Thesis comments Essay Example | Topics and Well Written Essays - 1000 words

thesis comments - Essay ExampleInstead Coase focused on factors within the governing body which impacted economic activity. Coasian scheme later became the foundation for what is today called internalization theory, integrity of the most significant theories to emerge in the study of multinational enterprises (Rugman & Verbecke, 2008). This theory suggests that foreign production and sales of a multinational business carry off place in response to imperfections in the goods and services commercialises. Buckley and Casson (1976) established the modern conception of this theory by suggesting three premises 1) firms maximize profit in a world of imperfect markets, 2) the imperfect disposition of the markets for intermediate products motivates firms to bypass them by creating internal markets, and 3) internalization of markets across national boundaries generates multinational enterprises. Thus, the multinational organization is seen as a device for raising efficiency by replacing external markets with an internal market within the company. Caves (2007) suggests that the establishment of a subsidiary by a multinational enterprise amounts to the adit into one national market based on needs created by another market. One type of entry is horizontal expansion whereby a subsidiary produces the aforesaid(prenominal) product (or product line) as the p arnt company. other is vertical expansion or integration across national b clubhouses either backwards in order to obtain raw materials or other intermediate products needed by its main operations, or ship to provide a distribution channel for its exports. Consequently there are three types of organizations potentially relevant to multinational enterprises. The first is a horizontally integrated firm, meat a firm which produces essentially the same product line for all(prenominal) of the geographic markets where it has a presence. The second is a vertically integrated firm, meaning a firm that produces outputs in some of its set ups which serve as inputs to others of its plants. The third is a diversified company, whose plant outputs are neither horizontally nor vertically related to one another (Caves, 2007). Hymers (1976) theory of global operations highlighted two major motivators of international operations, namely the exploitation of oligopolistic advantages and the removal of conflict between firms to modify market power by means of collusion. He states, It frequently happens that enterprises in different countries compete with each other because they sell in the same market or because some of the firms sell to other firms. If the markets are imperfect, that is, if there is horizontal or bilateral monopoly or oligopoly, some form of collusion will be profitable. One form of collusion is to have the various enterprises owned and controlled by one firm. This is one pauperism for firms to control enterprises in foreign countries. (Hymer, 1976, p. 25). Hymer emphasizes that direct f oreign investment is not motivated by provoke rates but rather by potential profits which can be derived by unequivocal a foreign enterprise. Vernons product cycle model (1966) is an important macroeconomic approach to sagacity international business. This theory describes the product cycle as consisting of three primary phases innovation, growth, and maturation. During the last, maturation stage of the product, the