University of south africa
MNI3701 Assignment 2
Chris van Zyl Student Number: 08168350
Table of Contents
1. Question 1.
John Dunning’s integrated framework. Eclectic framework.
2. Question 2.
Key issues and environmental forces and its direct impact on MNE,s
3. Question 3.
Table: Foreign entry modes
4. Question 4.
Local and foreign sourcing
5. Question 5
Foreign exchange risks for MNE,s
Question 1
John Dunning’s Electric Paradigm:
The paradigms are a combination of the following;
1. Focus on ownership factors (O)
2. International theory by location factors (L)
3. International theory by market failure factors (I)
His theory is also known as the electric paradigm of the ownership – location – internalization framework.
Dunning’s research focused on answering questions relating to firms investing overseas and what would determine the amounts and composition of international production.
1. Why and how firms go abroad are determined by the ownership advantages. Competitive advantages include size, monopoly power, better resource capability and uses. Also the advantage associated with a multi-plant enterprise that would include economics of scale and multi-nationality, greater opportunities and abilities to exploit differences in factor endowments these monopolistic advantages make up for not being a local firm.
2. Why firms choose production in one country over another is determined by the location advantages. The firms ownership advantages and factor inputs make it more profitable to do this outside their home country.
Other location advantages are spatial distribution of inputs and markets, transport and communication costs and government intervention.
3. How or by which route are answered by internationalism.
Ownership advantages uses internally instead of leasing or exporting them to the foreign market.
In conclusion, whether a...