EC1111 - International Economic Policy Seminar 4 - Suggested Solutions Vinay P. Nundlall Question 1 The Table below shows the 10 biggest multinational corporations by size of Foreign Assets (in millions of USD). Sales figures are also in millions of USD. a) Calculate the Transnational Index for each of these ten companies Assets Sales Employment Corporation Royal Dutch Shell plc Toyota Motor Corporation BP plc Total SA Anheuser-Busch InBev NV Volkswagen Group Chevron Corporation General Electric Co Exxon Mobil Corporation Softbank Corp Home economy United Kingdom Japan United Kingdom Industries France Belgium Germany Motor Vehicles United States Industries United States Machinery United States Industries Japan Industry Mining, quarrying and petroleum Motor Vehicles Petroleum Refining and Related Petroleum Refining and Related Industries 1 Food & beverages 208 012 258 381 Petroleum Refining and Related Industrial and Commercial Petroleum Refining and Related 165 969 Telecommunications 145 611 Foreign 349 720 303 678 235 124 233 217 197 254 189 116 178 525 Total 411 275 435 958 263 316 243 468 431 888 192 093 260 078 365 183 70 352 330 314 121 881 220 296 Foreign 152 018 173 529 140 683 110 255 39 507 54 160 45 324 Total 233 591 67 000 254 753 148 941 183 008 141 526 45 517 240 366 110 484 123 692 218 608 82 166 Foreign 43 598 74 500 70 496 163 177 346 715 28 704 191 000 35 725 42 032 Total 92 000 348 877 102 168 206 633 626 715 55 200 295 000 71 100 63 591
The Transnationality Index, TI, is given by 1 ForeignAssets + ForeignSales ForeignEmployment 3 TotalAssets TotalSales TotalEmployment For each of the MNC: Royal Dutch, TI = 0.74 Toyota, TI = 0.60 BP, TI = 0.75 Total, TI = 0.81 Anheuser-Busch, TI = 0.82 Volkswagen, TI = 0.60 Chevron, TI = 0.58 General Electric, TI = 0.57 Exxon Mobil, TI = 0.52 Softbank, TI = 0.62 b) What does the selection of these ten companies reveal about the characteristics of multinationals? For each of these companies, the TI is quite high, well above 0.50 (the maximum value is 1.00). These are companies that have a truly international operation. With regards to industries, 9 of the 10 industries involve technology and heavy machinery where huge initial investments are required. c) Rio Tinto, a UK company that is involved in Mining, Quarrying and Petroleum, has the following figures: Assets Foreign Total Sales Foreign 33429 Total Employment Foreign 50531 Total 89177 89263 233781 51018 2
Calculate Rio Tinto's Transnational Index and comment on it, relating it to the theories of MNC's we discussed in the lecture. Rio Tinto has a huge proportion of its assets listed as Foreign Assets. It is yet another MNC that is in the mining industry. This may be an indication of Location Advantages that allow a company to become an MNC. Question 2 List some reasons why governments of developing countries would want to attract FDI. What