Question

1. Describe the following three theoretical frameworks in relation to MNCs:
   1. OLI Framework
   2. Knowledge-Capital Model of MNCs
   3. Agglomeration Economics
   4. Product Life Cycle Theory
   5. Internalization theory

Answer 1

Ans a. OLI Framework : O - 'ownership', L - 'Location' & I - 'Internalisation' in FDI.

These are investment edge in business that ehnaces a companies sustainability & profitability when they are about to invest in foreign market - expansion decision. These are also knows as advantages a concern may have over others as a result of these factors. All of these three are factored before a companies decides to invest in foreign country.

Ownership: This means does company have an advantage of being a native conern that very well understands the technology, culture & social asects of a nation. This is definitiely an edge whan there are forign players also in the business. The advantage of having a local representative is also a boost to brand, properties and other rights of a company. If a company is seen as foreign in the investing nation it may impact their image in long run as people may not be able to turn loyal or relate themselves to it thus affecting sustainability & profitabilaity.

Location: This means that the choice of location of investment is in your favour in terms or either connectivity to major ports, availability of skilled workforce, availability of cheaper workforce, workforce thats fluent in many languages, the material required for r]production is readily aavailable etc . These are few example to understand how the concern is positioned to take the edge off the competition and sustain for longer times - profitably.

Internalisation: These are a few key critical point when concern or company decides if I am going to continue to do certain activity in-house or shall I outsource it. Like transport service - a lot of compnies are outsourcing this sphere because it is more cheaper and high on productive for admin staff to manage it offshore. These decision are critical decision as some times external parties are better off supporting these activities compared to in-house management.

Ans c. Agglomeration Economics

This is a short concept to understand where and when firms thinks about decreasing there cost of production they cluster at one place there by leading to smaller ETA's. These firms are mainly in same fields of operations making similar finished good or services.

This idea had worked in reducing cost and attracting new custmer - like you may seen some specific markets for electornis goods arund yourselves. There will be all kinds of electronis products and every seller may be selling or manufactirung the similar kind of product. And as they all cluster they are better of seen as one unit and attract more outsider & customers.

The seller among themselves exchange labour easily and bear almost nil transportation cost - hence good for decreasing cost of production.

Ans d. Product Life Cycle : this is basically about the 5 stages thats goes into creating or raising a product from level 0. These 5 stages are namely...

a) Development : The stage when the idea is taking its form. When there is lot of research work done, money is invested, and lot of time is also invested in getting transformed product. This stage has risks too - just in case the final product is not what was incepted initilly.

b) Introduction : The stage where idea is secured. The product is thoughfully introudec between customer & markets (potential), the idea is then registred against copy rights & IP's rights. Marketting & advertsing cost is high and benefits are realised a little delayed.

c) Gronwth : as the name suggests. The salse of the product startes picking up gradually. The company identifies and expands the market for maximum ROI. Here the demand, supply & profits all are increasing and compitiors of the product enter the market.

d) Maturity : again as the name suggest the markets are all ripe and benefits realised. The company redeploys its R&D teams to enhance the useability of the product. The sales may be highest in this stage and the demand and hence due to the Return to scale the prices may be lowered.

e) Decline : all thats has gone through an upward trend start declining i.e. demand, production, supply & profits. Some companies may reinvest profits in R&D for a enahanced product with certain new features or they may go out searching for new market and the trend of 5 stages repeat. Some conserns may sell the product rights and gets into new idea. In a way it is a stage of closure and some new beginings.