Automotive industry in the United Kingdom
The automotive industry in the United Kingdom is now best known for premium and sports car marques including Aston Martin, Bentley, Daimler, Jaguar, Lagonda, Land Rover, Lotus, McLaren, MG, Mini, Morgan and Rolls-Royce. Volume car manufacturers with a major presence in the UK include Ford, Honda, Nissan, Toyota and Vauxhall Motors (owned by General Motors). Commercial vehicle manufacturers active in the UK include Alexander Dennis, Ford, GMM Luton (owned by General Motors), Leyland Trucks (owned by Paccar) and London Taxis International (owned by Geely).
In 2008 the UK automotive manufacturing sector had a turnover of £52.5 billion, generated £26.6 billion of exports and produced around 1.45 million passenger vehicles and 203,000 commercial vehicles. In that year around 180,000 people were directly employed in automotive manufacturing in the UK, with a further 640,000 people employed in automotive supply, retail and servicing.
The UK is a major centre for engine manufacturing and in 2008 around 3.16 million engines were produced in the country. The UK has a significant presence in auto racing and the UK motorsport industry currently employs around 38,500 people, comprises around 4,500 companies and has an annual turnover of around £6 billion.
The origins of the UK automotive industry date back to the final years of the 19th century. By the 1950s the UK was the second-largest manufacturer of cars in the world (after the United States) and the largest exporter. However in subsequent decades the industry experienced considerably lower growth than competitor nations such as France, Germany and Japan and by 2008 the UK was the 12th-largest producer of cars measured by volume. Since the late 1980s many British car marques have been acquired by foreign companies including BMW (Mini and Rolls-Royce), SAIC (MG), TATA (Jaguar and Land Rover) and Volkswagen Group (Bentley). Rights to many currently dormant brands, including Austin, Riley, Rover and Triumph, are also owned by foreign companies.
Famous and iconic British cars include the Aston Martin DB5, Aston Martin V8 Vantage, Bentley 4½ Litre, Jaguar E-Type, Land Rover Defender, Lotus Esprit, McLaren F1, MGB, original two-door Mini, Range Rover and Rolls-Royce Phantom III. Notable British car designers include John Polwhele Blatchley, Ian Callum, Colin Chapman, Alec Issigonis, Charles Spencer King and Gordon Murray.
Transportation is a major contributor to air pollution in most industrialised nations. According to the American Surface Transportation Policy Project nearly half of all Americans are breathing unhealthy air. Their study showed air quality in dozens of metropolitan areas has worsened over the last decade. In the United States the average passenger car emits 11,450 pounds (5,190 kg) of the greenhouse gas, carbon dioxide annually, along with smaller amounts of carbon monoxide, hydrocarbons, and nitrogen.
Animals and plants are often negatively impacted by automobiles via habitat destruction and pollution. Over the lifetime of the average automobile the "loss of habitat potential" may be over 50,000 square meters (540,000 sq ft) based on primary production correlations. Animals are also killed every year on roads by automobiles.
Growth in the popularity of vehicles and commuting has led to traffic congestion. Brussels is considered Europe's most congested city.
Fuel taxes may act as an incentive for the production of more efficient, hence less polluting, car designs (e.g. hybrid vehicles) and the development of alternative fuels. High fuel taxes may provide a strong incentive for consumers to purchase lighter, smaller, more fuel-efficient cars, or to not drive. On average, today's automobiles are about 75 percent recyclable, and using recycled steel helps reduce energy use and pollution. In the United States Congress, federally mandated fuel efficiency standards have been debated regularly, passenger car standards have not risen above the 27.5 miles per US gallon (8.55 L/100 km; 33.0 mpg-imp) standard set in 1985. Light truck standards have changed more frequently, and were set at 22.2 miles per US gallon (10.6 L/100 km; 26.7 mpg-imp) in 2007.
