Firms may, however, find economies of scale at a level other than that of the factory floor. Coca-Cola is a case in point. Scale is not a huge advantage on the manufacturing side of its business, which involves blending water, gas and a special syrup. Scale economies come into play in other areas, such as reinforcing its brand by making a global marketing effort and helping its bottlers, most of whom are independent, learn from the experiences of their counterparts in other countries. These scale effects have driven Coca-Cola to become a highly multinational company.
Another explanation for the growth in multinationalism is vertical integration. In some industries, the interdependence of suppliers and users of a particular resource makes it difficult for such firms to cooperate at arm’s length, since there is always the risk that one will try to undermine the other. This is the reason many firms integrate vertically, buying up their suppliers or their customers. Sometimes, those suppliers or customers will be abroad, turning the acquiring firms into a multinational.
A third reason for the spread of multinationals is that they tend to be successful. In any business, inefficient firms will eventually fold, giving way to those that can earn higher profits. As the world economy becomes more integrated, it is to be expected that the companies most adept at crossing borders are those that prosper. It should come as no surprise that firms from richer countries do this best. As a rule, they have been exposed to more competition in their home markets and are therefore well equipped for international competitive battles.
There is yet one other reason for firms to operate as multinationals: because everyone else is doing it. Many companies exist to serve other companies, rather than household consumers. If multinational car manufacturers want to use the same headlights in cars assembled in different countries, then headlight manufacturers must become multinational, too. This is why consulting firms and accountancies have been falling over one another to build seamless global networks. Although deregulation and privatisation have had a big effect on the telecoms industry, the demands of corporate customers are helping propel the globalisation of that industry.
Credit the critics
The reasoning above suggests that the growth of multinational companies is
fairly benign. But that is not always the case.
For one thing, multinationals’ size and scale can make it possible for them to exert power in an exploitative way. A company whose facilities are located in a single country has no alternative but to comply with that country’s laws and social norms, unless it wishes to import products made by others rather than making them itself. A multinational, however, can move production: if America’s worker-safety law is too restrictive, the company can move its factory to Mexico. It can also lower its tax bill by using internal pricing to shift profits from high-tax countries to low-tax ones.
This flexibility may make it harder for governments to raise revenue, protect the environment and promote worker safety. Critics fear an undesirable “race to the bottom”, with governments reducing desirable social protections to attract investment by multinationals.
Others point out that the race can be healthy insofar as it forces governments to be careful before imposing costly regulations and taxes. Certainly, many developing countries are eager to be “exploited” by as many multinationals as possible.
Another common criticism is that multinationals are exporting jobs to low-wage countries. This may be true in some industries, such as textiles and electronics. But in most cases it is exaggerated. Labour costs now make up only 5-10% of production costs in OECD countries, down from 25% in the 1970s. Multinationals tend to be motivated more by the other considerations that have been mentioned, rather than simple wage-cutting exercises.
Although the social impacts are often misstated, some multinational expansions are indeed unequivocally bad, with no offsetting benefits. Since most company bosses gain esteem (and, studies show, more pay) from operating a bigger outfit, it is no surprise that they expand at every opportunity, whether it is through a merger or a direct foray into a new market. As globalisation takes hold, these adventures are increasingly of a multinational nature. In some cases they represent a wasteful use of shareholders’ capital.
Today, as for many years, roughly three-fifths of all foreign direct investment goes into wealthy countries and two-fifths into «developing» countries.
In those days, a large share of direct investment in developing countries went into the extraction of natural resources, especially oil, for shipment abroad. Now, however, a much bigger share of it aims to tap local markets. As they become wealthier, people are able to buy more cars, computers and other consumer products. This is why car makers are racing to build plants in countries such as Thailand and Brazil: not to export to Japan and America, but to meet rising demand within South-East Asia and South America. Multinationals are more prominent in these developing economies than in richer ones .
Size isn’t eveeything
Around half of all foreign direct investment involves mergers and acquisitions. These deals help companies to achieve economies of scale in marketing and distribution, for example, and they allow well-managed firms to take over poorly managed ones. Many of those mergers have also been between firms which supply other multinationals with professional services, telecommunications and air travel, in an effort to develop global networks. For all of these reasons, such cross-border m&a activity occurs disproportionately among firms based in rich countries. This is why, for all the interest in developing countries, the United States was the world’s biggest recipient of foreign direct investment.
In certain industries and for certain products, the importance of multinational companies is increasing quickly. But the trend is easy to overstate. Most economic activity - cutting hair, driving taxi cabs, renovating houses - is still performed on a small scale. Most industries operate, if not at the level of the town or neighbourhood, then on a national basis. Even in manufacturing, speed, innovation and proximity to customers can matter more than sheer size. Being multinational is no guarantee of success.
VOCABULARY
| 1. multinational corporations (multinationals) | транснациональные компании |
| 2. direct investment | прямые инвестиции |
| 3. royalties on technology | платежи (роялти) за использование технологий |
| 4. parent firm | материнская компания |
| 5. affiliate | дочерняя компания |
| 6. liquid | ликвидный |
| 7. to raise money | мобилизовать, привлечь капитал (деньги) |
| 8. components | комплектующие части, детали |
| 9. subcontractors | субподрядчики |
| 10. brand | фирменный знак, торговая марка |
| 11. vertical integration | вертикальная интеграция |
| 12. acquiring company | приобретающая, поглощающая компания (при слиянии) |
| 13. consulting firms | консалтинговые фирмы |
| 14. accountancies | зд. бухгалтерские (аудиторские) фирмы |
| 15. facilities | зд. Мощности |
| 16. worker-safety law | закон (нормы) по технике безопасности |
| 17. merger | слияние (компаний) |
| 18. shareholder’s capital | акционерный капитал |
| 19. to take over | поглотить (компанию) |
| 20. M&A (mergers and acquisitions | слияние и поглощение компаний |
4. Переведите отрывок «Credit the Critics».
