Il Forum - According to the theory the company can maintain its wandajackson - Mer Giu 26, 2019 10:09 am Oggetto: According to the theory the company can maintain its
That OLI paradigm states that
a company first need "O"- owner specific competitive advantage in the home market that can be transferred into a international market. Then the company have to be attracted by "L"- location specific characteristics of an foreign market.
These characteristics might include low price of raw materials in addition to labor, a large family market, unique sources with raw materials, or leading-edge technological centers. Location is not optional because the company
have different FDI attitudes. By relying to location characteristics it can pursue different FDIs. It can implement either horizontal or vertical FDIs.
The horizontal FDI occurs when a company locates a plant abroad so as to improve its market usage of foreign consumers. Vertical FDI, simply by contrast, is not mainly and even necessarily aimed at selling in
a foreign country nevertheless to cutting costs by using lower production costs now there. The "I" stands with regard to internalization.
According to the theory this company can maintain its aggressive advantage if it fully controls all the value chain in their industry. The fully had MNC minimizes agency charges resulted from asymmetric
information, not enough trust, monitoring partners, suppliers and banking institutions.
Self financing eliminates supervising of debt contracts on foreign subsidiaries which can be financed locally or simply by joint ventures. If a firm has a low global cost and high availability of capital why share it with
joint ventures, dealers, distributers, licensees, or nearby banks that probably have got higher cost of money.