Oil consumption in the twentieth and twenty-first centuries has been abundantly pushed by automobile growth; the 1985–2003 oil glut even fuelled the sales of low economy vehicles in OECD countries. The BRIC countries might also kick in, as China briefly was the first automobile market in December 2009.
Nanotechnology (sometimes shortened to "nanotech") is the manipulation of matter on an atomic and molecular scale. The earliest, widespread description of nanotechnology referred to the particular technological goal of precisely manipulating atoms and molecules for fabrication of macroscale products, also now referred to as molecular nanotechnology. A more generalized description of nanotechnology was subsequently established by the National Nanotechnology Initiative, which defines nanotechnology as the manipulation of matter with at least one dimension sized from 1 to 100 nanometers. This definition reflects the fact that quantum mechanical effects are important at this quantum-realm scale, and so the definition shifted from a particular technological goal to a research category inclusive of all types of research and technologies that deal with the special properties of matter that occur below the given size threshold. It is therefore common to see the plural form "nanotechnologies" as well as "nanoscale technologies" to refer to the broad range of research and applications whose common trait is size. Because of the variety of potential applications (including industrial and military), governments have invested billions of dollars in nanotechnology research. Through its National Nanotechnology Initiative, the USA has invested 3.7 billion dollars. The European Union has invested 1.2 billion and Japan 750 million dollars.
Nanotechnology as defined by size is naturally very broad, including fields of science as diverse as surface science, organic chemistry, molecular biology, semiconductor physics, microfabrication, etc. The associated research and applications are equally diverse, ranging from extensions of conventional device physics to completely new approaches based upon molecular self-assembly, from developing new materials with dimensions on the nanoscale to direct control of matter on the atomic scale.
Scientists currently debate the future implications of nanotechnology. Nanotechnology may be able to create many new materials and devices with a vast range of applications, such as in medicine, electronics, biomaterials and energy production. On the other hand, nanotechnology raises many of the same issues as any new technology, including concerns about the toxicity and environmental impact of nanomaterials, and their potential effects on global economics, as well as speculation about various doomsday scenarios. These concerns have led to a debate among advocacy groups and governments on whether special regulation of nanotechnology is warranted.
As of August 21, 2008, the Project on Emerging Nanotechnologies estimates that over 800 manufacturer-identified nanotech products are publicly available, with new ones hitting the market at a pace of 3–4 per week. The project lists all of the products in a publicly accessible online database. Most applications are limited to the use of "first generation" passive nanomaterials which includes titanium dioxide in sunscreen, cosmetics, surface coatings, and some food products; Carbon allotropes used to produce gecko tape; silver in food packaging, clothing, disinfectants and household appliances; zinc oxide in sunscreens and cosmetics, surface coatings, paints and outdoor furniture varnishes; and cerium oxide as a fuel catalyst.
Further applications allow tennis balls to last longer, golf balls to fly straighter, and even bowling balls to become more durable and have a harder surface. Trousers and socks have been infused with nanotechnology so that they will last longer and keep people cool in the summer. Bandages are being infused with silver nanoparticles to heal cuts faster. Cars are being manufactured with nanomaterials so they may need fewer metals and less fuel to operate in the future. Video game consoles and personal computers may become cheaper, faster, and contain more memory thanks to nanotechnology. Nanotechnology may have the ability to make existing medical applications cheaper and easier to use in places like the general practitioner's office and at home.
The National Science Foundation (a major distributor for nanotechnology research in the United States) funded researcher David Berube to study the field of nanotechnology. His findings are published in the monograph Nano-Hype: The Truth Behind the Nanotechnology Buzz. This study concludes that much of what is sold as “nanotechnology” is in fact a recasting of straightforward materials science, which is leading to a “nanotech industry built solely on selling nanotubes, nanowires, and the like” which will “end up with a few suppliers selling low margin products in huge volumes." Further applications which require actual manipulation or arrangement of nanoscale components await further research. Though technologies branded with the term 'nano' are sometimes little related to and fall far short of the most ambitious and transformative technological goals of the sort in molecular manufacturing proposals, the term still connotes such ideas. According to Berube, there may be a danger that a "nano bubble" will form, or is forming already, from the use of the term by scientists and entrepreneurs to garner funding, regardless of interest in the transformative possibilities of more ambitious and far-sighted work.