5. Напишите реферат и аннотацию данного текста.
Text B.
1. Переведите следующий текст:
BEHIND AMERICA’S SMALL BUSINESS SUCCESS STORY.
The OECD became latest organisation to hail America as the rich world’s most entrepreneurial economy. Businesses with fewer than 100 people are credited with creating two out of every three of America’s net new jobs. Last year 37% of its venture-capital investments went to start-ups, compared with l2%in Europe. The National Federation of Independent Businesses (NFIB) boasts that America’s small businesses count as the world’s third-biggest economy in their own right.
But is America winning these plaudits by default? To be deemed a better breeding ground for small businesses than, say, Germany (which does not even have a precise word for venture capital) is hardly difficult. It says nothing about how much better America could be; nor about the growing suspicion that American entrepreneurs face an increasingly inhospitable legal and regulatory structure.
Most people’s idea of a successful small American business is a fast-growing Internet company, backed by venture capital. Kent Bowen of the Harvard Business School argues that reality is more mundane: a small family firm in an established industry, growing at around 15% a year, with that growth financed internally. Many of its bugbears, such as big companies that settle their bills late, are familiar to its peers in Kyoto or Cannes. But not all of them. Small American companies have to deal with litigiousness on a scale that their European and Japanese peers can only laugh about.
Most people assume that big firms an more vulnerable to the excesses of America’s tort system because they are fatter targets for lawyers. But big firms also have the money - and the time - to fight back. Small firms have no such resources. Over half the own ers of small businesses take home less than $50,000 a year in pay: the average court case costs more than $l00.000. No wonder, the boss usually tries to deal with the complaint himself, and will often settle quickly.
Employment-practices liability insurance is already a $l00m-a-year business - even though insurers often cover only legal costs and the rates are extortionate. Law suits are also restricting the freedom of small American firms to hire and fire employees, long one of their chief advantages. Many small firms no longer give references for fear of subsequent lawsuits; many more do not fire anyone without consulting their lawyer first. Hopes for reform look slim. In any case, according to one British-born businessman in New York, most Americans “have no idea that this sort of hassle does not happen anywhere else”.
Small businesses the world over complain about bureaucracy, but the red tape spinning out of Washington is copious and the country’s small businesses, handicapped by a lack of resources, find it disproportionately restrictive.
One particular irritation for small businesses is the tax code, which is riddled with loopholes and exemptions, many of them created by large businesses. In a recent series of Senate hearings, various Internal Revenue Service officials admitted that small businesses such as mom-and-pop shops were easy “audit hits”, because they lack the resources to defend themselves.
Given all this, why are American small businesses optimistic about their future ? Why are new firms still sprouting across the country? And why is it virtu ally impossible to find an entrepreneur anywhere in America who would rather set up shop anywhere else?
Some of this is due to the country’s booming economy, but there are two other reasons as well. The first is structural. Despite all the lawyers, the HMOs, the increased regulation and so on, America still provides more of the things entrepreneurs want than anywhere else: access to capital to start businesses (California and Massachusetts alone have bigger venture-capital industries than the whole of Europe); a relatively flexible labour market that allows, you to hire and fire workers more easily than elsewhere; a legal system that does not stigmatise you if you fail; and a tax system that allows you to keep most of the spoils if the business succeeds.
The second reason is that American entrepreneurialism seems more rooted in culture than structures. As Paul Morin of the Wharton School of Business points out there is no obvious shortage of capital in Europe or Japan: it just does not go into the same sort of risky endeavours.
VOCABULARY
| 1. entrepreneurial | предпринимательский |
| 2. venture-capital investment | «рискованные» («венчурные») инвестиции, т.е. инвестиции с высокой степенью риска в основном в новые компании или наукоемкие отрасли |
| 3. start-up (s) | новая (ые) компания (ии) |
| 4. bugbears (s) | те, кто представляют собой угрозу; являются причиной опасений и трудностей |
| 5. to settle bills | оплатить по счетам |
| 6. litigiousness | споры или дела, подлежащие судебному разбирательству |
| 7. tort | гражданское правонарушение, деликт |
| 8. employment-practices liability insurance | страхование обязательств по трудовым отношениям (контрактами) |
| 9. insurer | страховщик |
| 10. extortionate | зд. Очень высокие «грабительские» |
| 11. law suit (s) | судебный процесс (разбирательство) |
| 12. reference (s) | рекомендательное письмо, характеристика |
| 13. hassle | зд. Трудность, препятствие |
| 14. red tape | бюрократический механизм |
| 15. tax code | налоговый кодекс |
| 16. loophole (s) | «лазейки» (доход от уплаты налогов) |
| 17. exemption (s) | налоговые льготы |
| 18. mom-and-pop shop (s) | зд. Семейный бизнес (магазин) |
| 19. HMO | Health Maintenance Organisation (амер.) Организация Медицинского Обеспечения |
2. Напишите аннотацию данного текста.
1. Переведите следующий текст: