Pros and Cons of Multinational Companies

The advantages of having a multinational company.

These are the reasons for companies to go multinational. 

There are many benefits for a company to expand their businesses to global scales.

Impacts on the host countries. There is more employment so more people will have higher chances of getting a job. There will be improved technology and inward investment. More competition between the domestic companies of the country and a lot more outflow of cash.

The home country would be having the more cash inflow though there would be more unemployment  in the country and increased employment in the company. The home country would be responsible for most money related issues in the company.

Globalisation

Globalisation means the expansion of a business into international economy through business.
Many big companies that want to get the word of their business to other parts of the globe would be thinking of setting up companies in other countries.
Companies we see around the world like:

• Apple
• Microsoft
• Blackball
• Nike
• Adidas
• Nokia

They have made their business globalised for many national economies to access.

PEST Analysis

PEST means

• Political
• Economic
• Social
• Technology

Political

• Environmental issues
• Law
• Regulatory bodies and processes
• Government policies
• Trading policies
• Home market lobbying/pressure groups
• International pressure groups
• Conflicts

Economic:

• Fiscal policy
• Monetary Policy
• Trade policy
• Interest rate
• Unemployment

Social:

• Lifestyle
• Culture
• Trends
• Pressure groups
• Environmental Issues

Technology

• New Products
• New raw materials
• Process
• Sources of Finance

What is Production? Methods of Production

Production simply means creating a product. Process that converts raw materials into goods.

Methods of Production

To discuss about these three methods of production, I will take a shoe company as an example.

1. Job Production

Job production means producing products one at a time. A shoe company makes many shoes but where there are a few of those custom or unique shoes that are not standard. Shoes with different specification, looks or quality that satisfies the customer's order.

Advantages

• Product satisfies customer's specifications
• Advance technology that is able to more with versatile labour
• No finished goods stock

Disadvantages

• Short production of those shoes increase production costs for each unit
• Cost for advanced technology and professional labour will take up more cost

2. Batch Production

The process involves creation of different sets of the same basic product in batches. Shoes that are of the same type but different colour or size are manufactured through batch production. There is some repetition of production.

Advantages

• Suitable for a wide range of products of the same line/model of shoes which use the same machinery only with different settings.
• More styles of the product (other than one same shoe) so workers/staff will have more job satisfaction.

Disadvantages

• Relatively short production runs result in higher costs per unit
• Machinery and multi-skilled labour adds up to more cost
• Space will be more occupied for raw materials and finished goods

3. Flow Production

Mass production. Work is completed from one operation the proceeds on to another stage without stop. It is a continuous process where raw materials move through stages until completion. Socks can be a good example of flow production. From cotton to sewing and to finish, mass production through stages of production are involved.

Advantages

• Work in progress is at low level and slower
• Not much specialized labour required throughout the process
• Mass production os fixed goods will lower the average costs which means lower prices for customers

Disadvantages

• Large amount of raw material needed to prevent running out of stock
• If demand varies, constant amount of overstocking of finished goods will happen
• Repetitive job can lead to workers having less job satisfaction
• Setting up production lines will cost high

How are prices set?

Determinants of Price

Demand

• Price
• Income
• Tastes
• Expectations

Back to the demand over price graph on the previous blog entry, we saw that when price increases the demand decreases. If the consumers see a higher price, they will be buying less of that product.

If the consumer's income increases then the demand will increase as well; that is when the product is classified as a normal good. Although, when it comes to inferior goods, demand decreases as the consumer's income increases.

"Tastes" is a word that is used to define the attitude of the consumer towards the product. If someone likes the product, he/she will want to get it. In other words, when "tastes" increases, the demand increases.

Expectations is when the producers will expect when the consumer's income increases or decreases and set for future prices.

The changes in demand fall upon these determinants of demand.

Supply

• Production Cost
• Technology
• Numbers of sellers
• Expectations on the business

Businesses would want to make the most profit out of the least amount of cost. High production costs mean less profit. Factors that affect production costs are input prices, wage rate, government regulation and taxes.

More advanced technology that requires less work and produce the best outcome will reduce production cost and increase profit so there will be higher supply.

More sellers in the market can increase the supply.

Expectations will help the producers to determine when to use the supply at the right amount and time.

A change of in the supply is determined by these determinants of supply.

Bibliography

Beggs, Joddi. "The Determinants Of Demand." About.com Economics. About.com, n.d. Web. 05 Dec. 2012. <http://economics.about.com/od/demand-and-the-demand-curve/ss/The-Determinants-Of-Demand.htm>.

Anonymous. "How Does Consumer Income Affect the Demand for Normal and Inferior Goods?" WikiAnswers. Answers, n.d. Web. 05 Dec. 2012.

Taltman3. "Business Solutions." Business Solutions. N.p., 14 May 2011. Web. 07 Jan. 2013. <http://teamaltman.com/2011/05/great-web-entrepreneurs-–-set-the-right-prices/setting-prices-how-to-set-right-product-price/>.

