A

multinational is an organizational firm that

engages in some form of cross border
commerce, either in the amassing of factor
inputs, or in the distribution of finished
goods or services.

Here well examine

When MNCs create value
When they dont create value
When changes in the environment erode
their potential for value creation

 Investors

can simply invest money in a MNC

in the relevant industry to allocate across its
productive activities around the world.
The MNC decides whether backing the
entrepreneur exceed the opportunity costs.
MNC

compensates for informational and

contractual problems in cross border
markets.
It adds value when it is able to complete a
transaction better than alternative
institutional mechanisms for doing so.

 Cost

increases due to following reasons:

Cultural and language differences
Financial reporting differences across
countries
Differences in legal regimes and enforcement
mechanism

Helps locate scarce engineering talent for an

entrepreneurial venture. This basically helps
both potential employees as well as employers.
Intellectual property rights
Guarantee quality of goods and services that are
moving cross-border
They even substitute for missing specialized
cross-border intermediaries such as executive
search firms, financial analysts etc
Energy and efforts invested in developing in
developing one common set of international
accounting standards.

 The

value chain divides firms activities into

two classes:
Primary activities that directly generate a
good or a service eg. Inbound and outbound
logistics, operations, marketing, sales etc.
Support activities that make the primary
activities possible eg. procurement,
technology development, human resource
management etc.

NIKE
It designs its products in US, uses production
facilities in emerging markets such as Indian
& China and sells to customers all over the
world with major chunk in developed
countries that have high disposable income
Shoe

making labor intensive activity,

countries such as India & China offer
significant cost advantage given the low
labor costs

 Nike

basically an intermediary that brings

together low cost shoe producers in merging
markets with affluent consumers in Western
markets by filling the voids more efficiently
than others

It

is able to add value to the fragmented low

cost emerging market shoe producers and to
customers in advanced economies who wish
to buy branded shoes at affordable prices

1. Cross border supply

demand for funds
2. Transferring financial
services technology
across borders
3. Cross border product
market and labour
market

 Multinationals

can behave as impact

enterprises, driving progress at scale.
They are uniquely positioned to leverage
their size and business models to address
social problems sustainably and at scale.
Corporations can serve as impact enterprises
by creating shared value, using their core
businesses to generate economic value
through social progress.

By reconceiving
products

Meeting social needs

Improving access to products and services
(Capital intensive)

By enhancing
productivity

Labour Intensive
improving company operations to enhance
quality, improve efficiency, or decrease
risk while addressing a social issue

By building
clusters

conditions to improve the operating

environment affecting business and
alleviate social problems
Labour and Capital intensive

 Multinationals

have the choice regarding its

core business model as it seeks to enter
different countries.
It can adapt the way it perform activities or
change the context in which it operates.

 Cross

border voids appear to be fairly

resilient value creation predicated on their
existence is likely to be long-lived.
Limited incentives for specialized
intermediaries ensuring that multinationals
become global intermediaries.