Discussion. 1. When a corporation is trading with a foreign country, does that make it a multinational corporation?

1. When a corporation is trading with a foreign country, does that make it a
multinational corporation? What are the main characteristics of an MNC?

2. State some of the reasons that companies expand overseas.

3. Where is the center of the decision making process in an MNC?

4. What is a particular risk to an MNC if innovation slows down?

5. Why did European companies go overseas long before the Americans did?
What were some of the factors influencing the United States companies to establish
overseas locations?

6. What are an MNC's major resources? What are some of the objectives in
putting these resources to work?

7. What is the difference between the global concept and the international di­
vision structure?

8. What is meant by a system of centralization?

Language Practice Translate into English

РЕСТОРАННЫЙ БИЗНЕС

Стало известно, что корпорация McDonald's ведет переговоры о продаже контрольного пакета своего подразделения Partner Brands, объединяющего ресторанный бизнес Boston Market, Chipotle Mexican Grill и Donatos Pizzeria. По информации из осведомленных источников, переговоры пока находятся в начальной фазе. Тем не менее эти же источники сообщают, что корпорация McDonald's уже обратилась к нескольким инвесткомпаниям и спонсорам, чтобы понять, насколько они заинтересованы в приобретении 51-процентного пакета акций Partner Brands. По мнению аналитиков, этот пакет может стоить более S500 млн. McDonald's отказывается комментировать известия о возможной сделке. В 2002 году объем продаж 1083 ресторанов Partner Brands составил SI млрд, совокупный объем продаж более чем 30000 тыс. точек быстрого питания McDonald's превысил $40 мрлд. По итогам прошлого года операционные убытки Partner Brands составили S66 млн.

По материалам еженедельника "Ведомости "

Supplementary texts

Text A

The corporate-growth puzzle

WHY do firms grow? It is an important question. Yet economists, management gurus and business-school boffins have so far failed to answer it convincingly.

There are three main competing theories. The traditional explanation is that firms grow to reap economies of scale, and to increase their market power. They stop growing once they reach an optimum size, when they run out of profitable investment opportunities or become too big and bureaucratic to manage.

Life-cycle theories, which became popular in the 1970s and 1980s, identify several stages in the growth of firms, including an entrepreneurial phase, maturity and finally a period of decline. A third view, currently fashionable, attributes firms' growth to their "core competencies". Admittedly, this is a somewhat nebulous con­cept. But in essence, it means that a firm's performance is determined by building on a set of key skills that distinguish it from its rivals. These might include better tech­nology, a trusted brand name, or the experience of its employees.

All three theories seem plausible. Yet none of them squares with the evidence. That at least is the conclusion of a new paper about corporate growth by Paul Gero-ski, an economist at London Business School. The most important empirical finding, confirmed by study after study of companies big and small, is that a firm's growth largely follows a "random walk"— an erratic and unpredictable course. That is not quite the same as saying that it is driven purely by chance or good luck. But it does undermine the theories that purport to ex plain, and hence predict, corporate growth.

But it is not a total mystery. There is in fact some evidence that smaller firms grow faster than bigger ones. In particular very small, very new firms tend to grow much faster than established ones. But company sizes do not appear to converge, ei­ther within particular industries, or across them.

More surprisingly, firms' growth rates are only weakly correlated with that of the economy as a whole or, indeed, with that of their own industry. Recessions seem to hit only a few firms badly; most are largely unaffected, while some actually prosper.

From the Economist

Comprehension task

1. What is the traditional explanation of a company's growth?

2. How can a company's growth be explained by the life-cycle theory?

3. What is the third concept of the corporate growth?

4. What is the theory proposed by Paul Giroski, an economist at London
Business School?

5. What firms grow faster and why?

Text В

Pre-text assignment

1. Explain the meaning of the term "globalization". What organizations are
global?

2. What criteria do you think global companies use when they choose the lo­
cation of their production plants around the world?

The world's view of multinationals

None of this is new. Three decades ago, multinationals were already widely denounced as big, irresponsible, monopolistic monsters. But they then went through a period of being sneered at as yesterday's clumsy conglomerates, before being lauded in the 1990s as the bringers of foreign capital, technology and know-how. Yet now the hostility has returned. One explanation is the sheer speed at which multinationals have recently expanded abroad. This has made them the most visible aspect of glob­alization, buying some local firms and driving others out of business. Even to rich, well-run countries, their sheer size can seem threatening. Thus the Irish sometimes fret about the fact that foreign firms account for almost half of their country's em­ployment and two-thirds of its output; and Australians point nervously to the fact that the ten biggest industrial multinationals each has annual sales larger than their gov­ernment's tax revenue.

Such clout needs to be used with care, if it is not to be seen as a threat to na­tional sovereignty and democratic accountability. For example, countries may feel that their freedom to set taxes as they wish is threatened by the ability of multination­als to shift profits, or operations, from one country to another.

Every so often, too, a multinational does something stupid. Nike, Shell, Enron, Monsanto. McDonald's: each has recently made errors of judgment that united oppo-

sition al home and abroad. And multinationals face strong incentives to behave badly. Thus those in the natural-resource and mining business often cosy up to whichever regime is in power, however nasty, in order to protect their investment. Those making consumer goods frequently flit to whichever country offers the best deal on labour costs at the moment.

What most companies fear more than resentment abroad, though, is the protest at home. Typically, they still employ two-thirds of their workforce and produce more than two-thirds of their output in their home country which, in the case of 85% of multinationals, is one of the wealthy members of the OECD.

Individual firms are as capable of doing harm as is any other entity. But as a class the multinationals have a good story to tell. In the rich world, according to OECD research, foreign firms pay better than domestic ones and create new jobs faster. That is even more true in poorer countries: in Turkey, for example, wages paid by foreign firms are 124% above average and their workforces have been expanding by 11.5% a year, compared with 0.6% in local firms. Big foreign firms are also the principal conduit for new technologies, as is clear from the fact that 70% of all inter­national royalties on technology involve payments between parent firms and their foreign affiliates. As for the environment, most research suggests that standards tend to converge upwards, not downwards.

Big companies come and go at lightening speed: one-third of the giants in America's Fortune 500 in 1980 had lost their independence by 1990 and another 40% were gone five years later. Globalization is as much of a threat to lumbering giants as to smaller folk, and often a boon for the nippy little firms (hat create most of today's new employment and wealth. The merger waves that attract so much attention, and fear, more often reflect defensive efforts by the corporate establishment than the predatory acts of world dominating devils.

Multinationals should continue to listen, to try to do no harm, to accept the re­sponsibilities that go with the size and wealth. Yet, in the main, should be seen as a powerful force for good. They spread wealth, work, technologies that rise living standards and better ways of doing business. Perhaps if a few bosses took to the streets with placards, that message might more readily get across. From the Economist