The advantages of multinational companies are obvious and huge.

1. Strong funds

Take Carrefour and Procter & Gamble, which we are familiar with, as an example. The former has total assets of US$20.3 billion, foreign assets of US$10.3 billion, and sales abroad. is US$17 billion, with total sales of US$30 billion; the latter has total assets of US$31 billion, total foreign assets of US$10 billion, foreign sales of US$18 billion, and total sales of US$37 billion. Obviously, these two companies have strong competitiveness in the retail and daily chemical industries.

2. In addition to their advantages in economic strength, more importantly, multinational companies generally have a global corporate strategy. The "deeply integrated" production structure they increasingly pursue makes them more competitive in the process of competition. With flexibility and cost advantages

Why do multinational companies have strong international competitiveness? Traditional theories of multinational corporations, industrial organization theory and enterprise theory have provided many theoretical explanations on the sources of competitive advantages of multinational corporations. As competition intensifies and the environment changes, the current international competitiveness of multinational companies mainly stems from strong advantages in five aspects.

1) Core knowledge and capabilities form new monopoly advantages

Monopoly advantage refers to the competitive advantage generated by a multinational company's unique resources or capabilities relative to its competitors. It is generally believed that the monopoly advantages of multinational companies mainly come from the following aspects:

2) Product differentiation

Neoclassical economics pursues the theoretical assumption of perfect competition. In the market structure, many producers produce the same type of products, but they are unable to control the market. They can only accept the equilibrium price formed by the relationship between supply and demand, and monopoly advantages are out of the question. However, in the real world, imperfect competition is normal in the market. In the market structure of imperfect competition, many producers have differences even if they produce and sell the same type of products. This difference is reflected in the quality, performance, grade, specifications, brand, trademark and other aspects of the product. Who knows? Whoever masters differentiation will have a competitive advantage over competitors. It is precisely because of the wide variety of products they produce that they meet the needs of consumers at different levels and thus gain competitive advantages.

3) Technology R&D investment and technology monopoly

Due to their huge assets and risk resistance capabilities, multinational companies are able to invest heavily in research and development and take the lead in technological innovation, thus forming technological Leadership and technology monopoly, such as having patent rights, patented technology, production know-how, new product development capabilities, etc. that are superior to competitors.

4) Market monopoly advantage

Multinational companies have multinational marketing networks and have accumulated rich marketing skills for a long time. The products of one or some multinational companies in market segments are often internationally recognized. With a high market share, it is easy to form a unilateral monopoly or oligopoly, manipulate market prices, etc.

Going further into the interior of multinational companies, we can find that in addition to the above traditional manifestations, the monopoly advantages of contemporary multinational companies have also developed a new form of expression - core knowledge and capability advantages, which can be called for the new monopoly advantage. This advantage has gradually replaced the monopoly advantage in the traditional sense and has become the main source for multinational companies to establish monopoly advantages.

The general background for the emergence of new monopoly advantages is that the knowledge economy will become the dominant economic form. In the era of knowledge economy, the cultivation and possession of knowledge and the resulting differences in capabilities have increasingly become one of the main sources of competitive advantage for enterprises. This new monopoly advantage possessed by contemporary multinational companies is obvious. Many multinational companies have established their own unique knowledge training and knowledge sharing systems, have core capabilities, and increased technological innovation to form technical knowledge monopolies.

The absolute monopoly status of contemporary multinational companies can be seen from their strong technical strength and very strong technological innovation capabilities. Take the Global 500 as an example. Today, they own more than 71% of the new technologies and new processes produced every year in the world, and they account for about 62% of the world's total international technology transfer. According to statistics, the scientific research expenditures of the world's 500 largest companies account for 85% of the total scientific research expenditures of the host countries in the United States, 76% in the United Kingdom, 82% in France, and 93% in Italy and the Netherlands. Some new technological innovations are owned by multinational corporations.

