Free Accounting Dissertations - One Way Of Doing This Is To Set Up Operations Near Those Of Leading
One way of doing this is to set up operations near those of leading competitors. This is why some US firms have moved some of their research and development facilities to Japan. With this strategy, they find it is easier to monitor the competition and to recruit scientist from local universities and competitive laboratories. Kodak is an excellent example. The company made the decision to build 180,000 square foot research centre and it started cultivating leading scientists to help with recruiting. Kodak used all the same approaches that Japanese firms employ in the US; financing research by university scientists and offering scholarships to outstanding young Japanese engineers, some of whom would later join Kodak. As a result, Japan is now the centre of Kodak’s worldwide research efforts in a number of high-technology areas, Shapiro (2003).
Like exports and imports, FDI is a driver of international business and many companies use FDI to establish footholds in the world marketplace by setting up operations in foreign markets or by acquiring businesses there. When looked at from an overall perspective, FDI data show that industrialized countries have invested very large amounts of money in other industrialized nations as well as smaller amounts in less developed countries (LDCs) such as those in Eastern Europe or newly industrialized countries such as Korea and Singapore. However, most of the world’s FDI is invested both by and within the three ‘triad’ major groups as mentioned earlier, the US, European Union, and Japan. The US is an excellent example of a country that is a major target of investment as well as a major investor in other countries. By 1999 the US had become such a major investment target that foreign holdings were almost $1.1 trillion (See Table 2 on inward stocks of world foreign direct investment). The largest destination of FDI is the European Union (15 countries) with almost $1.7 trillion, and then Asia with almost $1 trillion. This shows that the US is a prime site for FDI. The Barriers to entry that MNC ‘s face include issues such as innovation, factor conditions, demand conditions, related and supporting corporations, and firm strategy, structure, and rivalry. In the computer industry, for example, Intel’s research and development (R&D) arm created a continuing flow of new age computer chips each more powerful than its predecessor. And at the upper end of this market, IBM’s R & D prowess helped it capture more and more of the business demand for powerful computers, while at the lower end Dell Computer’s dominated the field with its high-quality PCs that were sold at rock bottom prices. This is where innovation acts as a barrier to entry for a corporation. Factor conditions include land, labour, and capital. As a result, if a country has a large, relatively uneducated workforce, it will seek to export goods that are highly labour-intensive.
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