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The equity arrangements multinational business strategy

Author: ZhangQin From: www.yourpaper.net Posted: 2010-02-24 04:21:32 Read:
Paper Keywords: Multinational companies operating overseas equity arrangements
Abstract: multinational corporations to invest in a country or region, Ownership Arrangement is one of the first strategic decision. Option arrangements not only affect investment investment enthusiasm of all parties, can also affect a range of issues to investors the level of capital investment, the extent of technology transfer, as well as revenue allocation, appropriate option arrangements is the core of multinational companies operating overseas revenue maximization lies.
Most of the research on multinational equity arrangements choice theory is static, concerned that multinationals initial equity options, and the focus is one of the factors that impact on the equity arrangements. In recent years, foreign research began to focus on the dynamic choice of multinationals into equity. Domestic on multinational equity arrangements research, mainly on empirical research in multinational companies in China, but in the analysis process is still focused on entering the equity arrangements. Multinational corporations operating overseas equity arrangements choose the actual - multinationals parent company as the main global business strategy for the interests of the point, considering all the factors dynamic ongoing decision-making process of this dynamic decision-making including multinationals continue increase in equity until owned behavior, but also reduce the equity as well as the behavior of the withdrawal of capital.
Transnational Corporations equity arrangements
Suitable option arrangements become key multinational companies operating overseas, but also control over transnational corporations overseas subsidiaries so as to realize its global strategic core elements linked to the equity arrangements directly with the distribution of benefits and risk sharing. The other means of control, such as the appointment of key positions right technology and the allocation of resources such as the right, most of the equity derivatives. Multinational corporations operating overseas equity arrangements generally have the following types:
First, all have. Usually refers to the parent company of wholly owned or owns more than 95% of the subsidiary's shares, the subsidiary of a wholly-owned company is a multinational company. For multinational companies, in terms of production and business activities of the wholly-owned subsidiary of the direct control and able to fully implement the overall strategy of the multinational companies, to avoid contradictions and conflicts caused by the joint ventures, etc. and exclusive superprofit. However, due to the prosperity of the nationalist sentiments of the countries in the world, the local market conditions unpredictable and wholly owned subsidiary of exposure to higher risk.
Second, is a part owner. Usually refers to the parent company with subsidiaries owned between 5% and 95%. According to how much of the specific equity ownership, can be divided into a majority stake in the form of usually 50% of the equity interest of 95%; peer owned parent company and a partner each own a 50% stake in the subsidiary; a minority stake in the form of usually the equity of 5% to 50%. Partial equity owner, multinational companies can take full advantage of the resources and advantages of local partners, and are more likely to be accepted by the local government and the people. But part owner of both sides prone to conflicts and disputes, is not conducive to the unified control and coordination of transnational corporations.
Three non-equity arrangements (contract management). Usually refers to the parent company does not have, or has only less than 5% of the subsidiary's equity. Non-equity arrangement is often seen as a special case of the equity arrangements. In this way, multinational companies often through to achieve overseas operations, such as licensing, franchising, contract manufacturing. The way risk is relatively small, and multinational companies to participate in the equity in the case of restricted or not allowed, and able to participate in the local production and business activities. But for multinational corporations, the control and influence of the implementation of the minimum.
Second, multinationals choose a different option arrangements factors
(A) factors of the host countries.
1. Political factors. Mainly refers to the political stability of the host government, local nationalist sentiment and so on. If the host country, the political situation is not very stable, and relatively high local nationalist sentiment, then, multinationals often do not consider a sole way, but prefer joint ventures and non-equity arrangements.
2. Economic factors. Including the credibility of the host country, the multinational companies' investment policies and regulations, and local partners. The credibility of the host country, including the host country, the existence of financial repression, how monetary stability. Local partners, mainly to see if it has a local market, marketing channels, financing capability, the relationship with the Government's advantage to see is consistent with the multinational companies operating goals and philosophy.