Outsourcing is contracting with another company or person to do a particular function. Almost every organization outsources in some way. Typically, the function being outsourced is considered non-core to the business. An insurance company, for example, might outsource its janitorial and landscaping operations to firms that specialize in those types of work since they are not related to insurance or strategic to the business. The outside firms that are providing the outsourcing services are third-party providers, or as they are more commonly called, service providers.
Although outsourcing has been around as long as work specialization has existed, in recent history, companies began employing the outsourcing model to carry out narrow functions, such as payroll, billing and data entry. Those processes could be done more efficiently, and therefore more cost-effectively, by other companies with specialized tools and facilities and specially trained personnel.
Currently, outsourcing takes many forms. Organizations still hire service providers to handle distinct business processes, such as benefits management. But some organizations outsource whole operations. The most common forms are information technology outsourcing (ITO) and business process outsourcing (BPO).
Business process outsourcing encompasses call center outsourcing, human resources outsourcing (HRO), finance and accounting outsourcing, and claims processing outsourcing. These outsourcing deals involve multi-year contracts that can run into hundreds of millions of dollars. Frequently, the people performing the work internally for the client firm are transferred and become employees for the service provider. Dominant outsourcing service providers in the information technology outsourcing and business process outsourcing fields include IBM, EDS, CSC, HP, ACS, Accenture and Capgemini.
Some nimble companies that are short on time and money, such as start-up software publishers, apply multisourcing -- using both internal and service provider staff -- in order to speed up the time to launch. They hire a multitude of outsourcing service providers to handle almost all aspects of a new project, from product design, to software coding, to testing, to localization, and even to marketing and sales.
The process of outsourcing generally encompasses four stages: 1) strategic thinking, to develop the organization's philosophy about the role of outsourcing in its activities; 2) evaluation and selection, to decide on the appropriate outsourcing projects and potential locations for the work to be done and service providers to do it; 3) contract development, to work out the legal, pricing and service level agreement (SLA) terms; and 4) outsourcing management or governance, to refine the ongoing working relationship between the client and outsourcing service providers.
In all cases, outsourcing success depends on three factors: executive-level support in the client organization for the outsourcing mission; ample communication to affected employees; and the client's ability to manage its service providers. The outsourcing professionals in charge of the work on both the client and provider sides need a combination of skills in such areas as negotiation, communication, project management, the ability to understand the terms and conditions of the contracts and service level agreements (SLAs), and, above all, the willingness to be flexible as business needs change.
The challenges of outsourcing become especially acute when the work is being done in a different country (offshored), since that involves language, cultural and time zone differences.
Franchising is a business model in which many different owners share a single brand name. A parent company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement.
Franchising is a faster, cheaper form of expansion than adding company-owned stores, because it costs the parent company much less when new stores are owned and operated by a third party. On the flip side, potential for revenue growth is more limited because the parent company will only earn a percentage of the earnings from each new store. 70 different industries use the franchising business model, and according to the International Franchising Association the sector earns more than $1.5 trillion in revenues each year.
The franchising business model is used across many industries, but it is most popular in the fast food restaurants, hotel, and casual & upscale restaurants industries. According to an International Franchise Association study, franchisee-owned locations accounted for 56.3 %, 18.2 %, and 13.1 % of each respective industry's total locations in 2001.
McDonald's (MCD) operates the world's largest fast food chain, and earns 37 % of its revenue from franchising across its approximate 31,400 restaurant locations. Franchisees operate 65 % of McDonald's restaurants worldwide.
