Thursday, 1 January 2015

Spreading the European model to Asia...

IKEA store in Shanghai, China

Cf. page 71 of your textbook.

The above photo illustrates the spread of the "European model" to Asia and the opening-up of China economically and culturally (though not politically); wealthier Chinese can now buy Western consumer goods and adopt Western ways of living. The result is a hybridisation (westernisation) of local culture. Chinese people, by buying Western goods, "buy into", to some extent, the Western lifestyle and the values that underpin it.

Ikea is a multinational corporation (aka MNF or multinational firm), created in 1943, with its headquarters in Sweden, its financial branch in the Netherlands, and some of its production facilities in China. It makes and sells (in over 200 stores worldwide) cheap but well-made DIY furniture and home decoration. Its brand name is famous. It is a firm which prides itself on having a strong ethical code...

What is a multinational corporation?

Definition by the Farlex Financial Dictionary: "It is corporation that maintains assets and/or operations in more than one country. A multinational corporation often has a long supply chain that may, for example, require the acquisition of raw materials in one country, a product's manufacture in a second country, and its retail sale in a third country. A multinational often globally manages its operations from a main office in its home country. Multinational corporations are controversial among groups such as environmentalists and worker advocates, who claim that multinationals exploit resources and employees. On the other hand, proponents argue that multinationals create wealth in every country where they operate, which ultimately benefits workers as well as shareholders".

Two-thirds of world trade is now controlled by the 60,000+ multinational corporations. They control the production and distribution of food, furniture, cars, luxury items, films, energy, chemicals, medical goods, electronic goods, and other consumer products, raw materials, construction, services such as telephone networks or banks and insurance, etc.

They more or less impose their goods, services, production and management methods in every region of the world, most easily within the less powerful nations. People in the emerging countries do not necessarily benefit from their presence, but their lifestyles and values are inevitably influenced by them, especially the rising middle class.

MNFs wield a strong social and cultural influence, and the bigger MNFs are also extremely powerful economically and politically. They act in the interests of their shareholders, which are not necessarily compatible with the interests of governments, people, or smaller businesses... Many MNFs it seems elaborate international strategies with less and less regard for the customs and laws of particular countries (investing in countries that present the "least resistance")...

To optimise profits, MNFs need to standardize a product (make it the same) in order to make it easier and cheaper to produce. Also, MNFs have to promote their goods to as big a market as possible. They face the problem of creating demand in foreign markets. So, in order to sell as many standardized products to as many consumers as possible, the marketing strategy of firms puts the emphasis on the "exoticism" of the product (the strange Swedish foods in Ikea stores for example) or on its perceived foreign-designed/made superior quality (like "Made in Germany" or the Apple products). Sometimes, minor concessions are made to local customs (no beef in Indian Mcdonald's hamburgers, or the different styling of a car depending on which country it is being sold to). Often, a product sells well because the product is perceived as cheap, or useful. Some MNFs have a virtual monopoly on certain products or services (Chinese toys or electronic products, or Google for example) which means that they can sell their products easily. The standardization and internationalization of products results in people (especially the young and affluent) having ever more similar lifestyles all over the world, with materialistic and individualistic values becoming the norm.

The fact that MNFs are, by definition, international (products designed in one place, produced in a number of other places, with headquarters in a "home country" but with its financial services in another, etc.) means that products and services are less and less identified with a particular country. 

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