5) New internalization advantages

Internalization advantages refer to the fact that due to the incompleteness of the market, enterprises internalize the intermediate product market and replace the external market with internal collaboration, thereby saving on utilization. The excessive transaction costs generated in the external market reduce the competitive advantage brought by the enterprise's production and operation costs.

The idea of ??enterprise internalization has been proposed as early as Coase's 1937 article "On the Nature of Enterprises". Coase believed that "the operation of the market has a cost. By forming an organization and allowing When an authority (an 'entrepreneur') controls resources, certain market operating costs can be saved." Later, Buckley and Carson proposed the concept of intermediate products to provide a new explanation for the reasons why companies pursue internalization. The so-called intermediate products refer to semi-finished products used by enterprises to manufacture other products, as well as research and development, marketing skills, technology, management skills, personnel training, etc.

In the real world, not only the final product market is incomplete, but more importantly, the intermediate product market is also characterized by incompleteness. This incompleteness makes it very difficult for enterprises to conduct transactions through the external market. Transaction costs, in order to maximize profits, companies must strive to internalize the transfer of these intermediate products within their organizational systems. It can be seen that the competitive advantages brought by multinational companies by internalizing the external market (herein referred to as traditional internalization advantages) are mainly reflected in two aspects: First, reducing transaction costs. When enterprises conduct transactions in the market, they will generate a variety of Costs, such as the cost of obtaining necessary information, the cost of finding and bargaining with suitable trading partners, the negotiation cost of stipulating the rights and obligations of both parties in the contract, the risk cost and opportunity cost of accepting the contract, time lag due to market contact or intermediate products Costs arising from untimely supply, etc., can be reduced by changing the transaction activities for intermediate products from relying on the external market to being conducted through the internal organization of the enterprise. The second is to use transfer pricing to obtain financial benefits. Transfer pricing refers to the pricing of intermediate products between the parent company and its subsidiaries or between subsidiaries. Companies can avoid or evade taxes through transfer pricing to maximize the company's overall profits.

In the past, the main method of internalization of multinational companies was the integration of property rights, that is, through mergers and acquisitions, new enterprises, etc., to achieve equity participation and control of the company's upstream or downstream products (especially intermediate products). The biggest disadvantage of this internalization method is that as the scale of the enterprise expands, the internal organizational management expenses of the enterprise also increase significantly, which partially or even completely offsets the cost savings brought by internalization. The inherent slow response of large enterprises also It hinders the establishment of competitive advantages of multinational companies.

Some multinational companies have developed a new form that can be called "virtual internalization", that is, they do not use equity participation as the main form, but use strategic agreements to build internal markets, so that they can enjoy the benefits of traditional internalization. The benefits - saving market transaction costs and gaining new advantages in saving organizational management costs. This new form has increasingly become one of the main sources of competitive advantage for contemporary multinational corporations.

6) Global strategic advantages of value chain decomposition and integration

Global strategic advantages refer to the global strategic advantages that multinational companies use to coordinate and arrange production and operation activities on a global scale in order to reduce costs and maximize profits. resulting organizational efficiency. Foreign direct investment and increasingly developing strategic alliances are the main manifestations of multinational corporations' global strategies. Generally speaking, the global strategic advantages of multinational companies are mainly reflected in three aspects:

First, through foreign direct investment, they obtain the low-cost advantage of the host country. Multinational companies usually choose host countries with abundant natural resources, cheap labor, and superior geographical location to invest, which can reduce production costs and seek low-cost advantages for products.

Second, gain market entry advantages. Through foreign direct investment, multinational companies can bypass the tariff and non-tariff barriers of the host country and reduce the cost of entering the market; at the same time, they will take advantage of the convenience of local production and operation to occupy the host country's market to the maximum extent and obtain a satisfactory market share.

The third is complementary advantages. Multinational companies establish strategic alliances on a global scale and can make the most of the superior resources and capabilities of enterprises around the world and even competitors, thereby enhancing their own competitiveness.