The franchising business model consists of two operating partners: the franchisor, or parent company, and the franchisee, the proprietor that operates one or multiple store locations. Franchising agreements usually require the franchisee to pay an initial fee plus royalties equal to a certain percentage of the store's monthly or yearly sales. Initial fees vary significantly across each industry, ranging from $35,000 for an Applebee's restaurant to over $85,000 to open a Hilton hotel. Royalty fees are also variable - for example, Intercontinental Hotels Group (IHG) franchisees are required to pay the company 5 % of their yearly sales, while Applebee's franchisees pay 4 % of monthly sales and IHOP franchisees pay a 4.5 % royalty fee of weekly sales. The franchisee also covers the costs of actually starting and operating the store, including legal fees, occupancy or construction costs, inventory costs, and labor. Franchise agreements usually have a term of between 10 and 20 years, depending on the company.
The parent company authorizes the franchisee's use of the company's trademarks (for example, selling Big Mac's at McDonald's) as part of the franchising agreement. Additionally, the franchisor provides training and support as well as regional and/or national advertising.
Franchisees require less initial capital than independently starting a company and can use proven successful strategies and trademarks. Franchisees are provided with significant amounts of training, not common to most entrepreneurs. The franchisor benefits because it can expand rapidly without having to increase its labor force and operating costs, using much less capital.
Sustainable development has been defined in many ways, but the most frequently quoted definition is from Our Common Future, also known as the Brundtland Report:
"Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts:
· the concept ofneeds, in particular the essential needs of the world's poor, to which overriding priority should be given; and
· the idea oflimitationsimposed by the state of technology and social organization on the environment's ability to meet present and future needs."
All definitions of sustainable development require that we see the world as a system—a system that connects space; and a system that connects time.
When you think of the world as a system over space, you grow to understand that air pollution from North America affects air quality in Asia, and that pesticides sprayed in Argentina could harm fish stocks off the coast of Australia.
And when you think of the world as a system over time, you start to realize that the decisions our grandparents made about how to farm the land continue to affect agricultural practice today; and the economic policies we endorse today will have an impact on urban poverty when our children are adults.
We also understand that quality of life is a system, too. It's good to be physically healthy, but what if you are poor and don't have access to education? It's good to have a secure income, but what if the air in your part of the world is unclean? And it's good to have freedom of religious expression, but what if you can't feed your family?
The concept of sustainable development is rooted in this sort of systems thinking. It helps us understand ourselves and our world. The problems we face are complex and serious—and we can't address them in the same way we created them. But we can address them.
Organic foods are foods that are produced using methods of organic farming - that do not involve modern synthetic inputs such as synthetic pesticides and chemical fertilizers. Organic foods are also not processed using irradiation, industrial solvents, or chemical food additives. The organic farming movement arose in the 1940s in response to the industrialization of agriculture known as the Green Revolution. Organic food production is a heavily regulated industry, distinct from private gardening. Currently, the European Union, the United States, Canada, Japan and many other countries require producers to obtain special certification in order to market food as organic within their borders. In the context of these regulations, organic food is food produced in a way that complies with organic standards set by national governments and international organizations.
Evidence on substantial differences between organic food and conventional food is insufficient to make claims that organic food is safer or more healthy than conventional food. With respect to taste, the evidence is also insufficient to make scientific claims that organic food tastes better. Many supporters of the organic foods movement believe that pesticides, herbicides and artificial additives found in non-organic food might be carcinogenic. The American Cancer Society has said "whether organic foods carry a lower risk of cancer because they are less likely to be contaminated by compounds that might cause cancer is largely unknown" but "vegetables, fruits, and whole grains should form the central part of a person's diet, regardless of whether they are grown conventionally or organically".
Demand for organic foods is primarily concern for personal health and concern for the environment. Organic products typically cost 10 to 40 % more than similar conventionally produced products. According to the USDA, Americans, on average, spent $1,347 on groceries in 2004; thus switching entirely to organics would raise their cost of groceries by about $135 to $539 per year ($11 to $45 per month) assuming that prices remained stable with increased demand. Processed organic foods vary in price when compared to their conventional counterparts.