SUPPLY & DEMAND

Supply & Demand.

Firstly, I would like to use this graph to start off this blog entry.

Based on this graph, we can notice a few things. First, supply goes proportional to the price, as price increase/decrease supply follows. Second, demand goes inversely proportional to price, as price increases demand decreases and vice versa.

The Law of Demand

As the price of an item decreases, the demand of quantity will increase and as the price of the item increases, the demand of that quantity will decrease. That is why we see it down-sloping from left to right.

The Law of Supply

The quantity of supply varies directly with price. The amount of the product increases as the price of it increases. That is why we can see an up-sloping graph.

Demand is low when supply is high. Supply is low when demand gets high. Where there is less of the product which consumers want, they will be willing to pay for that product at a higher price. Once there is a lot of that product available then consumers would not want to pay for the product at the same price but rather lower so selling that product at a lower price to extinguish the extra quantity to be used as space for other products.

To set the right price, it would be where the two lines meet.

What would I like to make

The task given by my teacher was to figure out what would I like to make if I were given the opportunity and sufficient expenses needed to make it.

I would personally like to have the opportunity to make a brand of golf equipment, that specialises in irons, that will blow away other brands with an affordable price that offers the most out of every penny.

Many golf equipment brands such as Taylormade, Cobra and PING that produces quite excellent lines of golf equipment and has what led them to the top of the market. Many golf equipment brands including the three mentioned produce irons that appear quite costly to people, and mostly to the people outside of the United States. A good set of irons that appear useful to many amateurs would cost, in Malaysian stores, about RM3000 at the best price.

Golf equipment as in computers, televisions, food and clothing are all about the name, the branding, the value and many times the population of buyers forget about price. That is why big companies get better and small companies are unable to grow.

The idea behind a good iron set is broken down into many aspects of the club. Firstly, the feel of the club that aims for lower handicapped players rather than high. Then, there is performance that breaks down into forgiveness, consistency and, the winner to many golf clubs, the distance the club can provide. Lastly, the looks! Many iron sets make it to the top not because it is a prettier club but the ability of that iron set may not be all that good.

What I am going to do is invent an iron set that provides a balance of all those aspects. 

screenshot taken from the GolfWRX Review on Mizuno MP-69 irons

This is one very good iron produced by the Mizuno that achieved a rating of the maximum points given  by GolfWRX, a website on club-reviews. This set of irons looks good, has real good performance and has excellent feel. This set of irons are aimed to the low handicappers that want to get the best out of their shots. These irons are not easy to use for the higher handicappers.

The aspects that I would want to touch in the iron set I will make are:

• Great looks 4.5  / 5
• Good feel 4 / 5
• Good performance 4 / 5

I am trying to aim the high to mid handicappers, 18-handicappers and higher. An iron with great looks is what is needed to pull the eye of the consumer to consider taking your idea. Most poor golfers do not do their research on the type of golf clubs that suit them and just buy because they found it in good condition for a low price.

The feel of the iron will have to be just fine for players of high handicap. The big change in feel for most golf clubs is if it were a cast or forged iron. Any real golfer can easily notice the difference between cast and forged. Forged irons give a better feel most of the time but are costly to make rather than cast irons. Of course the iron set I will produce will be cast, as for most irons used today are cast.

Performance is all about the research put into the club.

This is Taylormade's new line of irons, Rocketbladez.

The once thing that drives every golfer mad is that speed pocket that adds more flexibility to the face and more speed resulting in MORE DISTANCE! This got me excited over it but then when I actually did my homework into looking up more on the club specifications, I realised that this set of irons would not satisfy me. Many people do not and will get themselves making wrong decisions.

My club will have a decent amount of research put into it because I would like to focus more on the looks and feel of the club that will get the higher handicappers attention.

That previous Mizuno MP-69 iron set and this new Taylormade Rocketbladez iron set costs 900 dollars and 800 dollars respectively. I am not in the United States and if I were to buy either of these from a local store, the price I saw with my own eyes is RM 3500 which is way much more than the deal the US citizens can get.

I want to run production of this line of irons (because the task says I have the sufficient amount of budget to work with) in the United States and China. Majority of all production of this iron set will be in China because we all know why businesses run with "Made in China", "Assembled in China" and etc. Because of low cost and huge amount of production.

I will be able to sell my iron set for about 600 dollars or slightly more. Fun thing here is, on the product it will mention "Designed in Malaysia" so prices in Malaysia will differ less from the price in the US stores. Maybe just about RM 2300 which isn't too much for a person to afford.

I am sure this product will develop itself in Asia and slowly grow in the US as well if I this business runs smoothly.

Bibliography

Floyd. "Mizuno MP-69 Irons Review." GolfWRXcom. N.p., 20 May 2012. Web. 05 Dec. 2012.

"Rocketbladez Irons." Taylormade Golf. Taylormade, 2012. Web. 4 Dec. 2012. <http://taylormadegolf.com/TaylorMade/RocketBladez-Irons/DW-JN933,en_US,pd.html>.