The multinational enterprise as a firm and the Foreign Direct Investment are the key forces in economic globalization as their importance to the world economy is seen where foreign direct investment has grown rapidly than the world trade. (Liebscher, 2007) Hence this paper is going to help us to analyze MNE as a firm that manufactures consumer electronics and home appliances in Europe, describe the business plan of the MNE and also the future of the MNE hence help us to understand it in a more clarified manner. One of the terms which point out the heightened consciousness of the MNE has gradually become rooted in popular discourses over the last decade to the extent that we don’t only see references in globalization of money markets but we also see the use of illicit drugs as well (Wattanawisitporn, 2005).
It is not like everyone is usually affected by the globalization process to the same extent but can be referenced as one of the ways of formulating a theoretical globalization by the ideology of MNE. The process of creating a theory usually leads to the ability of adapting to a logic that assumes some master abilities of global integration. By the look of these perspectives it is clear for the MNE firms to intensify a global time-space that compresses by universalizing new communication technologies that aggravate to the flow of commodities. Hence it is assumed that Europe is one of the key places that are believed to be conducting an FDI in the countries that are affected by the contributions of the multinational enterprises such as UAE, hence leading to reduction of introducing negative products to the countries affected (Liebscher, 2007).
Describe an MNE with a brief business plan
Multinational enterprise facilitates the supply of investments in either countries or different groups organized by individuals. Thus in my case I have chose on US as a major investor in the production of home appliances and other electronics in UAE as a way of expanding our market. This is supposed to not only increase a profit for the US but also help the United Arab Emirates people to improve their living standards through creation of jobs and also lead to interaction among the involved parties. The FDI does not involve any kind of vicinity in expertise as the combination of the different talents help to weigh up in terms of being general and studying the present in the light of the past for the purpose of gaining in the future (Xiaohu, 2005). This has an implication that the relations between UAE and US will establish peaceful links and therefore attain competitive advantage in their operations.
Thus this in the event helps the organizations both in US and UAE to recover from any negative effects of economic contractions or negative business cycles; and hence lead to the convertibility of a common currency that would lead to the ability of purchasing the electronic products and other home appliances. There is a likelihood of developing technology through facilitation of online sale of the commodities and thus the involved parties can put their savings into the services of their home. Moreover, this will help them to maintain an important relationship that fits easily into the simple Cartesian geography of the nation –state system but also conceive towards a political community that expresses within the nation-state (Wattanawisitporn, 2005).
The benefits and costs of FDI to the home and host countries
Business transactions need a lot of capital and therefore the low rates of domestic savings as make them to depend on external capital flow to finance new investments hence FDI offers scarce local capital that is usually supplemented. The multinational enterprise demand the price for injecting capital into the host country economy especially by foreign investors who aim to grab large profits hence FDI usually compares favorably with those accompanying the sources of external financing. FDI offers certain advantages over foreign aid by providing favorable financial terms that are usually with political strings that are a times either implicit or precise.
FDI has brought about the investment of the technological developments in the local firms hence helping them to produce efficiently by licensing technology to other firms and introducing techniques to local partners through joint ventures hence benefiting the host’s country. FDI has also benefited both the home and host countries with the knowledge of modern management methods that is often spread through training indigenous personnel that grows at the expense of emigrant that is in place (Wattanawisitporn, 2005). UAE will definitely benefit through increased literacy levels and developed technology; this endorses easier operation of commercial activities and therefore increases the profit levels of the firms in UAE.
It is argued that the economic and political costs of FDI often outweigh the benefits as large size of profits is repatriated to shareholders in the home country rather than the reinvested locally. Due to their size, the foreign firms receive special terms from local banks when borrowing capital as compared to local firms hence reflect negatively in the hosts country for balancing payments. FDI is assumed to represent attempts of export pollution where the environmental enforcement is stringent hence the cost of dealing with pollution is high in the home country. It is thus clarified from the main findings that the benefits generally outweigh the cost by a wide margin but they don’t occur automatically. Moreover, the policies developed by FDI are important to the developing countries hence should harvest these benefits and consider the foreign investors as a channel for poverty improvement (Xiaohu, 2005).
The Future of MNE
The Multinational enterprise has inspired scholars to conduct much more practical analysis that includes both transaction cost related parameters and competence related variables. It is furthermore argued out that the rigorous study of MNE character does not need to reply upon behavioral assumption of opportunism. MNE has also suggested a new path that is to be followed by the internalization theory that is to remain relevant to the field of international business. Focusing on international business as a future prospect in MNE and FDI co-evolutions MNE’s governance and its technological competence that determines both the present and future strategies.
The determination of MNE activity and policy response to its economic and social consequences and thus this interplay is governed and organized. MNE also goes to the extent of providing a useful framework for understanding the reactions and strategic polices that are usually pursued by both the home and host country. It is furthermore assumed that the multinational corporation is an instrument for peace and thus helps to encourage an era of international government, hence the future of international system is composed of large regional states with a large increase that has been bipolarized between the home and host country (Liebscher, 2006).
The Multinational enterprise is furthermore believed to have contributed to the potentiality of the non-government of the international activity that challenges the inter-governmental system. The multinational enterprise is to build more symmetric organization that permits full participation by creating interest in the less developed states and are responsive to their wants (Xiaohu, 2005). There is the assumption that the continued development of technology, social and political trends would lead to the reduction of the globe that the world political organization would adapt to the inherent economic advantages of global enterprises.
The study of the multinational enterprise is believed to have revolutionalized critically by examining the pragmatic observations about FDI that is believed to give a long-run theory .The future of multinational enterprise also entails as the world’s largest firms that offers predictions and policy implications that has led to the introduction of an internalization theory that focuses more on FDI. Thus this paper has helped us to analyze trends and the future changes in the way of knowledge production by Multinational enterprises that retrain competition and technological knowledge (Xiaohu,2005).