Analysis of Advantages and Disadvantages of FDI
First, for those companies which manufacture high technology products (personal computer, electronic chip), it is unbearable to license their core technology to a potential foreign competitor. Although licensing is a good way to earn a good return from firm's technological know-how, any firms are unwilling to provide potential foreign competitors which may compete with it in the future with their own advanced technology.
Second, for those companies which need to maintain tight control around the globe, licensing is not good option. Licensing doesn't usually provide a tight control for multinational manufacturing firms. If a manufacturing firm in these two situations (1) global oligopolies; (2) intense cost pressures industries, undertakes licensing to expand their foreign market, it may have to encounter a dilemma: on the one hand, licensees always take their own benefits into account firstly. On the other, the center, according to firm's whole benefits, need to disperse manufacturing to locations around the globe where factor costs are most favorable to minimize costs. When there is a discrepancy between multinational firm and its subsidiary, it is not easy to conciliate, as there is few restrictions on whether the same strategies the licensee should adopt with the center.
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