which impede companys work; 140 mn. Euro investment; mix of foreign and local suppliers, larger share of foreign suppliers, large product portfolio, many difficulties during the economic turmoil, but a very dynamic growth since 2003; until 2004 very autonomous subsidiary; change since 2006; Nestle entered very late in 2000, overregulation and restrictions by RO government; ridiculous high import duties; non cooperative local institutions; improvements needed in the judicial system, labor law, etc., looking forward to EU accession to further integrate the subsidiary into the Nestle supply chain;

    Slide 20:2007, Unilever closed down its margarine plant in Bulgaria; relocated production to Ploest, Romania; 100 employees affected; 2008, Nestle relocated its ice-cream production from Romania to Bulgaria (Varna); part of the company re-organization process; convenient from logistical and transport point of view; 6 mil. Euro investment; Varna factory to supply Romanian market and other Balkan countries. 2008, Kraft foods announced the intention to close by the end of 2009, the Brasov unit, with 440 employees. Some of the products will be transferred to the Bulgarian subsidiary of the group. The motivation is the limited area for expansion of the unit located in the centre of Brasov town.The 440 redundant workers will receive compensatory payments. In 2007, the turnover at Brasov site was 137 million euro.

    Slide 21:In 2009, Anheuser-Busch InBev announced the sale of its Central European operations to CVC Capital Partners (CVC); this includes breweries in Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, Romania, Serbia and Slovakia. Istvn Szoke, Head of Central and Eastern Europe at CVC, said: The acquisition marks the first investment in the region for CVC and we are delighted to acquire such a strong business with iconic brands, experienced management and dedicated employees. CVC is committed to developing the group, to be renamed StarBev, into the regional champion and will work with the local management teams and employees to achieve this goal. (Press release, Brussels, 15 october, ABInbev)

    After EU enlargement the idea of a food MNEs embeddedness might be seriously questioned in any country (Western or CEE) from the union. The economic integration of Central and Western Europe was the major force, which provoked and facilitated the processes of company restructurings .

    Slide 23: No claim for strong generalizations; Food industry has its peculiarities oriented mainly to the local market, dependent on local suppliers, difficult transportability of products, heavily dependent on the purchasing power of the population. HOWEVER: Food industry gives important hints for other sectors and global companies. Large restructurings in all sectors of the European economy. Reorganizations and plant closures observed not only in traditional industries, but also in services - telecommunications, postal services, banking and insurance and public administrations. Just a few examples: automotive industry, Ford, Bosch, Volkswagen; transport sector, Airbus; IT sector IBM, etc. EU questions the embeddedness of MNES

    Slide 24: This does not mean that there is no need for focused national and regional policies to improve countries growth and competitiveness; The challenge is how to grasp the knowledge that foreign firms bring, whether they stay forever or for a while.

    Slide 25: Thank you very much for your attention !