Please answer this in your own words and if you did not already attempt this que
ID: 339858 • Letter: P
Question
Please answer this in your own words and if you did not already attempt this question for me before. A. When there is a multinational enterprise formed through foreign direct investment, does it use the local suppliers? If yes, why? If no, why? B. How is it different as opposed to outsourcing and licensing cases? C. Are national enterprises with licensing or outsourcing using local suppliers? If yes, why? If no, why? Please answer this in your own words and if you did not already attempt this question for me before. A. When there is a multinational enterprise formed through foreign direct investment, does it use the local suppliers? If yes, why? If no, why? B. How is it different as opposed to outsourcing and licensing cases? C. Are national enterprises with licensing or outsourcing using local suppliers? If yes, why? If no, why? A. When there is a multinational enterprise formed through foreign direct investment, does it use the local suppliers? If yes, why? If no, why? B. How is it different as opposed to outsourcing and licensing cases? C. Are national enterprises with licensing or outsourcing using local suppliers? If yes, why? If no, why?Explanation / Answer
A) Multinational Enterprises formed through FDI do use local suppliers in mocts of the cases for some of the most important reasons as mentioned below:
i) Local suppliers tend to be cheaper in cost compared to the international suppliers.
ii) The logistics,and other dynamics involved are of lesser hassle than getting its suppliers from distant locations
iii) In some jurisdictions , the fact that an FDI is allowed is on the basis of precondition that certain amount of raw materials etc are to be bought locally, thereby giving a boost to the local economy.
iv) Adopting such an approach also helps the Multinational Enterprise have a good will with the local populace and authorities . This helps in the over all business functionung of the enterprise.
In most of such local suppliers being utilised, the Multinational Enterprise has very very strong quality control measures, which forces the local suplliers to ensure the quality levels as required by the entterprise.
B) This is different from outsourcing and Licensing cases is that the these do not carry the brand of the Multinational Enterprise with them. While thses outsourced units may have the same quality standaards and services level as that of the Multi National Enterprise, the goodwill of the brand does not allow these outsourced set ups to price it at the level of the international entity.
C) The national enterprise do use the services of the local suppliers for the same set of reasons as pointed in (A). The difference in this case is that the national enterprise, being from the same country, definitely enjoy higher flexibilities everything wise-subsidies, tax breaks (whereever applicable) etc.
How ever the national enterprise have to still compete with price barriers with the multinational enterprises(which is a separate discussion alltogether)