Currently, the global strategy of multinational companies has a new feature, that is, the decomposition and integration of corporate value chains on a global scale to gain strategic advantages.

The production and operation of multinational companies is a value chain. According to Porter's value chain theory, this value chain consists of enterprise infrastructure, human resource management, scientific and technological development, procurement management, incoming material storage and transportation, production and processing, and finished product storage and transportation. , marketing, after-sales service and other links. Multinational companies decompose the value chain based on the principles of cost minimization and profit maximization, arrange each link in the most suitable country or region in the world, and then integrate them. Relatively speaking, That is to say, the cost of the final product or service will be low, and the relatively low cost will enable multinational companies to gain a competitive advantage.

7) More prominent advantages of economies of scale

Economies of scale reflect the relationship between the economic scale of an enterprise and its economic benefits. A large number of studies have shown that the expansion of enterprise scale can improve the economic benefits of enterprises. The advantages of economies of scale of large enterprises are reflected in many aspects, such as cost savings from centralized production and operations, centralized production, centralized research and development, establishment of large-scale sales networks, centralized market purchases and sales, etc., which can all improve the use of corporate resources. efficiency, reducing the cost per unit product. Large enterprises also have strong organizational management capabilities, rich international business experience, and various professional management talents, which are conducive to the division of labor and integration of internal resources within the enterprise, forming an overall advantage; financing advantages, large enterprises have strong strength and good credit. Funding is often available at a lower cost and has a wide range of financing channels, among other things.

Compared with ordinary enterprises, the scale of multinational companies is undoubtedly very huge. The economies of scale generated by the huge scale of multinational corporations have become an important source of their competitive advantage.

8) The increasingly important advantage of speed economic benefits

Speed ??Economy refers to the excess economy brought about by companies meeting certain customer needs faster than competitors. profit.

The reasons for the economic benefits of speed are: first, the first entry effect. Whichever company can be the first to seize business opportunities and meet customer needs as quickly as possible will be the first to gain customer recognition and win customer loyalty. It will gain the "first entrant advantage" and occupy a larger market share, thereby being able to compete in future competitions. Win the initiative. Second, the effect of technological innovation. Enterprises adhering to the speed economic strategy means that enterprises increase technological innovation and strive to carry out product innovation or process innovation at the fastest speed. The upgrading of products is accelerated and product quality is continuously improved. Compared with old products, new products will It will bring more economic benefits to the enterprise. Third, utility spillover effects. In modern economic society, customer demand is changing at an accelerating rate, and customers prefer products with short life cycles and fast updates. The more novel the product, the greater its utility in the eyes of customers. Therefore, if a company attaches great importance to the time effect and can satisfy customer needs to the maximum extent in the fastest speed and minimum time, then customers will be willing to pay high prices, and the company can obtain excess profits.

Currently, multinational companies are vigorously implementing the "speed economy strategy", which is highlighted in the cycle of technological innovation and the application strategy of technological innovation results.

The technological innovation cycle of multinational companies is showing an increasingly shortened trend. For example, Microsoft is launching new versions of its Windows operating system more and more frequently, thus occupying the advantage of being the first innovator for a long time.

The application of technological innovation results has been greatly accelerated. In the past, the application of technological achievements generally showed the characteristics of gradient promotion. When multinational companies initially developed new technologies and produced new products in the home country, they first met the domestic market demand, then obtained sales benefits in the international market through exports, and finally the technology was exported to the outside world. transfer. The competitive advantage gained by a new technology has a long-term nature. However, after World War II, imitation innovation, typical of Japan, flourished. Competitors would imitate the technology during the export period and occupy the local market first, making it increasingly difficult for new technologies to maintain a long-term competitive advantage. Therefore, multinational companies increasingly adopt the "sprinkler irrigation model" of overseas expansion. Once new technologies and products are developed, they are adopted in all markets around the world almost simultaneously.