A multinational company maximises its competitive advantage by Essay

A multinational company maximises its competitive favour by controlling its own summate chain. Discuss - Essay ExampleAccording to Caves (2007) any business, which has showed strength of having varied number of chain stores located in different parts of the world is capable of achieving nice economies of scale such as time bank billss, humble use of global resources and market dominance amongst other aspects, which place scarcely be relevant to the maintenance of supply chain. Globalization and FDI The globalization of commerce has a major(ip) impact on modern business (TOMAR, 2009). Globalization affects the way business is carried out and the geographical theater where a business can operate. With globalization, even small businesses ar able t operate in the global arena, which then leads to Foreign Direct Investment. Foreign Direct Investment affects and in turn is affected by the supply chain. It also affects the supply chain decisions which a firm is likely to make with depend to whether they are going to manage their entire supply chain or if they are going to outsource the supply chain to a third part. With regard to choosing a supply chain work, businesses look for the model which will offer them strategic edge over their competitors. It is therefore non a matter of choice, yet it is a matter of choosing the most efficient way of survival in a marketplace that has been make even more competitive by the existence of globalization. Issues of competitive advantage simply entail an giving medication being able to dominate the market over other firms who trade in the same line of product. Firms that have numerous numbers of chain stores in different countries have got potentials of achieving increased sales volume. anyway proper choice of the location of an industry is the most practical way of distribution of production cost. Therefore, with very minimal cost of production a company can easily enjoy the competitive advantage. Moreover, with several(prenominal) advantages associated with supply chains, the company would be left with principal mandate of concentrating on other internal aspects of production, and this makes set aside benefit to the maintenance of supply chain by an organization (working mother, 2001). The Coase Theory of Transactions Costs and Decisions making The Coase theory postulates that in the absence of transactional costs, businesses would be able to share the property space without having to worry how resources are allocated (Jager, 2008). In regard to the supply chain, what this means is that if there are no negotiation costs betwixt two firms which are at different levels in a single supply chain, the two firms would not mind continuing to depend on each other to complete the supply chain. The Coase theory was demonstrable by Ronald Coase who tried to understand the free markets and why regulations are not necessary. According to the Coase theory, an organization would only then choose to co ntrol all its supply chain if there were costs of negotiating the terms of attend with other firms in the supply chain. If these costs of negotiation do not exist, the costs of outsourcing some of the supply chain would not hinder a firm from outsourcing. In fact, according to the Coase theory, where transactions of negotiations do not exist, the two (or more) firms in a supply chain would naturally gravitate to the most efficient relationships with the most efficient supply chain. This implies that in the abs