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Understanding Corporate Strategy and Foreign Direct Investment

This chapter provides an in-depth exploration of corporate strategy within multinational corporations (MNCs) and their foreign direct investment (FDI) approaches. It covers the theoretical underpinnings of MNCs as oligopolists and examines the necessity of FDI, addressing factors like market integration, financial market imperfections, and diversification. Additionally, it articulates three key strategies: innovation-based, mature, and senescent MNCs. Finally, the chapter discusses the formulation of global expansion strategies, emphasizing the importance of awareness, entry modes, and competitive advantage.

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Understanding Corporate Strategy and Foreign Direct Investment

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  1. CHAPTER 20 CORPORATE STRATEGY AND FOREIGN DIRECT INVESTMENT

  2. CHAPTER OVERVIEW: • I. THEORY OF THE MULITNATIONAL CORPORATION • II. THE STRATEGY OF MULTINATIONAL ENTERPRISE • III. DESIGNING A GLOBAL EXPANSION STRATEGY

  3. I. THE THEORY OF THE MULTINATIONAL CORPORATION • I. THE THEORY OF THE MULTINATIONAL CORPORATION • A. The MNC as an Oligopolist: Why FDI? • 1. When is FDI justified? • 2. Internalization • 3. Market Integration • a. Vertical • b. Horizontal

  4. THE THEORY OF THE MULTINATIONAL CORPORATION • B. Financial Market Imperfections • 1. Hypothesis • 2. Diversification Effect of the MNC

  5. II. THE STRATEGY OF THE MNC • II. THE STRATEGY OF THE MNC • A. Three strategies: • 1. No. 1 That of the Innovation- based MNC

  6. THE STRATEGY OF THE MNC • Three Strategies (con’t) • 2. No. 2 That of the mature MNC • a. the importance of economies of • scale and • b. economies of scope

  7. THE STRATEGY OF THE MNC • 3. No. 3 The senescent MNC • a. global scanning capability • b. the role of rationalization and • integration.

  8. THE STRATEGY OF THE MNC • 4. FDI and Survival • a. Cost reduction • b. Economies of scale • c. Multiple sourcing • d. Keeping domestic customers

  9. III. DESIGNING A GLOBAL EXPANSION STRATEGY • III. DESIGNING A GLOBAL EXPANSION STRATEGY • A. Five Necessary Elements: • 1. Awareness of profitable investments • -building competitive advantage • 2. Selecting a mode of entry • -evaluate systematically

  10. DESIGNING A GLOBAL EXPANSION STRATEGY • A. Five Necessary Elements (con’t) • 3. Adjusting the Effectiveness of the Entry Mode • - continual auditing • 4. Using appropriate evaluation criteria

  11. DESIGNING A GLOBAL EXPANSION STRATEGY • 5. Estimating the longevity of competitive advantage: • a. Develop competitive strength • transferable overseas. • b. Not easily duplicated

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