A changing nature of international business.
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Since the 1980's, there is a changing nature of international business. MNC's needed a transformation to follow this change, that is why international business networks appeared. According to Casson and Cox (1997), network can be defined as : " A set of linkages which either directly or indirectly connect every member of a group". This essay will first deal about the network concept (as a "high trust co-ordination mechanism linking independent owners"), then the classification and the components of a network will be analysed, and finally the network concept seen as an explanation of international business. In network, there is the implication of close but non exclusive relationship. Autonomy and choice are emphasised. So, what do we mean by network? Network is a solution (J. Child & D. Faulkner, 1998) to reduce uncertainty (with good relationship and solidarity), to provide : flexibility, capacity (with links inside the networks between firms), speed (to take rapidly advantage of opportunities), access to resources and skills not owned by the company itself (a company can finish a project using abilities and skills of other in the network), information.
In addition, what are the different components of a network? First, the geography of the TNC's is composed by , for example : the headquarters (corporate or regional), the Research and Development and the production process (Dicken, Global Shift). Besides, network is the centre of different relationships. Some of the most important are the one which appear firstly in subcontracting (industrial or commercial one). It enables the principal firm to avoid new investment, to externalise risks and costs for example. For the subcontractor the advantage is to get access to certain unattainable market. Secondly, the international strategic alliances, which are not mergers, are divided in three types: the research oriented, the technology oriented and the market oriented. These alliances enable firms to get an easier access to the markets, to technologies and to share cost. Another interesting point is the connection between the organisational dimension of TNC networks and the geographical dimension. First there is the Hymer model (Appendix 2)
Moreover, some external factors favour networks. Indeed, governments are favouring networks by creating free trade areas or making agreements (firms are involved in networks by making alliances, sub-contracting...).There is also the implication of some international institutions like the WTO. This latter has for purpose to make the world as a single market, so firms and countries would be connected each other in the area of international business. To conclude, with the above definition of the networks, their core elements and their different ways to be successful, we can understand better why the network concept can be seen as an explanation of international business. Nowadays, it will be very difficult for a firm (which wants to be an international one) to survive without integrating a network. Indeed, it is very hard to trade internationally if you stay in your own sphere. Networks are part of the international business which tend to lead to the inter-dependence idea. Indeed, countries' and firms' networks are present and they form the today's world. (1029 words) 1/4
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