3. Social and cultural factors. Mainly refers to the language of the host country, the people's values ??and way of life and foreign cultural acceptance and acceptance of the degree. In general, the more social and cultural differences in the host country and the home countries of TNCs significant multinational companies owned more would not choose.
(B) factors that multinationals own
1. Competitive advantage. When multinational companies with industrial property and intellectual property advantage, will generally choose a sole proprietorship enterprise established in the host country, both to protect its new technology and property rights, can also bring the excess profits of the new market. Conversely, if the transfer of technology to the host country, the products have been relatively outdated, tend not to consider the form of sole proprietorship. Multinationals have engaged in operating the necessary resources in the host country, it is less likely to choose options to share with others; mainly to the use of local resources, mostly joint ventures.
2. Global strategic objectives. Some multinational companies expect multinational companies to increase the adaptability of the host operating environment and into the local market as a strategic goal, often tend to choose joint ventures and non-equity arrangement, in order to make full use of the advantages of the host country, the local partner; The global implementation of a unified scheduling and control, to avoid conflict between different markets, often tend to the entire equity interest or a majority stake in the form of.
3. Multinational management experience. Multinational companies overseas have been tended to in some way, such as a sole proprietorship, in this regard have rich management experience of the management staff, the new host equity options will tend to the original way. And in the same host country, there is progressive accumulation of management experience. Learn more about the host country system, policy, culture, markets, multinationals will gradually reduce the reliance on local partners, and tend to raise equity ratio.
4. Historical heritage. Different historical and cultural background of multinational companies will exhibit different preferences options. Example, U.S. multinationals have been more preference to the establishment of the entire equity interest in the subsidiary, to facilitate the way to gain control of key decision-making; Japan or European multinationals is more emphasis on relationships and mutual cooperation, tend to take the joint venture. Third, the multinational companies operating overseas equity strategy
The Research Institute of the Chinese Ministry of Commerce 2004 "Business Week" Global 1000 multinational-based research 2O05-2O07 investment trends in China. The author is the main part of the data for this research, Empirical Analysis of Ownership Arrangement in multinational companies (Unless otherwise noted, data are derived from this), hereinafter referred to as "findings".
(A) multinational companies the early host the equity arrangements
General multinationals more attention in entering the host country during the fight for a good business environment, favorable resource conditions, then the rational choice should be joint ventures and non-equity cooperative mode. From a cost point of view, due to enter the host country for the first time, the cost of external risks brought by the uncertainty of the operating environment was significantly larger, and therefore choose to favor multinational companies sharing part of the cost of joint ventures and non-equity cooperation. For the host country is an emerging market economies, the equity proportion restrictions due to the government's foreign parties tend to be more strict, and the development of the market is relatively imperfect, joint ventures and non-equity co-operative is more conducive to enter the host country. The findings show that multinational companies trying to enter the Chinese stage, usually take interventional investment to symbolically a joint venture with Chinese enterprises, a lower proportion of shares, and does not account for business ownership. This fully shows that the multinational corporations, "to limit the risk of initial entry, expansion or termination of the results of operations of the investment depends on the joint venture or other strategic motives.
(B) into the host country after the equity adjustment
1. The increase in equity until owned strategy. Out unified, coordinated the effectiveness of its business strategy and to obtain a greater return on investment considerations, the original non-equity arrangements project, multinationals tend to the rights stipulated in the contract, such as copyrights, patents, trademarks, technical know-how, converted into equity investment to obtain a minority stake or majority stake in a joint venture or sole proprietorship mode. "Findings" After attempts to enter, investment in China, multinational corporations wholly owned by Holdings, the the substantial investment ratio will increase. Select the influencing factors affect multinational companies to continue to invest location, policy continuity and degree of honor to be the overriding factor. Some products supply industry has played a positive role in the expansion of the industry in the specific areas of aggregation, forming a virtuous circle into the region to attract other suppliers, finished product manufacturers. At the same time, the findings also show that investment in production, 57% of the investment by transnational corporations tend owned New, higher than 37% of the proportion of joint ventures.
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