While organic food accounts for 1–2 % of total food sales worldwide, the organic food market is growing rapidly, far ahead of the rest of the food industry, in both developed and developing nations. World organic food sales jumped from US $23 billion in 2002 to $52 billion in 2008. The world organic market has been growing by 20 % a year since the early 1990s, with future growth estimates ranging from 10–50 % annually depending on the country
As long as business has existed - since the ancient beginnings of commerce and trade-consumers have tried to protect their interests when they go to the marketplace to buy goods and services. They have haggled over prices, taken a careful look at the goods they are buying, compared the quality and prices of products offered by other sellers, and complained loudly when they feel cheated by shoddy products. So, consumer self-reliance has always been one form of consumer protection. The Latin phrase caveat emptor - meaning 'let the buyer beware' - has put consumers on the alert to look after their own interest. This form of individual self-reliance is still very much in existence today.
However, the increasing complexity of economic life in the20th century, especially in the more advanced industrial nations, has led to organized, collective efforts to safeguard consumers. These organized activities are usually called consumerism or the consumer movement.
At the heart of consumerism in the United States is the attempt to expand the rights and powers of consumers. The goal of the movement is to make consumer power an effective counterbalance to the rights and powers of business firms that sell goods and services.
Within an advanced, industrialized, free enterprise nation, business firms tend to grow to a very large size. They acquire much power and influence. Frequently, they can dictate prices. Typically, their advertisements sway consumers to buy one product or service rather than another. If large enough, they may share the market with only a few equally large competitors, thereby weakening some of the competitive protections enjoyed by consumers where business firms are smaller and more numerous. The economic influence and power of business firms may therefore become a problem for consumers unless ways can be found to promote an equal amount of consumer power. Most consumers would feel well-protected if their fundamental right to fair play in the marketplace could be guaranteed. In the early 1960s when the consumer movement in the United States was in its early stages, President John F. Kennedy told Congress that consumers were entitled to four different kinds of protection: 1. The right to safety: to be protected against the marketing of goods which are hazardous to health or life.
2. The right to be informed: to be protected against fraudulent, deceitful, or grossly misleading information, advertising, labeling, or other practices, and to be given the facts to make an informed choice.
3. The right to choose: to be assured, wherever possible, access to a variety of products and services at competitive prices and in those industries in which competition is not workable and government regulation is substituted, to be assured satisfactory quality and service at fair prices.
4. The right to be heard: to be assured that consumer interests will receive full and sympathetic consideration in the formulation of government policy, and fair and expeditious treatment in its administrative tribunals.
The consumer bill of rights, as it was called, became the guiding philosophy of the consumer movement. If those rights could be guaranteed, consumers would feel more confident in dealing with well-organized and influential corporation in the marketplace
RUNNING A BUSINESS
Certain very large companies are registered as public limited companies (PLC). They raise capital by selling shares to the general public, and these shares are listed on the Stock Exchange.
Selling shares is one of the ways in which companies raise capital; A share is ownership of a proportion of the company, and thus the right to a proportion of any profit it makes (dividend). Shareholders cannot insist on the payment of a dividend every year since this is up to the directors to decide. But if they are dissatisfied with the management of the company as members they have the right to remove the directors. The more shares a member holds, the more voting rights he will have in general meetings. Shares may be acquired when the company is first set up; or at a later share issue. Or they may be bought or received from an existing shareholder. Sometimes a company gives existing members the right to buy shares from another member before he is allowed to sell them to a new member. Each share is equal in value. But that value may be greater or less than the nominal value. For example, a member of a successful company who bought shares at S10 each may be able to sell them at a premium -perhaps $12 each. But he may also find that he has to sell them for less than their nominal value - at a discount.
Another way for a company to raise capital is by issuing debentures, or bonds in return for loans. Debenture holders are entitled to an annual payment of interest, and it is not linked to the company's profits and losses. In general they have the right to sell their debentures back to the company or sell them on to someone else. If possible, the lender will make sure his loan is secured by a charge over a company asset, so that he will have the right to take company property should there be no money to repay him.
