Multinacional Companies - Ownership Advantages and Internalisation

Abstract:

The debauched uses its Ownership advantages in a foreign awkward despite having disadvantages versus local anesthetic firms.

Why not sell the OA (as an intermediate good) to local firms, who can use it better? A local firm does possess its own advantage of being local and indeed may be able to use the OA more effectively in that location. But it is more advantageous not to because the marketplace is inefficient, it is better to INTERNALISE than externalise.

Ownership advantages

Ownership advantages (OA) confer on the firm queen in the market, or a cost advantage that outweighs the senseless costs of doing business abroad.

* Technology (ability to create, acquire and upgrade)

* Management skills

* trade skills and well-known trade names

* Size of firm (economies of scale)

* Capital accessibility and financial expertise

* Entrepreneurial drive and vision

* Ability to foresee and examine advantage of global production and market opportunities

Internalisation:

The basic condition WHY FIRMS INTERNALISE use of the OA (rather than externalise it by sell it to another firm) is because the MARKETS FOR OAs, as intermediate goods, ARE VERY feeble ( i.e. costly and risky to use).

The reasons for this MARKET FAILURE differ harmonise to the type of intermediate goods (i.e. inputs that play a role in a firms ability to supply value to consumers). e.g.



technology, management skills, marketing skills and trade names, raw materials

and component parts.

However there are operation markets for such intermediate products in the form of:

technology licensing, management contracts, franchising and trademark licensing.

When it uses these mechanisms the firm externalises its OA. Thus it gains financial rewards from marketing the OA itself.

Alternatively it can internalise use of the OA; i.e. apply it itself to support its own production of the nett product (or service)...

If you want to get a full essay, ordinance it on our website: Orderessay



If you want to get a full essay, wisit our page: write my essay .