Walmart case

6 June 2016

A firm with economic operations located in at least two countries. 2. What is exports, and what is the difference between MNE activity and exports? Exports are products which are exported from one country to another, selling those products to another company. The companies are not located in those ‘host-countries’. MNE activities means that a company is also located in those countries. They produce in those countries and from there, they sell the products in the host countries. 3. What different types of FDI exist?

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Natural resource seeking
Market seeking
Strategic resource seeking
Efficiency seeking

4. What does it mean that Argentina has 15100 million dollar of sales in 2003? How much of that goes back to the US? How much to local Argentinean customers? And how much is shipped to third countries? In question 2 we asked for a theoretical distinction. What different types of FDI can you distinguish empirically using the sales data? Make for each type of FDI a new column and calculate the share of each type of US MNE activity in total US MNE activity. 729 – 9018 – 5354.

5. See the slides of the lecture, or use the Excel file. Which three countries have the highest fraction of efficiency seeking MNE activity? Why would that be? Which country has the highest fraction of market seeking MNE activity? Why would that be? What type of MNE activity of US multinationals is most important for the Netherlands? Why would that be? Canada, UK, Germany – Those countries are big countries with a lot of MNE activitys – New Sealand – They have to expand overseas – export platform – the Netherlands are dependent on export at some products.

6. What factors would play a role in determining how much MNE activity a country attracts? Are all these factors equally important for all the different types of MNE activity? Explain.

Export, import, products which can be gained in own country, infrastructure.

7. Calculate the mean of the different types of MNE activity

Market seeking, Efficiency Seeking, Export platform.

8. In the globalization debate proponents and opponents discuss the different positive and negative aspects of globalization. Opponents frequently refer to the damaging role of multinationals in the context of child labour, pollution, and abuse of power in countries with weak governments.

This boils down to a view on multinationals that locate production in those places where production is the most efficient. This is an often heard claim that opponents make. Having calculated the mean scores of different types of FDI, can you say that these opponents or anti-globalists are right?

9. What are the 2 key observations that are the basic starting point for Bartlett and Ghoshal?

1. Universal model to treat your subsidiary:
homogenization
Either complete HQ control and no subs independence or complete independence. Universal response helps to deal with the coordination problem, but sometimes better to allow limited subs aut.

2. HQ-hierarchy syndrome: centralization
Senior mangtemen views the organizaton as consisting of 2 levels (tension between HQ-subs.) Subsidiaries seen as units that “act as implementers and adapters of the global strategy in their localities”

10. What is the consequence of the above observations?
As a consequence of (1) opportunities are missed by local subs: HQ may kill entrepreneurial spirit in subsidiaries.

11. What difficult and important managerial question does this trigger? How much autonomy do you give to a subsidiary?

12. What factors determine how much autonomy you give to a subsidiary?

13. Based on these two factors, Bartlett and Ghoshal have developed a 2 x 2 taxonomy. Draw this and explain it in your own words.

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