Free Accounting Dissertations - This Demand Provides A Number Of Benefits. First It Helps The Seller
This demand provides a number of benefits. First it helps the seller understand what the buyers want. Second, if changes become necessary, such as customer desires for a product that is smaller, lighter, or more fuel efficient, the local seller has early warning and can adjust or innovate for the market before more distant competitors can respond. Related and supporting corporations, when suppliers are located near the producer, these firms often provide lower-cost inputs that are not available to the producer’s distant competitors. In addition, suppliers typically know what is happening in the industry environment and are in a position to both forecast and react to these changes. By sharing this information with the producer, they help the producer maintain its competitive position. Firm strategy, structure, and rivalry, this adds that no one managerial system is universally appropriate. Nations tend to do well in industries where the management practices favoured by the national environment are suited to their industries sources of competitive advantage. For example, in Japan, successful firms are often those that require unusual cooperation across functional lines. In addition to this they do also face political and foreign exchange risks which can sometimes not be foreseen before entry into a foreign country.
Now, Buckley and Casson (1976) (theory of direct investment) argue in opposition to the Hymer (1976) - Kindleberger (1969) theory of oligopolistic advantage, that in he post second world war, a simultaneous occurrence of five elements led to the rapid growth of multi national corporations activity, they are, the rise in demand for technology intensive products; efficiency and scale economy gains in knowledge production; problems associated with organizing external markets for this new knowledge; reductions in international communication costs; and increasing scope for tax reduction through transfer pricing. They particularly focused on the third factor, the existence of market imperfections, which generates benefits of internalization. Here, a distinction was made among five elements, the absence of futures markets for knowledge production, requiring both the planning of knowledge development and its exploitation by the firm; the inability of external markets to allow optimal price discrimination when selling proprietary knowledge; the frequent occurrence of bilateral bargaining problems between monopolistic suppliers and monopsonist buyers of knowledge; buyer uncertainty, when purchasing new knowledge; and various difficulties associated with pricing knowledge. They also add that internalization occurs only to the point where the benefits equal the costs.