A limited liability company is not the only way to run a business. A single person may operate as a sole trader, and even if he employs many people, he alone is responsible for management and, thus, for any debts. Another way to run a business is for two or more people to form a partnership in which they share management, profits and liability to debts. The share is not necessarily an equal one, but depends upon a partnership agreement among them. This usually reflects the amount of capital each partner has invested in the business. Partnerships can be formed very easily and the legal position of partners is not very different from that of sole traders. Unlike members of a company partners may find their personal property is at risk if they are sued by creditors. It is also possible to form an unlimited company. Since member's liability is unlimited this is, in effect, similar to a partnership.
If the advantage of forming a company is that is offers members some protection in case of bankruptcy, the disadvantage is that there are many regulations to observe in setting it up and running it. Under English law, there must be a minimum of two people and they must sign a document called a memorandum of association. The memorandum contains the name of the company, its objects, whether it is limited by shares or guarantee and the amount of share capital.
There are some restrictions on the choice of name: for example, the register will not accept a name that is the same or very similar to a company already registered, since this could confuse consumers and clients.
The simplest way to enter a foreign market is through exporting. The company may passively export its surpluses, or may take commitment to expand exports to a particular market. In either case the company produces all its goods in the home country though it may make changes to them for the export market. There are two types of exporting: indirect and direct. Indirect exporting means working through the independent middlemen such as agents and dealers. Indirect exporting can be done with little investment and therefore involves less risk. Mistakes can be made but they should not be too costly.
Direct exporting involves setting up an export department or even a overseas sales branch which actively uses the company's own employees. This will give the seller more presence and control in the market but obviously means heavier investment.
A second method of entering a foreign market is through the joint ventures with foreign companies. There are four types of joint venture.
Licensing is the simplest way for a manufacturer to produce its goods in the foreign market. The company enters into an agreement with a licensee offering the right to use a manufacturing process, trademark, patent or other item of value for a fee or royalty. Once again the company gains entry into the market at little risk but there are potential disadvantages. The company has less control over the licensee than if it had set up its own production facilities. If the licensee is very successful, the company has given up the potential for larger profits and, if and when the contract ends, it may find it has created a competitor.
Another option is contract manufacturing. This means contracting with foreign manufacturers to produce the product. It has the drawback of less control over the manufacturing process and the loss of potential profits on manufacturing. On the other hand it offers the company a chance to get off to a quicker start and take on less risk. There is also an opportunity to form a partnership or buy out the local manufacturer later.
Joint ownership ventures consist of the company joining with foreign investors to create a local business in which they share joint ownership and control. Joint ownership may make sense for political and economic reasons. Sometimes foreign governments make joint ownership a condition for entry. It also has certain drawbacks. Above all, there is the danger of disagreement over crucial issues such as investment and marketing. One firm may want to put money back into the company while the other wants to take it out.
Besides exporting and joint ventures there is also a possibility of direct investment -in other words developing foreign-based assembly or manufacturing facilities. If the foreign market is large enough, local production facilities offer many advantages. The company may have lower costs in the form of cheaper labor, raw materials and transport/distribution. The company will gain a better image in the host country because it creates jobs. It also develops a deeper relationship with government, customers, suppliers and distributors. Finally, by direct investment, the company keeps full control over investment and marketing policies. The main disadvantage is that the firm faces many risks such as devalued currencies, declining markets or even government takeover.
THE WORLD'S CHAMPION MARKETERS: THE JAPANESE?
Few dispute that the Japanese have performed an economic miracle since World War II. In a very short time, they have achieved global market leadership in many industries: cars, motorcycles, watches, cameras, optical instruments, steel, shipbuilding, computers and consumer electronics. They are now making strong inroads into rubber tyres chemicals, machine tools and even designer clothes and cosmetics. Some credit global success of Japanese companies to their unique business and management practices. Others point to the help they get from Japanese government, powerful trading companies and banks. Still others say Japan's success is based on low wage rates and unfair dumping policies.
But one of the main keys to the Japan's success in its skilful use of marketing. They know how to select a market, enter it in the right way, build market share, and protect their share against competitors.
The Japanese work hard to identify attractive global markets. They look for industries that require high skills and high labour intensity but few natural resources. These include consumer electronics, cameras, and pharmaceuticals. They like markets where consumers around the world would be willing to buy the same product design. They look for industries where the market leaders are weak or complacent
Japanese study teams spend several months evaluating the target market, searching for market niches that are not being satisfied. Sometimes they start with a low-price, stripped-down version of a product, sometimes with a product which is as good as the competition's but priced lower, sometimes with a product with higher quality or new features. The Japanese line up good distribution in order to provide quick service to their customers. They use advertising to bring their products to the customer's attention. Their entry strategy is to build market share rather than early profits. The Japanese are often willing to wait even a decade before realising their profits.
Building market share
Once Japanese firms gain a market foothold, they begin to expand their market share. They pour money into product improvements and new models so that they can offer more and better things than the competition. They spot new opportunities through market segmentation, develop markets in new countries, and work to build a network of world markets and production locations.
Protecting market share
Once the Japanese achieve market leadership they become defenders rather than attackers. Their defense strategy is to continue product development and refine market segmentation.
The term 'multinational' is used for a company which has subsidiaries or sales facilities throughout the world. Another expression for this type of business enterprise is 'global corporation'. Many of these giant organisations are household names such as Coca Cola, Heinz, Sony, Hitachi, IBM, and General Motors. Companies like these control vast sums of money and they operate in countries with widely differing political and economic systems.
Looking back into history, we can find two main reasons for the development of multinationals. Firstly, when companies found that their national markets had become saturated, they realized that they could only increase profits by setting up subsidiaries abroad. Secondly, if a country set up trade barriers - usually tariffs or quotas - against a company's products, then the only alternative for the company was to establish a factory or sales organization in the country concerned.
In earlier times most countries gave the multinationals a 'red carpet' welcome because they saw such foreign investment as creating much-needed employment, stimulating the business sector generally, and possibly earning foreign currency if the company's products were exported. More recently, however, the tide has turned against the multinationals. They are now viewed by many with suspicion; once heroes, they are now villains on the international business stage.
Tension between host country and multinational is inevitable in many cases because multinationals do pose a threat to national sovereignty.
The multinational is big and rich. It often operates in industries which are difficult to enter and of vital national importance, e.g. the computer, chemical and automobile industries. Most important of all, the main objective of the multinational is to organize its activities around the world so as to maximize global profits and global market shares. Each subsidiary is part of an international network of affiliates. These all interact with each other. Each part serves the whole. The centre controlling the network - the multinationals' headquarters - is not under the control of the host government. It is frequently thousands of miles away from these subsidiaries.
To illustrate this principle of interaction between affiliates, we can take the example of the Canadian company Massey Ferguson. It can make tractors in the USA for sale in Canada that contain British engines, French transmissions, and Mexican axles: all products of the company's subsidiaries. IBM is another company which is transnational in scope. A typical 360 - series computer may include components from four or five countries.
Developing countries, in particular, have become concerned about their dependence on foreign investment in key sectors of their economy. They have become aware that foreign subsidiaries often take most of their profits out of the country rather than reinvest them in the company. Sometimes, the flow of funds causes disastrous fluctuations in the exchange rates of their currencies.
Arguing against multinationals critics try to shrill tones that these organizations engaged in an anti-competitive activities insensitively shut down plants, make huge bribes to gain contracts, interfere politically, destabilize currencies, underpay their workers and so on. Those speaking for the defense see these corporations almost as international agencies promoting peace, providing better, cheaper products, and bringing much needed resources, expertise and employment to the host countries.
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Дуев Андрей Аркадьевич
Для студентов 1 и 2 курса
Заочной формы обучения